Sustainable Development
-- The Chinese People’s Choice
Road to Success
China’s establishment of a market economy over the past three decades has resulted in growth of the country’s economy at an average annual rate of 9.8 percent. In 2012, the country’s GDP was second in the world only to the U.S.
According to British economist Angus Maddison, China accounted for 32.9 percent of global GDP in 1820, but in the 20th century fell far behind newly industrialized Western countries. By 1978, China’s share of global GDP had plunged to 4.9 percent. In 2010, however, China’s GDP surpassed that of Japan to become the world’s second largest economy, and its exports surpassed Germany’s, making it the world’s largest exporter.
China’s miraculous economic development over the past 30 years is due to the market-based system that has liberated the people’s entrepreneurial spirit. The market economy has helped to kick-start the productivity long suppressed under the old system, enabling China to achieve sustained high-speed growth, according to preeminent economist Wu Jinglian.
Professor Liang Xiaomin of Beijing Technology and Business University has utmost confidence in China’s economy. He cites the household contract responsibility system, wherein remuneration is linked to output, that came into effect in the initial period of reform and opening-up and which invigorated the rural economy, laying foundations for further reform and economic development. The many private enterprises that have since appeared vitalize China’s economy, generating around 60 percent of the country’s total GDP. A more favorable economic environment since the turn of the new millennium provides suitable conditions for scientific and technological development, which in turn boosts economic growth. Moreover the improved legal system, as apparent in the Real Rights Law and Patent Law, provides better guarantees for economic development.
Professor David Li Daokui of Tsinghua University believes that two major forces will keep China’s economy developing – the consumption potential of a large population and the ongoing process of urbanization that will engender sustained infrastructure investment and improve the living standards of China’s migrant workers.
Chinese Characteristics
As the conuntry’s economic foundations grow stronger each year, each growth percentile represents a larger volume of GDP. China’s growth is expected to slow to 7.8 percent in 2013 – the lowest since 1999. The current view is that China will maintain economic growth at a medium rate of 7 to 8 percent in the coming years.
More disquieting than the change in the economic growth rate, however, as pointed out by Liang Xiaomin, is the fact that, “China is gradually losing its demographic dividend.” Liang’s reasons are twofold. The first is that improvements in people’s lives by virtue of increased GDP have emboldened workers to demand higher salaries. The second is the family planning policy, in force since the late 1970s, which has resulted in the country’s present labor shortage.
World Bank statistics show that the demographic dividend has contributed more than 30 percent to China’s economic growth. But the figure is declining. Ma Jiantang, head of the National Bureau of Statistics, predicts a steady decline in the country’s labor force that will continue until 2030.
Cao Heping, vice dean of the School of Economics at Peking University, said during a recent exclusive interview that, superficially speaking, the labor shortage affects the profits of enterprises and poses a great challenge to business operations. When considering the issue from a long-term point of view, however, it offers China’s economy the chance to achieve sustainable development by acting as a driving force towards the transformation and upgrading of enterprises. Specific reforms, such as raising worker efficiency, improving technology and reforming the money and capital markets, should therefore be carried out.
In addition to losing the advantages of the demographic dividend and low production costs, China is also struggling to change its old growth model, which relies on high investment and energy consumption and hence generates excessive emissions and pollution.
The latest green paper released by Chinese Academy of Social Sciences (CASS) shows that China is experiencing accelerated industrialization and urbanization, and that its coal and oil consumption rank it among the world’s worst polluters. The country thus faces problems in satisfying its growing demand for resources and energy. Its massive energy consumption will also inevitably create large volumes of greenhouse gas emissions. As reliance on traditional economic growth patterns is no longer tenable, in the future China must seek low-carbon development if it is to achieve the goals of building a harmonious society and sustainable development.
Policy-makers have reached consensus on transforming the economic growth pattern. China’s 12th Five-year Plan has made such transformation, in the interests of future development and accelerating adjustments to the economic structure, a main work focus. The 18th National Congress of the Communist Party of China (CPC) report clearly states that we should hasten the creation of a new growth model and ensure that development is based on improved quality and performance; also that we should expand incentives for pursuing innovation-driven progress, establish a new system for advancing modern industries, and create favorable conditions for a more open economy. These measures will result in economic achievements driven by domestic demand, especially consumer demand, by virtue of a modern service industry and strategic emerging industries, and by scientific and technological progress.
Imminent Transformation
Since the Chinese government undertook to transform its economic development model, China’s economic development has become healthier while maintaining stable and fast growth.
A review on the macro level shows that the share of tertiary industry in GDP is increasing steadily, having risen from 42.6 percent in 2009 to 44.6 percent in 2012. The service industry is also contributing significantly more to economic growth.
Primary industry electric energy consumption in 2012 was 101.3 billion kilowatt-hours – little different from the previous year. That for secondary industries was 3,666.9 billion kilowatt-hours, a year-on-year increase of 3.9 percent, and tertiary industry consumption was 569 billion kilowatt-hours, a year-on-year increase of 11.5 percent. The more rapid rate of increase in tertiary industry electric energy consumption compared to that of secondary industries signifies the gathering pace of adjustments to the country’s industrial structure.
When reviewing the key components of economic growth – investment, consumption and net exports – we can see that domestic demand is now the strongest driving force. In 2012, consumption contributed 51.8 percent to the country’s GDP growth – 1.4 percent more than investment. Liu Chuanzhi, leader of Lenovo, has pointed out that increasing people’s incomes is crucial to boosting consumption. “China’s GDP has grown rapidly for many consecutive years, and financial revenues have increased even faster. It would be conducive to boosting consumption if the government were to allocate a portion of increased revenues to increasing people’s incomes. For example, by reducing taxes payable by enterprises who, in turn, could pass on this saving to their employees,” Liu said.
