The year 2016 marks the beginning of China’s 13th Five-Year Plan, and the whole world is watching with anxiety the apparent slowdown of the Chinese economy, which has been providing the main steam for the global economy for years. After two decades of fast economic growth, many structural problems are surfacing all at once, and Chinese economy is under increasing downturn pressure. However, this tells only half of the story. The economic fundamentals are relatively intact, and there is more potential ahead.
Here are some hard facts for the international community to look at.
First and foremost is the prospect of economic growth. The current economic growth rate is the result of the policy readjustment of the Chinese government, which would allow the country to comfortably realize the “two centennial goals” in 2021 and 2049 respectively, and allow many industries to absorb the surplus production capabilities or to address excessive stockpiles. For that matter, the 13th Five-Year Plan has set the economic growth target at 6.5%, which is still outstanding by any standard.
Second is the steam for further economicgrowth. In line with the 13th Five-Year Plan, China has been launching ambitious infrastructure development programs, which would allow the country to expand or improve its electrical grid, to provide greater access to water and labor for urban development, to connect domestic markets, and to expand transmission of natural gas and power across the nation. The government has been pushing forward nationwide transportation and communication systems, and to expedite the connectivity networks with the countries along the “Belt and Road Initiative”. This would not only facilitate conditions for the free flow of necessities for production around the region, to promote market connectivity, but also for the industrial connectivity via regional investment cooperation.
Third, the service sector right now contributes about 51% of the annual GDP growth. China still has much room for development in that industry, before catching up with the high-national-income countries. Simply put, with every 1 percent increase, China would be able to generate more than 1 million jobs for the people around the country, which would help to effectively address the issue of national employment.
Fourth, concerns about national consumption are overstated. It is true that China suffered a 3% drop in foreign trade in 2015, but many developed countries also faced the same scenario against the sluggish global economy. Unlike many of them, however, China should be able to come out of the above scenario in the near future. The middle class in China is fast-grwoing, which is to become the main engine to power national consumption. Urbanization will add more people into the contingent of effective consuming population. The 230 million-strong gray population will certainly create new demands in terms of medical care, social service and health-promotion services. The national campaign to eradicate poverty would involve 7 million people, which would create immense steam for consumption via housing construction, transportation, education and healthcare, etc. Meanwhile, China has already become the main investing country, which will help it extend its economic frontier, and provide trade, investment, technology transfer and industrial cooperation for all the stakeh-olding countries. Therefore, all the above factors will cement China’s positions as the fastest-growing consumer market in the world, and the second largest importer of goods and services. President Xi jinping assured the international community, while visiting the United States late last year, that China would increase import totaling at $10 trillion in the next five years, which remains the sound prospect that many countries can count on.
Fifth, China has just launched the national strategy for renovative development. This will facilitate conditions for the burgeoning private sector to take center stage, and gain a more prominent position in the national economy. With more incentives in place, both public and private enterprises will increase their R&D input, which would allow China to continue retaining its position as the global manufacturing hub as well as the largest manufacturing economy in the world. More importantly, the above renovation and technological innovation will not only offer new development opportunities to Chinese high-tech enterprises but also provide foreign enterprises with the same opportunities.
Sixth, it is an open secret that“One Belt One Road Initiative”has moved China’s central and western regions into the frontlines for a new round of opening up. China has designated four free-trade zones and initiated policies to revitalize its economic zones and high-tech industrial parks. All of these measures are aimed at attracting more foreign investment, and for the national enterprises to extend their production lines, to seek partners along the “new Silk Road”. This will certainly create new steam for the national economy in the long run.
Seventh, urbanization is an empowering force. Currently, China’s urban population constitutes roughly about 60% of the national total, and growing. Every 1 percent of additional urbanization means 13 million rural people become city or township dwellers, which would not only create new space for service industries to expand, but also create more fresh labor to fill in the labor gap in the cities.
Last but not least, the issue of “population dividend” is a false worry. The international community has a general perception that China has passed the “Lewis turning point” in terms of population dividend. However, it is too soon to come to the conclusion. The fact is that China has more than 100 million people with college degrees or above, which still remains a huge potential to tap into for high-end manufacturing industries. Each year, there are about 7 million college and university graduates and some 6 million skilled labor graduating from the vocational schools. Meanwhile, China has readjusted its population plan and the retirement scheme. All these factors would help to extend the population dividend chain, and continue to provide human capital for China to carry out its innovative economy and to attract FDI from around the world.