China's economy: the inevitable adjustment
Updated: 2016-02-02 10:02
By Ken Davies(chinadaily.com.cn)
|
||||||||
China has actually been recovering only a small percentage of the value-added of the high proportion of exports accounted for by foreign-invested enterprises. That's why Apple has such a high share price in the United States even though its iPhones and iPads are "Made in China" (but, please note, "Designed in California").
China has established itself as the world's foremost manufacturer in terms of quantity. It now has to switch to higher-quality exports driven by innovation and quality control, both of which can ensure that the total value-added is bigger and keep more of the value-added in China, and both of which have so far eluded expensive efforts of policymakers to achieve them.
Both before and during the reform period (since the end of 1978), the chief driver of economic growth has been investment, especially in expanded output of products. This is normal for a developing economy, but advanced economies inevitably move to a more consumer-oriented one, less reliant on capital expenditure and exports and more dependent on household spending.
The government has been trying to implement this model, with consumption a much higher proportion of GDP, for some time. It has been promoting leisure activities, including longer weekends, longer vacations, domestic and foreign tourism, and much else, since the 1990s. It has been trying to develop services industries, including retail finance, tourism, entertainment and sports.
At the same time, incomes have been rising. Lewis' "unlimited supply of labor" has at last come to an end, as workers have gone back to their villages and coastal employers have been compelled to raise wages to lure them back.
A major feature of the readjustment process is a slowing of growth to rates more like those in other advanced economies, i.e. well below the 10 percent per annum of the reform period and also well below the current rate. If China's GDP were to rise at an annual rate of 5 percent a year for the next 10 years, it would still be a very respectable rate of development, and still one of the highest in the world.
The author is president of Growing Capacity, Inc., an economic policy consultancy. He is former chief economist, Asia for the Economist Intelligence Unit and head of global relations in the OECD's Investment Division.
- Obama pledges $4.2b for computer science education
- Zika a new headache for Olympics prep
- Key players in 2016 US presidential race
- Negotiating political transition in Syria 'possible': Hollande
- At least three killed in light plane crashes in Australia
- BOJ further eases monetary policy, delays inflation target
- International friendship blossoms in peony painting
- Culture Insider: Little New Year
- Global celebrations mark Chinese New Year
- Motorcycles ride home for Spring Festival reunion
- Sharing their wealth: Chinese celebrities and charity
- The world in photos: Jan 25 - 31
- Year of the Monkey arriving in Washington
- Djokovic puts down Federer fightback to reach final
Most Viewed
Editor's Picks
8 highlights about V-day Parade |
Glimpses of Tibet: Plateaus, people and faith |
Chinese entrepreneurs remain optimistic despite economic downfall |
50th anniversary of Tibet autonomous region |
Tianjin explosions: Deaths, destruction and bravery |
Cinemas enjoy strong first half |
Today's Top News
National Art Museum showing 400 puppets in new exhibition
Finest Chinese porcelains expected to fetch over $28 million
Monkey portraits by Chinese ink painting masters
Beijing's movie fans in for new experience
Obama to deliver final State of the Union speech
Shooting rampage at US social services agency leaves 14 dead
Chinese bargain hunters are changing the retail game
Chinese president arrives in Turkey for G20 summit
US Weekly
Geared to go |
The place to be |