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China 2049: Economic Challenges of a Rising Global Power

Aug 24-2020   



In the 146th edition of Langrun Policy Talk, Prof. Yao Yang, Dean of the NSD, spoke on the growth logic and potential of the Chinese economy. The webinar was jointly held by the NSD and Peking University Press and centered around discussions on China’s economic outlook in the face of the compounding effects of the pandemic and new international challenges. The event also saw the formal launching of a new book by Prof. Yao and two co-authors, David Dollar and Prof. Huang Yiping of the NSD, with the title China 2049: Economic Challenges of a Rising Global Power.

 

In the three decades before the initiation of the reform and opening up policy, China primarily relied on ‘unconventional economic and social policies’, said Prof. Yao. In lieu of adhering to comparative advantages, as conventional wisdom might have it, China opted to double down on the heavy industry despite limited capital stock and low per capita income. Such an undertaking pulled off outstanding accomplishments, notably outsize capital accumulation; yet it was fraught with problems such as neglection of the light industry and constraints on the living standards of both urban and rural residents.

 

In the era of reform and opening up, China has been adopting the policy advice of neo-classical growth theory with flexibility. The core of the policy advice encompasses three facets: mobilizing the labor force, capital accumulation, and technological advancement. Some meta-analysis claim that total-factor productivity growth has merely contributed 20% of China’s economic growth. But Prof. Yao questioned the yardstick being used. If measured with the variation rate in wage and capital return, the contribution ran to as high as 41% in the period from 1996 to 2015, much in line with that of developed countries.

 

For the next 30 years, China 2049 aims to answer two questions: How big will the growth potential be? And will China realize its pre-set goals? Based on the convergence theory, Prof. Yao and his co-authors focused on three convergence conditions, namely urbanization rate, education level, and labor to population ratio, and came up with three growth scenarios. The Chinese economy will slow down continually from 2020 and onwards, with an even sharper decline from 2025 to 2027. Nonetheless, it will still post an average growth rate of 4.7% in the three-decade span. In 2030, it will surpass the US economy in size, provided that the latter grows at 2% annually. Furthermore, by assuming the high-growth scenario of the Chinese population, per capita income will be about 60% of the US one in 2050.

 

China 2049: Economic Challenges of a Rising Global Power

Aug 24-2020   



In the 146th edition of Langrun Policy Talk, Prof. Yao Yang, Dean of the NSD, spoke on the growth logic and potential of the Chinese economy. The webinar was jointly held by the NSD and Peking University Press and centered around discussions on China’s economic outlook in the face of the compounding effects of the pandemic and new international challenges. The event also saw the formal launching of a new book by Prof. Yao and two co-authors, David Dollar and Prof. Huang Yiping of the NSD, with the title China 2049: Economic Challenges of a Rising Global Power.

 

In the three decades before the initiation of the reform and opening up policy, China primarily relied on ‘unconventional economic and social policies’, said Prof. Yao. In lieu of adhering to comparative advantages, as conventional wisdom might have it, China opted to double down on the heavy industry despite limited capital stock and low per capita income. Such an undertaking pulled off outstanding accomplishments, notably outsize capital accumulation; yet it was fraught with problems such as neglection of the light industry and constraints on the living standards of both urban and rural residents.

 

In the era of reform and opening up, China has been adopting the policy advice of neo-classical growth theory with flexibility. The core of the policy advice encompasses three facets: mobilizing the labor force, capital accumulation, and technological advancement. Some meta-analysis claim that total-factor productivity growth has merely contributed 20% of China’s economic growth. But Prof. Yao questioned the yardstick being used. If measured with the variation rate in wage and capital return, the contribution ran to as high as 41% in the period from 1996 to 2015, much in line with that of developed countries.

 

For the next 30 years, China 2049 aims to answer two questions: How big will the growth potential be? And will China realize its pre-set goals? Based on the convergence theory, Prof. Yao and his co-authors focused on three convergence conditions, namely urbanization rate, education level, and labor to population ratio, and came up with three growth scenarios. The Chinese economy will slow down continually from 2020 and onwards, with an even sharper decline from 2025 to 2027. Nonetheless, it will still post an average growth rate of 4.7% in the three-decade span. In 2030, it will surpass the US economy in size, provided that the latter grows at 2% annually. Furthermore, by assuming the high-growth scenario of the Chinese population, per capita income will be about 60% of the US one in 2050.