China considers weak global demand, high public debt and unemployment rates of developed countries, and a bad timing of exit strategies main risks to the world's recovery outlook, a Chinese official attending a regional economic forum here said Thursday.
Zheng Xiaosong, Director General for the International Department of China's Ministry of Finance, told the Asian Development Bank (ADB) forum that though the global economy is expected to perform better this year than 2009, three major risks are threatening the recovery outlook.
Zheng said the first risk is a lag in the pick-up of private demand as effect of the government-led stimulus package ebbs.
"If the private demand remains sluggish due to high unemployment rate and low productivity, the world economy will continue to be weak," he said.
The second, Zheng said, is the public debt of developed countries keeps high and their unemployment rate is increasing.
He said according to IMF's estimate, the ratio of public debt to GDP of developed countries will jump to 100 percent in 2011. And the job market in the developed countries is worrisome as the unemployment rate hit 10.2
percent in the U.S. last October and 9. 8 percent in the Euro zone.
Zheng said high unemployment will feed on the fiscal burdens as fiscal expenditure on unemployment relief would increase and mount pressure on fiscal balance.
Zheng said governments around the globe also face the challenge of timing the roll-back of the extra-ordinary stimulus packages put in place.
Too early or too late will spell trouble, Zheng said, adding that if countries cannot coordinate effectively on the exit strategy, coupling with imbalanced global recovery and loose liquidity, large amount of speculative
capital will flow in, probably causing asset bubbles in some countries that have quick recovery.
Zheng said China's counter-crisis policies have largely paid off. The GDP growth increased by 7.7 percent in the first nine months of 2009 and is set to surpass the government's 8 percent goal for the whole year. He said domestic demand is contributing more to economic growth as China underwent the arduous re- structuring process to reduce the country's reliance on exports.
Zheng said while China will continue the "proactive fiscal policy and moderately easy monetary policy" in 2010, the policies will be more flexible and focused.