“Will China's degree
of success decide global growth in the 21st century? ”
Sept. 13, Brown, who attended the annual Summer Davos
Forum that opened on Wednesday in Dalian, said Chinese officials would reveal
how long China will need to make the transition from an investment-led,
middle-income country to an innovative, consumer-driven, high-income one, and
thus when it will become the world's largest economy.
Recalling the history
of China's development in recent years, under the first wave of modernization,
China's progress to middle-income status has been astounding and dramatic.
Nowadays with the officials focusing on China's next challenge — the shift to a
high-productivity, high value-added, consumer-based economy — the aim is to
double average incomes by 2020, to achieve 70 percent-plus urbanization by
2025.
But Brown also noted
that most important barriers to long-term success are the disparities in wealth
and low levels of innovation, skills and capital operation. As far as I know, I
incline to believe the rules in a free market and consider it is a difficult
path for China to reach a developed level. Initially, the economic policy must
focused on structural change in the long-run and reinforce what Chinese
President Xi calls “socialism with Chinese characteristics”, such as
restrictions on labor mobility and private credit. It usually takes a long
period to address some structural issues. Secondly, as an essential share of national
income, services have just overtaken manufacturing, and China has a long
tradition that consumer spending is always bigger than investment. It is
usually a dangerous method to pursue economic development only by export-led
growth. Thirdly, China should try its best to make the RMB become one of the
world currency and pay more attention to reforming efficiency in the process of
opening up the financial or electricity sectors to non-public capital, etc. In
my opinion, I do not believe that nowadays the Chinese government could take
these efficient actions very quickly.
As we discussed in classes, the export-led industrial
structure has different impacts on different countries. For a small country, it
has so weak effects on foreign trade that it should enlarge its foreign trade
exports and pursue the greater scale merit. But for China, an influential trading
body with 1.3 population and huge purchasing power, it is very hard to display its
comparative advantages only by focusing on the export orientation strategy.
Moreover, the trading conditions are getting worse for domestic enterprises,
especially in the south of China, due to the vicious competition such as the
reduction of unit cost, the technical barriers of trade and inefficient
resource allocation.
Source:
I agree with you that in a free market it would be difficult for China, as a whole, to reach a truly developed level. I also think it is a bad idea to have economic development and growth led by exports. However, I think China is in a position to become an even larger global presence. The unveiling and ratification of a major program for reforms for the next decade, which will occur at the Chinese government's third plenum in November is promise to bring another great leap forward in China's dramatic ascent. For China to move from an export led growth view they will need to have structural changes and have restrictions on labor mobility and private credit. With the change China will be implementing I believe they will be able to increase their own growth and drive the global economy as one of the world's largest trading countries.
ReplyDeletehttp://blogs.reuters.com/great-debate/2013/09/12/chinas-commitment-to-growth-will-drive-the-global-economy/
ReplyDeleteChina is challenged with the shift to a high-productivity, high value-added, consumer-based economy. Their aim is to double average incomes by 2020, to achieve 70 percent-plus urbanization by 2025 and to have the world’s largest supply of graduates. If it succeeds, China will quickly surpass America as the world’s largest economy. Regarding the Ricardian Model wages across countries are determined by absolute advantage: The wages in China are currently low because it has little or no absolute advantage. A country with poor technology can export at a price others are willing to pay by having low wages. That means China has to develop its technology before its wages will rise. At present I think China is competitive because of the low prices caused by low wages and with higher wages it really has to build up on new developed-in House technologies.