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Which Fields Inspire Confidence in China's Future Growth?

By Dr. LIU Guohong

Since 2011, China's annual growth rate has fallen from a 2-digit number to about 7%. It is true that China is experiencing economic restructuring. However, one would 'miss the forest for the trees' if they considered this short-term restructuring as a long-term law.

 

Firstly, China has high-quality human resources. The Chinese spirit and tradition of diligence and endurance, particularly in the period of reform, opening-up and pushing industrialization forward, have transformed into incredibly powerful resource advantages and development impetus. In just 3 decades, Huawei has grown into the world’s largest provider of telecoms equipment by relying on the above-mentioned spirit and attitude. The Chinese people live a thrifty life and accumulate wealth, resulting in the fact that China accumulates capital faster than any other country in the world. It is true that China is now gradually becoming an aging society, which means the total labor population is in decline. However, the percentage of Chinese people receiving university education is rising considerably. In 2015, 7.5 million graduates graduated from universities, approaching the total population in Israel, a country known for its high-tech development. According to the results of a 2012 study by the OECD, by 2020, 29% of graduates aged between 25 and 34 in the world will come from China. For these reasons, we can safely expect the high quality of Chinese human resources to be sustained, and the high-quality labor force of China to continue to rise significantly. Moreover, as the cultural gene of the Chinese people determines our habit of saving, the accumulation of wealth and capital in China will also continue to grow. After the Chinese economic restructuring is completed and a proper growth route is identified, it is likely that China will maintain a high-medium growth rate into the future.

 

Secondly, China has huge market demand. After experiencing rapid growth over the past 30 years or more in the process of reform and opening-up, 1.3 billion Chinese people have escaped from poverty. By 2020, when China fully realizes a well-off society, the market space and purchasing power of China will continue to grow; in fact, this can already be seen in the fever with which Chinese people shop all over the world nowadays. The Chinese people are also curious about new ideas, technologies and dynamics, and show a higher than average tolerance for taking risks in innovation.

 

Take the mobile and internet industry as an example: the Chinese people change their mobile phones very frequently, and they have a higher tolerance for risks involving the Internet, which ensures that the mobile and internet industries of China quickly realize the upgrading and replacement of products and technologies. We can predict that, after this round of economic restructuring, it is highly possible for China to lead global industrial development in mobiles, Internet, IOT, e-commerce and even new-type finance.
Thirdly, China pushes forward market-oriented reform that is aggressive but not bold-faced. Looking back over the country's market-oriented reform, China didn’t take 'shock therapy', but 'crossed the river by feeling the stones'. Over the past 30 years of reform and opening-up, the Chinese economy has made huge achievements in its transition. China is now performing exceptionally in perceiving reform and opening-up, and applying the international rules of the game. It is clear that reform and opening-up in China are still underway, and there are still huge opportunities to release the bonuses involved therein. Due to the great gap between the per capita GDP of China and those of other developed countries and regions in the world, there is huge potential energy in the Chinese economy between East China, Central China and West China, and between the urban and rural areas. Nevertheless, this also clearly reflects that the Chinese economy can find opportunities in a crisis. The downward trend of Chinese economic growth will to some extent help to break the vested interest in reform and opening-up, thereby practically promoting the process and laying the foundation for sustainable economic growth in China under the New Normal state.
 


(April 06,2016)