China currently has favorable conditions and the correct polices to resolve major financial problems including bad loans and social security pensions, Martin Feldstein, professor of Economics in Harvard University said here on March 24 in Beijing.
  Speaking at the China Development Forum, Feldstein said Chinese banks are essentially part of the government, and that most of their bad loans, which, in reality, constitute a fiscal problem, result from financing the investment projects, wages, and pension costs of state-owned enterprises.
  Therefore, given its strong economic growth, China can cope with its national debt, as long as new deficits incurred are limited or are converted into surpluses through the implementation of prudent tax, spending and banking practices, Feldstein said.
  Feldstein said he admires China's mixed social security pension system, saying that the system combines a taxpayer-financed basic benefit with mandatory individual investment-based accounts. The combination of the two provides benefits equivalent to 60 percent of the net income of an average worker, and more for those with
below average income.
  The system will permit maintaining high levels of retirement consumption without correspondingly high taxes, he said, suggesting other countries should follow suit.
  Feldstein reiterated his admiration for the economic achievements of China over the past two decades and his optimism with regard to China's policies for the future.