Since 2020, China’s economy has improved season by season. It’s true that in the first quarter last year, economic growth was hit hard, with negative growth of 6.8 percent. But in the second quarter, with the coronavirus under control, governments actively resumed production and the economy rebounded strongly to achieve positive growth of 3.2 percent. Further progress took place in the third quarter: China achieved positive growth of 4.9 percent. And fourth-quarter growth was 6.5 percent. Average annual economic growth for 2020 reached 2.3 percent — a figure that was unique worldwide.
In 2021’s first quarter, China’s economy may increase by more than 15 percent because of the lower base last year, and then it would fall season by season. For the fourth quarter, economic growth could be 6 percent. Average annual economic growth may exceed 8 percent.
It is estimated that by 2025, economic growth will stabilize at above 5 percent. By 2030, China’s growth is likely to fall above 4 percent, more than 3 percent in 2040 and more than 2 percent in 2050. It’s possible that in the next five years, around 2026, China's per capita GDP will reach $13,000 — the high-income country standard set by the World Bank. Thus, China will have successfully mitigated the middle-income trap.
Around 2030 or 2032, China’s total GDP could exceed that of the United States. I think this is probable by 2035. By the middle of this century, China will realize its modernization goal for a prosperous, democratic, civilized, harmonious and beautiful socialist modern country.
I believe that China’s economy in the post-pandemic era will be characterized by five development opportunities:
First opportunity: New urbanization and regional coordinated development.
As of 2019, the urbanization rate in China was only 60.6 percent and the urbanization rate of the household registration population was only 46 percent. By 2035, we’re expected to reach an urbanization rate of about 75 percent if it increases by 1 percentage point per year. This is the key to promoting the “dual circulation” pattern and high-quality development. It is also an important way to boost domestic demand because a farmer becomes a citizen who will drive the real economy, industrial development, employment and income growth.
In particular now, there are 600 million low-income people in China, with each person earning less than 1,000 yuan a month and 964 million people earning less than 2,000 yuan a month. Raising the income of low-and middle-income groups is significant for the goal of common prosperity. It is also a crucial means of avoiding the middle-income trap.
International experience shows that to get out of the middle-income trap, the key is to expand the middle income group, change the dumbbell structure of income distribution, and form an olive structure. I think it is realistic to increase the middle-income group to about 600 million by 2030, based on the current 400 million already at that level.
In addition, development imbalances will be addressed by promoting coordinated regional projects. In recent years, the Guangdong-Hong Kong-Macau Greater Bay Area, Yangtze River Delta, Beijing-Tianjin-Hebei area, Yangtze River Economic Belt, Yellow River Economic Belt and Chengdu-Chongqing metropolitan area — as well as the implementation of the Northeast Revitalization, the Belt and Road Initiative and other national strategies — all contain huge market space and development potential.
Second opportunity: Digital economy, industrial structure upgrading and the talent dividend.
In response to the pandemic, a new round of investment with new infrastructure at the core is playing a major role in promoting future industrial transformations and upgrades. This involves 5G, big data, cloud computing, industrial internet and intelligent manufacturing. It means the wide application of digital technology and the transformation of traditional industries — including agriculture and services — to achieve an overall industrial chain upgrade and improve quality.
In China, a population of 170 million who have a higher education and professional vocational training will be the human capital basis for the development of high-end manufacturing and modern service industries. The demographic dividend is shrinking, but a talent dividend will gradually appear in the future.
Third opportunity: Reform of state-owned enterprises to promote the development of the private economy.
The three-year action plan for state-owned enterprises is advancing steadily. At the end of last year, the Central Economic Work Conference proposed to break monopolies and promote fair competition in the market. I think antitrust should include both the platform economy and state-owned enterprises.
State-owned enterprises should have different functional positioning and play a greater role in the fields of the public good, public services, the national economy and industrial safety, as well as in the field of strategic technology. But in commercial competition, through the reform of mixed ownership, we can release more space to allow private enterprises to make greater achievements and let the market play a bigger role.
Fourth opportunity: Developing a silver hair economy and a healthy pension industry.
The latest data show that about 250 million people are aged 60 or over in China — 17.9 percent of the total population. The population of people over 65 is 180 million, or 12.6 percent of the country’s total. The scale of the elderly consumer market has reached 3.3 trillion yuan.
By 2050, China will have 480 million elderly people, or 34.1 percent of the population. It is accelerating toward a heavily elderly society, and its health pension industry is seriously inadequate. During the transition, demand for pension services is huge. Thus, improving the social security system for the elderly is a priority for Chinese society. In this regard, China should learn from Japan and Korea.
Fifth opportunity: Establishment of a “dual circulation” development pattern.
The new “dual circulation” development pattern means that the domestic economic cycle plays the leading role and the international economic cycle remains its extension and supplement. Domestic demand will be the strategic basis for promoting economic development.
Domestic demand includes investment and consumption, especially residential consumption. When per capita GDP reaches more than $10,000, consumer demand appears as a diversified trend. In addition, the development of the e-commerce industry enables products produced in remote rural areas to enter cities, and the two-way free flow of production factors between urban and rural areas releases huge market space.
Demand leads to supply-side changes and promotes industrial structure upgrading and investment structure optimization. But supply can also create new demand, each promoting the other and forming a new dynamic balance.
In this process, China will open wider and increase cooperation with its international partners. It will make greater contributions to the world economy. In recent years, even with the impact of the pandemic, China’s foreign direct investment and outbound direct investment have maintained steady growth.
International investors are optimistic about the Chinese market. Since 2019, China’s total retail sales of consumer goods have exceeded the United States, reaching 40 trillion yuan and making the country the world's largest consumption market.
Looking ahead, China will move from being the world’s factory to a huge market for the globe — from “made in China” to “created in China” and from commodity exports to capital exports. China’s future of economic development has great potential.