The Chinese economy: 20 years past and future
Editor’s Note: In 2001, China joined the WTO. In the same year, the Boao Forum for Asia was also founded. The past 20 years have seen miraculous economic growth in China. What are China’s secrets for keeping its economy booming even in the face of an epidemic? John Ross, Senior Researcher at Chongyang Institute of Financial Studies, Renmin University of China, shares his views with CGTN. The opinions expressed in the video are his own and do not necessarily represent the views of CGTN.
The past 20 years have seen a dramatic transformation of the Chinese economy. Twenty years ago, China was not a very important part of the world economy – it had just been admitted to the WTO. Now it’s the second largest economy in the world if you measure today’s prices, and it’s the largest economy in the world if you measure it in purchasing power parity.
Therefore, it has a huge impact on the global economy. If you take the IMF projections for 2020 and 2021, China will account for an astonishing 60% of global economic growth. If you take the whole period up to 2025, China will account for just over 30% of global economic growth compared to 10% for the United States.
The secret of the situation is, firstly, that it is fundamentally a socialist economy, which therefore means that it combines not only the private sector, but also the state sector of the economy. And that gives it a big advantage over Western economies, which really only depend on the private sector. Or, as President Xi Jinping puts it, China is ready to use both the visible hand and the invisible hand. In addition, it invests over 40% of its economy, nearly double that of the United States government, for example. And therefore, these elements mean a very rapid growth of the economy.
Then the immediate benefit is a very rapid recovery from the pandemic. If we are sitting here at the moment, the virus is not active in China. There are only tiny, small epidemics, whereas in the West the virus is spreading all the time, and the situation is very dangerous. Therefore, the economy cannot be opened quickly. So, what brings together the importance of the Boao Forum for Asia is that it showcases China’s long-term economic growth and the huge new role it is playing in the world. And second, China’s success in 2020 in battling the pandemic, which makes it the main driver of growth in the global economy right now. Obviously, the Boao Forum for Asia is very important in this context.
The big challenge is that China is on the verge of becoming a high-income economy by World Bank standards. China in 2020 has its own domestic goal of moderate prosperity. But for international comparisons, it is more practical to use the World Bank standard of a high-income economy, which is just over $1,000 GDP per capita per month. China will become a high-income economy in 2022 or 2023 according to this criterion.
This will transform the global economy, as the population of existing high-income economies is 16% of the world’s population. But China alone accounts for 18% of the world’s population. So China will more than double the number of people living in high-income economies. The big challenge is the diversification of the economy. When an economy grows, people really only care about having enough to eat in the most extreme cases, having decent housing, or being able to have free time.
But once you get to a high-income economy, the proportion of the economy spent on food or even housing will drop. People have much more complicated needs, cultural needs and travel needs. China has become the largest tourism economy in the world in terms of number of outbound tourists, education, culture, advanced healthcare. The whole economy will become much more complicated, and that is the fundamental challenge of the situation.
On top of that, we are entering a very critical time for climate change. Last year, President Xi Jinping announced China’s climate change goals, but now there is a new period of discussion on international climate change.
Fortunately, the Biden administration is much more sensible than the Trump administration. It comes back to the Paris climate agreement. This should lead to a discussion between China and the United States, the world’s two largest economies, about what to do about it.
This is a very serious problem, because the issue of climate change will be solved in the next five years. We cannot wait 10 or 20 years. So that’s another new element in the situation.
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