Chinese PM heir apparent to face low-growth economic phase

China`s economy is seen as having entered a phase of relatively low growth, a challenge for Li Keqiang, who is in line to become the next Chinese prime minister.

Experts say drastic reforms are needed for China to escape the so-called middle income trap, and whether Li can promote these reforms will determine the fate of the Chinese economy over the next 10 years.

The Associated Press on Monday quoted a World Bank report saying China`s GDP growth could fall to below 6 percent by 2015 if no policy changes are implemented. Chinese growth slowed to a three-and-half-year low of 7.4 percent in the third quarter this year.

Amid the widening income gap, low consumption and high export dependence, further worsening of the global business environment could stall China`s growth. The country needs to create 10 million jobs every year, including those for six million new college graduates. To meet this demand and stabilize society, China`s economy has to grow 8 percent each year, according to academic experts.

Solutions could come from economic reforms that slow business deceleration and strengthen the social safety net. Critics within China want a revamp of state-owned companies, but Li is not expected to promote this considering his political stance and actions.

The heads of state-owned companies in China are nominated by the government and directly influence political activities of the leadership and money matters.

Yao Wei, an economist at the French financial group Societe Generale, said China`s growth rate will increase 5 percentage points if economic reforms succeed.

koh@donga.com