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Justin Lin criticizes China growth pessimists

China's congress
Andrew Wong - Getty Images
China's congress

Former World Bank chief economist and senior adviser to the Chinese government Justin Lin has criticized widespread pessimism among economists and investors about the outlook for the world's second-largest economy and predicted it would grow between 7.5 percent and 8 percent for the next 20 years.

Mr Lin's comments come amid rising alarm at China's slowing growth, which appears to be on track for its poorest performance since 1990. That year the country was facing international sanctions in the wake of the 1989 Tiananmen Square massacre. The lowest rate of growth since then was 7.6 percent in 1999.

"In the past 33 years the prediction about the coming collapse of the Chinese economy has appeared periodically and that kind of prediction was cherished by many people," Mr Lin said on Monday. "I'm reasonably confident the Chinese government has the ability to maintain a 7.5 to 8 percent growth rate."

(Read More: China risks following Japan into economic coma)

Mr Lin said his prediction was partly predicated on Beijing continuing to implement market-oriented reforms and taking counter-cyclical measures to stabilize growth when it slows. He said China still has the "advantage of backwardness" and the potential for technological catch-up when compared with advanced economies. He pointed out that China's per capita income was just 21 percent of the U.S. in 2008 in purchasing power terms – a comparable level to Japan's in 1951, Singapore's in 1967 and South Korea's in 1977.

In recent weeks there have been increasing signals that Chinese leaders' tolerance for lower growth rates is being tested and the economy may be slowing more than they had anticipated. China's recently-installed premier, Li Keqiang, has emphasized the government's commitment to maintaining "economic stability" and relatively high growth rates.

Last week Beijing announced a "mini-stimulus" involving tax cuts for small companies, more investment in the country's enormous railway system and a support package to boost trade. Officials have said the government will reveal a plan next year to tackle air and water pollution involving Rmb 3.7 trillion ($603 billion) of government investment, a plan Mr Lin said would help to boost growth.

The government has also announced an urgent review of government debt in a clear sign of rising concern that high levels of indebtedness and potential bad loans are dragging down growth. Most economists expect China to grow by around 7.5 percent this year, but most see risks to the downside coming from already high debt levels and an inability to finance new projects in the country's investment-dependent economy.

(Read more: China slowdown digs a hole for US industrials)

"China's growth is more reliant on credit now than at any time in modern history and the government is clearly trying to restrain credit growth," said Ken Peng, an economist at BNP Paribas. "Predictions of 8 percent headline expansion are basically impossible to achieve because you can't boost growth and deleverage at the same time. The odds of growth falling below 7 percent next year are very high."


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After growing at an average annual rate of 9.8 percent for 33 years, the economy expanded by 7.8 percent last year and by just 7.6 percent in the first half of 2013 from the same period a year earlier.

Mr Lin said he believed 7.3 percent growth for the next seven years was the government's basic bottom line, as that was the rate needed to achieve Beijing's formal target of doubling household incomes in China between 2010 and 2020.

Mr Lin was speaking to journalists at a briefing arranged by China's foreign ministry. The setting for his comments suggested that Beijing is hoping to balance a flood of pessimism in the market over the state of the economy.