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Future Trends of Chinese Economy

Author: Source: Date:2017-09-15
Main points:
-Chinese economy has gone through an unprecedented period of annual GDP growth, at a rate lower than 8% for consecutive five years. Maintaining a growth rate of 8% used to be the bottom line –then Premier ZHU Rongji set the bottom line to be 8% during the 1997 Asian financial crisis; So did then Premier WEN Jiabao in the 2008 global financial crisis. The number was 6.9% in 2015, and 6.7% last year. No one dreams about 8% any more.
-The government intervention in 2008 and 2009 to boost the already cooling economy yielded only a temporary relief, leaving the fundamental problem untouched and creating further imbalance in capacity and demand. The delayed cure and setbacks from government intervention now require much more adjustments.
-HU Chunhua, the Party Secretary of Guangdong, contends in his speech in Peking University recently that the middle-income trap points to industrial structure rather than income. I agree with him on this point. The increasing income inequality does not come from income distribution but the laggard adjustments in industrial structure. What we have now is structural unemployment resulting from a lack of motivation for growth and fundamentally, a mismatched industrial structure. Some industries face an insufficient labor supply while others close down leading to unemployment. Nevertheless, those unemployed workers cannot find new jobs in emerging industries, which then contribute to the widening income gap.
-Taiwan, Singapore and South Korea have not been trapped but sustained growth. One of the key to their success story is that they invest tremendously in education and scientific research along with economic development. Scientific research determines whether the industries can move upward, when your economy develops to a certain stage.
-The Chinese economy is not only about the periodic macroeconomic problem but a structural problem that requires us to look from a rounded perspective.
-Every economy develops in a spiral. Therefore, I believe that China’s GDP growth rate can get back to 7%, and possibly 8% in two or three years.
-The rumor of a breakdown of Chinese economy has been around for quite a while. However, it has always sustained. Economic analysis cannot be solely data-oriented. Neither should we compare it with the economic conditions today in developed countries.
-China is in transition, which will generate more room for economic growth. Besides, with such a large market, domestic demands will continue to boost Chinese economy.