BEIJING, April 19,
2024 /PRNewswire/ -- A commentary by China's Diplomacy in the New Era
(chinadiplomacy.org.cn) on the topic of "Peak China".
Are you sure about 'Peak China?' Why China still has room to
grow
By Fabien Pacory
The world economy is experiencing what the World Bank calls "the
slowest half-decade of GDP growth in 30 years." As some of
China's key growth catalysts
weaken against this backdrop, a few stakeholders in the Western
economy have become defeatist and pessimistic.
Some believe that China will
soon get caught in the "middle-income trap" or even experience the
"Japanization" of its economy, characterized by low growth and
deflation.
Yet, a more subtle and nuanced look at China's economic aggregates and indicators
will lead us to a different conclusion. Taking a step back for a
new vista is crucial to gain greater clarity of the whole
landscape. When we do this, it becomes clear to us that
China's development is just
entering a more mature phase. The pessimism about the Chinese
market and economy is excessively undue.
China's manufacturing activity
rebounded in March, ending a five-month decline and adding evidence
that China's industrial sector is
gaining momentum for an economic recovery. The country's resilient
economy still has room to grow.
China's gross domestic product
exceeded 126 trillion yuan
($17.51 trillion) in 2023, an
increase of 5.2% over the previous year and outpacing the global
growth rate of about 3%. The Chinese economy is expected to
contribute more than 30% to world economic growth, remaining the
largest engine of the world economy in 2024. Despite cyclical and
structural challenges, China has
introduced a series of policy measures to stay dynamic and
resilient. The country aims for modernization through high-quality
development, with science and technology progress emerging as a new
growth driver. This approach has developed a "magnetic force" in
the Chinese economy's "innovation field."
The advancement of emerging and future-oriented industries, such
as hydrogen power, pharma-tech, new materials, bio-manufacturing,
and biotech, is set to not only enhance productivity in these
industries but also boost and transform traditional sectors. This
is creating a "new Chinese ecosystem of future factories"
characterized by the integration of the knowledge economy,
intelligence, and automation, steadily fostering new growth
drivers. It represents a new pattern of
"knowledge-industrialization" that is gradually taking shape.
We should try to understand this new economic situation and see
in it an innovation-driven model based on innovative practices and
policies in China. A significant
part of the new policy focus is on ensuring economic adaptation
that will allow sustained long-term development. In China, there has recently been much discussion
about the development of "new quality productive forces," even in
the country's urbanization system. For example, China underwent the fastest pace of
urbanization in human history over the last four decades, with
urbanization rate going from 20% in 1981 to over 66% by the end of
2023. This process drove huge changes in economic productivity and
created new demand for housing and infrastructure. The recent
debate is whether China has
already reached peak urbanization.
The Chinese government has primarily advocated for a new
approach to urbanization called "people-centered new urbanization,"
emphasizing quality over speed. This approach includes
"urban-to-rural" development rather than just moving people from
rural to urban areas. This will also boost new urban growth
patterns and smart urban evolutions.
China is exploring new areas
for growth, moving to the next stage of its development, and is
currently undergoing a major economic transformation from "growth
at all costs" to "high-quality growth." This approach prioritizes
people and human resources. Policymakers have placed great
importance on unlocking "new quality productive forces" as a major
policy shift, setting the stage for China's advancement toward high-quality
growth, a transition to a digital economy, a consumption-driven
growth model, and greener growth.
Take, for example, the adjustment toward a consumption-driven
growth model, China still holds
many possibilities and solutions to unlock consumer potential. One
strategy is to reduce its high savings rate, which is significantly
higher than that of many countries. According to the OECD,
China's savings rate was around
34-35% of disposable income, compared to 7-13% in other major
economies. Boosting consumer confidence could free some of these
savings up for consumption, catapulting China's economy to new heights.
In Western media, discussions about consumption in China often highlight the perceived weakness
of the domestic market. However, overlooking this vast and
competitive domestic market is unwise. Regarding the domestic
market and digital platforms, social shopping platforms are
deploying new models that make the most of digital technologies and
harness the power of Chinese consumers. Foreign brands and
companies cannot disregard this challenging and competitive
environment because there is a lot to learn here for the future of
e-commerce. For example, in the e-commerce in China, the so-called "user-driven" innovation
has sparked functions that grow and improve on their own, offering
more than just economic benefits to meet changing desires of
customers.
Additionally, China's push
toward greener technology and standards, aligned with its
"dual-carbon" goal, sends a powerful message on sustainable digital
development practices.
In 2023, China's clean energy
sector — encompassing electric vehicles, lithium-ion batteries, and
photovoltaic products, collectively referred to as the "new three"
— significantly propelled the nation's economic growth. The sector
contributed an unprecedented 11.4 trillion
yuan, up 30% year on year, to China's GDP and captured the largest slice of
investment growth. China's clean
energy industry leads the global energy transition, accelerating
the country's development of new growth drivers, aiding in
achieving climate targets, and reshaping the global clean energy
landscape.
China also unveiled new steps
to counteract a slowdown in foreign direct investment (FDI),
including expanding market access. While foreign companies have
been hesitant to invest, fluctuations in China's FDI inflows are common, as FDI was
delayed during the pandemic and post-COVID period. However,
evidence suggests that foreign corporations are not leaving
China.
In particular, the digital economy is a fertile ground for "new
patterns of growth," with cooperative initiatives that can lead to
shared prosperity and accelerated progress toward achieving the
United Nations Sustainable Development Goals.
China has become the new
epicenter of the digital revolution, driven by massive investments
in R&D to reshape the country's economic structure. With an
acute awareness and vision, the country is stepping up its efforts
to cultivate new productivity drivers, channeling considerable
resources into artificial intelligence, the Internet of Things,
cloud computing, the 5G network, and specialized advanced
manufacturing zones. These efforts are expected to yield more
meaningful results within the broader framework of China's cutting-edge initiatives, including
advances in biotechnology, nanotechnology and new materials. The
convergence of these innovations can spur fruitful growth.
This growth underscores China's
robust innovations in digital technology, significantly
contributing to the digital economy's high-quality development. The
digital economy now exceeds 50 trillion
yuan, accounting for more than 40% of its GDP. This
achievement is bolstered by new science and technology clusters,
with China boasting more than 20
of the world's top 100 clusters, including Shenzhen-Hong
Kong-Guangzhou,
Beijing, and Shanghai-Suzhou,
which are ranked second, fourth, and fifth respectively. Over the
past four years, China has
invested in new types of applied research and experimental
development with a multi-sectoral approach. China could emerge stronger in the coming
years with new generations of solutions, improved services, and
consumer products featuring highly innovative specificities. This
is already evident in the field of pharmaceutical research and drug
development process, where some clusters are advancing different
processes of experimental development and knowledge management.
To sum up, China's transition
to an innovation-driven economy reflects its far-reaching strengths
across all angles of the innovation ecosystem, marking a
significant chapter in the country's enduring legacy of management
practices, creativity, and invention, with new spatial patterns of
development in multi-sector growth models.
China is a country with
significant vitality and the ability to make the right
adjustments.
"Peak China" is nothing but a distorted and misleading
narrative; it's certainly premature to talk about a "peak."
Fabien Pacory is executive vice president of the French
Chamber of Commerce and Industry in China.
China's Diplomacy in the New
Era
http://en.chinadiplomacy.org.cn/index.shtml
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