WHERE WILL CHINA GO NEXT? (The YALE SCHOOL OF MANAGEMENT ) China faces an immense challenge: it needs to continue growing its economy while shifting away from the manufacturing-led model that has fueled its growth in recent decades. At the same time, it has to address concerns over pollution, income inequality, and other social issues. Yale’s Stephen Roach argues that the rest of the global economy has a stake in whether China can successfully shift gears. Some recent economic data out of China suggests that the economy is gaining steam. According to both official government measures and the HSBC Purchasing Managers’ Index, the manufacturing sector expanded in August 2013. Meanwhile, the HSBC PMI measure of the service sector also showed strong growth. Overall GDP growth in the first half of 2013 was 7.6%. But the important question, according to many analysts, is not whether China is growing but how it is growing. Any statistic is subject to many interpretations, and this seems particularly true for the Chinese economy. Where one economist sees an unsustainable and unbalanced economy, with investment outstripping consumption, another sees the same imbalance as evidence of a salubrious shift toward an urbanized and mechanized China. What everyone agrees on is that the Chinese economy is going through far-reaching changes. The 12th Five Year Plan lays out the Chinese government’s blueprint for shifting to a sustainable growth model and avoiding the “middle income trap,” the point at which developing economies often stall out. It calls for increases in domestic consumption and the service sector, further urbanization, and investment in and development of key industries with an emphasis on innovation and clean technology. The New York Times recently provided a look at what these changes look like on the ground. A video feature told the story of one family in the province of Shaanxi, which had moved from a rural village to a new development in Qiyan as part of a government relocation program. The family describes buying new appliances and furniture—examples of the kind of consumption called for in the 12th Five Year Plan. However, several members of the family had not yet found work. The Chinese government expects more than 20 million people per year to make a similar transition. Stephen Roach, the former chairman of Morgan Stanley Asia and a senior fellow at the Jackson Institute for Global Affairs, explains that whether China can successfully shift its economy will have a potentially transformative impact on the rest of the world: “If China does the transformation from the producer, export-led growth model that relies on others to provide its major source of demand to more of a consumer-led model, it will become a source of growth for other countries around the world.” bcove.me/qkx76q2x
Posted on: Thu, 12 Sep 2013 04:12:21 +0000
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