Sustaining high growth
Updated: 2013-04-02 08:02
By Stephen S. Roach (China Daily)
New leaders have vision and strategy, but also need courage and determination to tackle entrenched resistance to change
After six years of weighing the options, China is now firmly committed to implementing a new growth strategy. At least, that's the message from the just-completed annual China Development Forum, one of China's most important dialogues with the outside world.
There were no surprises in the basic thrust of the strategy: a structural shift in China's investment- and export-led growth model toward a more balanced consumer-based and services-led economy. Such a transformation reflects both necessity and design.
It is necessary because persistently weak global growth is unlikely to provide the solid external demand for Chinese exports that it once did, but it is also essential, because China's new leaders seem determined to come to grips with a vast array of internal imbalances that threaten the environment, widen income inequality and exacerbate regional disparities.
The strategic shift is also a deliberate effort by Chinese policymakers to avoid the dreaded middle-income trap, a mid-stage slowdown that has ensnared most emerging economies. Developing economies that maintain their old growth models for too long fall into it, and China will probably hit the threshold in 3 to 5 years.
Three things from this year's China Development Forum deepened confidence that a major structural transformation that will enable China to avoid the middle-income trap is now at hand.
First, a well-articulated urbanization strategy has emerged as a key pillar of consumer-led rebalancing. Urbanization was emphasized by Vice-Premier Zhang Gaoli in the forum's opening remarks and again by Premier Li Keqiang at the closing, and considerable details were provided in many of the working sessions. Urbanization is a building block for consumption, because it provides powerful leverage to Chinese households' purchasing power. Urban workers' per capita income is more than three times higher than that of their counterparts in the countryside.
The urban population in China reached 52.6 percent in 2012, up from 18 percent in 1980, and it is expected to rise toward 70 percent by 2030. If ongoing urbanization can be coupled with job creation, a distinct possibility because of China's emphasis on developing its embryonic labor-intensive services sector, the outlook for household-income growth is quite encouraging.