LONDON - Standard Chartered chief economist Gerard Lyons says the trend in China's economy is up, and he's generally positive about China's development in the coming years.

Gerard Lyons [Photo/standardchartered.com]

"But there could be setbacks or cycles along the way," Lyons told Xinhua in a recent interview.

The outlook for any economy depends on the interaction between the fundamentals, policy and confidence, as Lyons recently wrote in an article for Financial Times.

"Fundamentals of China are good; confidence is resilient; and China is fortunate to have plenty of room for policy maneuvers," he told Xinhua.

Because China's economic growth has slowed lately, Lyons expected the weakness to continue through to the end of this year with more policy stimulus to come.

"The current slowdown is mainly caused by shrinking exports due to weak situations in the outside world. But the biggest potential setback would come from a slowdown in investment," he said.

Investment takes up about 48 percent of China's GDP now, which is much higher than the world average of 22 to 24 percent as a recent World Bank report showed.

"If investment declines by one tenth, it will knock 4.8 percent off China's GDP," Lyons added.

He highly valued China's 12th Five-Year Plan, which in his view "gave a clear and sensible medium-term strategy to rebalance the economy away from investment to consumption."

"To get private consumption higher, China needs to help people have jobs, raise wages and build social welfare nets, which would discourage them from saving too much," Lyons said.

He underlined that economic rebalance was very difficult to achieve though quite easy to say, expecting China to spend 10 to 15 years to realize this goal.

"The good thing for China is that it has an ample room for policy maneuvers, in terms of interest rate, pumping money in, bank lending, as well as fiscal policies, which could help prevent a 'sharp' slowdown in the economy, although they may not be able to prevent a slowdown," Lyons said.

"Gradualism is another advantage for China," he said. "China has always tried to avoid doing things too much or too quickly when it comes to deregulating. Recent lessons showed that it also needs to be more gradual when boosting the economy."

"Actually China has already slowed down a bit in terms of policy boost as it seemed to have lagged behind expectations for more stimulus in the past several months," Lyons said.