A U.S. economist said Thursday that China's economic transition is "a virtuous cycle" that has put the country on a more sustainable path.
"It's kind of a virtuous cycle in which China's transitioning in way from an economy that was driven primarily by industry and investment toward one that is being driven primarily by service and consumption," said Nicholas Lardy, senior fellow of Washington, D.C.-based Peterson Institute for International Economics.
Lardy made the remarks at a panel discussion sponsored by the Committee of 100, an organization made up of elite Chinese Americans.
He said that during the economic transition, consumption, instead of investment, has become a much more important driver of China's economic growth, adding that the share of consumption in China's GDP has increased significantly since 2010.
Lardy said that the service sector in China has become a big economic engine, which is more labor-intensive than the industrial sector, leading to a fairly strong growth of employment and wage.
Talking about the impact of the slowing Chinese economy, Lardy said the countries heavily engaged in export of raw materials are significantly affected, but for the United States and other countries that are not commodities exporters, the slowdown of the Chinese economy does not have a very big effect.
Furthermore, China's economic transition might be beneficial for the United States over the next few years, Lardy said, as the United States is a strong producer of consumer goods and some U.S. companies such as Apple are benefiting from the shift toward more consumption in China.
Although China's economic growth rate reached a 25-year low of 6.9 percent in 2015 amid ongoing transition, Lardy said China is still responsible for about 30 percent of the global economic growth -- the same share China had four or five years ago when it was growing much more rapidly.
The expert saw a two-fold reason. First, the overall size of the Chinese economy today is much bigger than that of a couple of years ago, so 6 percent or 7 percent growth on this much larger base is still very big, he said.
Second, the global economic growth has slowed down and never really recovered to the pace prior to the 2008 financial crisis.
"China's contribution to the global expansion is still far and away the largest of any country in the world," Lardy said.