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BEIJING - The People's Republic of China (PRC) can help redress global payments imbalances by addressing its domestic challenges such as social development, income disparities between rural and urban areas and environmental degradation, ADB Vice President Lawrence Greenwood said.

By increasing spending on health and education as well as social security and safety net systems, the Government can encourage less household savings and more consumption. The Government can also discourage excessive retention of earnings by state-owned companies by encouraging them to pay dividends to the state, he said in an address to the Caijing Magazine Annual Conference held in Beijing on Monday.

Mr. Greenwood also noted that the Government has fiscal room to spend more on social sectors. He recommended less investment in support of production of goods and more on quality investment in human capital, particularly rural development, health and education, social security, environmental improvement and poverty reduction. He noted that increased government spending of RMB100 billion a year could lead to significant reduction of poverty and improve social development in rural areas of China.

Mr. Greenwood said deepening capital markets, opening markets for goods and services, and moving towards more flexible foreign exchange rate management will also help PRC address its external imbalances.

Mr. Greenwood added that the PRC is on the right track, has identified the imbalances it needs to address, and is developing and implementing detailed action plans to achieve more balanced growth. ADB is pleased to be working closely with the PRC Government in that effort by boosting the Bank’s investment in rural development, environmental protection, clean energy, water and waste water treatment.

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