CHINA.WIRE
Chinese economy driven more by domestic forces: study
 WASHINGTON, Jan 15 (AFP) Jan 15, 2008
 The surging Chinese economy has been largely driven by domestic forces and not as dependent on exports as some US officials contend, according to a new US study.

The study released Monday by the Carnegie Endowment for International Peace with the International Cooperation Center in China's National Development and Reform Commission, contradicts many assumptions about China's economic performance.

Economist Albert Keidel, who authored the report, wrote that China's stunning growth of around 10 percent annually since 1990s "has been overwhelmingly domestic in origin."

"Trade and foreign investment clearly became increasingly important as sources of foreign technology and management skill transfers; but unlike many other East Asian economies, China's own fast and slow cycles have not followed the fortunes of US economic growth and recession -- quite the opposite," he added.

He said that China's recent inflation surge "is the product of domestic rural structural problems, not excessive monetary growth linked to trade surpluses or foreign reserves."

The report comes amid a growing chorus of protests in Washington about Chinese economic management, claiming that Beijing uses an artificially low currency to gain an edge in exports to keep its economy rolling.

US officials have argued that China needs to stimulate more domestic demand to help ease dependence on exports that create global trade imbalances.

But Keidel's report said China already is driven to a large extent by domestic demand.

"US government analysts need to correct the popular misperception that Chinese growth is export-led and hence exchange-rate dependent -- it is not," he said.

"US commercial and diplomatic thinking regarding China's commercial behavior and long-term prospects needs to shift to account for this conclusion."

Because China's growth has not been export-led, Keidel said the United States should concentrate on improving domestic components of its own international competitiveness rather than blaming China for imbalances.

"Of course, this is not to say that successful export growth is not a vital part of China's development strategy," he said.

"Exports are clearly one of many essential components in a development strategy driven mostly by domestic demand."

Last year, Keidel released a study indicating China's economy is about 40 percent smaller than most estimates. The World Bank reached a similar conclusion in December.