New leadership urged to set reform agenda that secures growth, stability

China's top economist has taken the management skills that have enabled the country to avoid an economic or financial crisis amid intensive global interdependence as the biggest legacy of the government with Wen Jiabao as premier.

Fan Gang, director of the National Economic Research Institute of the China Reform Foundation, said the nation's new leadership should set a "reform agenda" to maintain stable economic growth and social stability for the coming decade.

Fan made the comments before Wen delivered his final Government Work Report on Tuesday.

Fan, who has intensive involvement in policy consultations, said the government led by Wen has been successful in maintaining stable economic growth in the past decade. "The new leadership should also have such macro-control skills to achieve this," Fan said during an exclusive interview.

"Otherwise, it would be disastrous if we encountered the financial and debt crisis that the US and Europe are suffering from."

Fan said maintaining such momentum is very important for China, and only through deepening reform and clearly defining the separate roles of government and the market can the new leadership under Xi Jinping and Li Keqiang enjoy such achievements.

Looking back, Fan said China has seen smooth and stable economic development in the past 10 years despite mounting challenges.

He said it was clear that from 2005 to 2007 the nation experienced double-digit high-speed growth, compared with economic bubbles in Western countries. But local governments' real estate investments caused overheating, with the government taking measures to curb this.

When the global financial crisis, which originated in the US, took its toll on China's economy in late 2007, the central government unveiled a multibillion-dollar stimulus package to speed up economic growth.

"So, generally speaking, we didn't see excessive overheating during the past 10 years and so we didn't need a hard landing or crisis to adjust our economy. We have made an economic soft landing, which is a big success," Fan said.

Europe and the US have been assured by China's soft landing, with Europe talking about a "lost decade or 20 years", Fan said.

"So macroeconomic management is very important for the new leadership, and we need to guard against an economic or financial crisis," he said.

Fan also said China's social welfare system has basically taken shape, with financial reform and internationalization of the renminbi making rapid progress.

"During the past decade, the US has been putting pressure on us and we have reformed our financial system without any shocks," he said.

Fan said fears in the international community have now eased over China's economic growth, as the country has realized a soft landing and market potential is still expanding. Meanwhile, China has been stepping up the process of changing its development model, which will mainly focus on domestic consumption.

"All these factors have eased global concern over China's near-term growth potential," Fan said.

He said concern had centered on the type of reform China will implement to realize long-term development and social stability. "Our reform tasks are many, but I think we must do two things first," he said.

First, he said, it is vital for the government to implement reform responsibly and to separate itself from economic activities and approval responsibilities. Second, China should set up an overarching institution to oversee the reform process.

"If the government doesn't reform itself, there is no real reform; and if there is no such institution to coordinate the interests of different organizations, reform will not be successful."

After China's new leadership was unveiled in November, Fan says he sensed its commitment to reform, based on what the new leaders had said and published recently.

He said that in previous decades the government has played a big role in developing a market economy. "But we are in the process of developing an economy with the private sector playing a major part and so we must clearly define the boundaries of the market and the government in developing China."

In doing so, Fan said the government should focus on offering public services instead of regulating and approving economic activity.

He also said the government has been shouldering too many public responsibilities, most of which are unnecessary. "The government's excessive rights are prone to bring corruption," Fan said. "To streamline the government's role, the most important thing is to reduce its public rights."

fujing@chinadaily.com.cn