Ernesto M. Hilario
” Is the goal to overtake the US and become the world’s largest economy?”
We’ve been fortunate to have visited China five times since 2016 and seen first-hand the progress it has made in various areas of economic development. But how will China look like, say, in 10 to 15 years? What will be the main thrusts of its economic development in the next five years and until 2035? Is the goal to overtake the US and become the world’s largest economy by 2035?
Early this month, the Chinese People’s Political Consultative Conference National Committee and the National People’s Congress convened precisely to formulate the 14th Five-Year Plan (2021-25) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035. This year’s annual gathering of the two major political entities is deemed significant as it took place on the 100th anniversary of the Communist Party of China.
The 14th Five-Year Plan spells out several major targets and tasks for this year until 2025. One, to maintain healthy economic growth. Two, boost innovation. And three, foster a new development paradigm to advance rural revitalization, promote coordinated regional development, and deepen reform and opening-up.
A recent article in China Daily by Liu Qiao, Dean of the Guanghua School of Management of Peking University explains how these targets can be achieved.
To maintain healthy economic growth, the government would have to keep raising total factor productivity, because the total economic productivity of China is determined by three factors contributing to total production as measured by GDP: natural resources and capital input; human resources and labor input; and technological base.
To become a modern country, China’s total factor productivity should reach 65 percent that of the United States by 2035. Which means China needs an annual total factor productivity growth rate of 1.95 percent or more than that of the US to achieve the target. Since China has already accomplished industrialization in the past four decades, labor-intensive industries should no longer be the major driver of the economy. It would have to develop other engines, such as the digital economy and new infrastructure, to boost total factor productivity and drive the economy.
Moreover, China should focus on boosting domestic demand and increasing consumption, in order to expedite internal circulation, which is the mainstay of what has been called the new “dual circulation” development paradigm.
China would also have to enhance its advantages in manufacturing, which is important for the smooth functioning of its industrial and supply chains. Further reform and opening-up, and more efficient allocation of resources, will also increase total factor productivity.
To boost domestic consumption, the government must supplement household incomes and promote fairer distribution of wealth by, for instance, taking measures to bridge the urban-rural development gap and the income disparity between the rich and the poor. This is crucial as roughly 20 percent of China’s total workforce is expected to shift from agriculture to the service sector. In 2017, nearly 27 percent of the country’s total workforce was engaged in the agriculture sector, but the figure is expected to drop to 6 percent in 2035. Hence, the government has to address the housing, education and social welfare problems of the new workforce entering the service sector.
And finally, China has to make greater efforts to move up the global value chains, so as to accelerate the development of core technologies and reduce its reliance on imports. For instance, China has to import up to 85 percent of parts of semiconductors from other countries. Therefore, the government should more vigorously promote innovation and better protect intellectual property rights. The annual 7 percent increase in overall R&D over the next five years is a timely move in this direction.
This year, the Chinese government has set a GDP growth target of above six percent. But international institutions forecast that China’s economy may well grow at about eight percent.
Expounding on this, Premier Li Keqiang said that “we would certainly be happy to see robust growth, but we are also keenly aware that the economy has just recovered and there are many incomparable factors this year. What’s more, there is also great uncertainty in global economic recovery.”
“A projected target is not something set in stone. It intends to guide expectations. We will further consolidate the foundation of economic recovery, promote high quality development and make our development truly sustainable. This target should also be aligned with what we can accomplish next year and the year after next. We must avert wild swings in economic performance which will de-anchor market expectations,” he pointed out.
“A growth too fast will not be a steady one. We need a steady pace to sustain China’s development. What we hope for such a big economy as China’s is sustained and sound growth for the long term,” he added.
“The fundamental purpose of China’s development is to enable the Chinese people to lead a better life. Our country is still a developing one and there is still a long way to go before we can achieve modernization. We will continue to focus on running our own affairs well. China’s development will be a major contribution to world peace, stability, development and prosperity.”
I recall that our National Economic and Development Authority (NEDA) came out a while back with a development blueprint until 2040 that sees Filipino families living a comfortable life in their own homes, and with enough savings to travel to both domestic and foreign destinations, among other key targets. How does our own long-term development blueprint compare with that of China?
Source： Manila Standard 24-03-2021