Will the Chinese economy continue to develop at high growth rate? How should China adjust its industrial mix and ensure a high employment rate? Famous Chinese economist Fan Gang, director of the National Economic Research Institute, answered these questions at a recent forum in Beijing.
Q: Will the Chinese economy continue to maintain a high growth rate in the coming years?
Fan Gang: The Chinese economy will continue to develop at a high speed, and may even accelerate a little. What does this mean for China? Last century and in the early 21st century, the Chinese economic growth rate was about 8 percent on average without inflation or deflation. In the coming years, the growth rate will be close to 9 percent or even higher.
Q: What is the reason for your prediction?
Fan Gang: First of all, after 20 years of reform and opening up, China's economic system is still changing, technology is still advancing and enterprise efficiency continues to increase. For example, every year for the last decade, the total factor productivity (TFP) growth rate of Chinese enterprises has been over 6 percent, compared with 3 or 4 percent in developed countries.
Secondly, various investments are enabling China to accumulate more capital. Domestic savings are substantial, foreign investment is significant and China's foreign exchange reserves are huge. With the trade surplus, a large amount of foreign investment (including foreign investment) in Chinese shares and with Chinese enterprises listing on overseas market, total investment has increased. Investment increases boost the growth rate.
The third reason for my prediction is only temporary �C the surplus production capacity which currently exists in some industries. If we could make good use of this surplus production capacity, the economy would grow faster. Based on these three considerations, I think China's economic growth rate will be around 9 percent. And with the proper policies in place, there will not be serious inflation or deflation. I expect this to be the case for at least the next few years.
Manufacturing industry in China still shows good momentum
Q: What do you think of adjustments to the industrial mix during the economic growth process?
Fan Gang: If China wants to continue to grow, it must not always be adjusting its economic structure. At the core of growth mode change is improvement in efficiency, but this does not mean China's economic structure will immediately be comparable to developed countries. For example, China has a lot of labor-intensive manufacturing industries showing strong momentum whereas a country like the US can no longer make such industries economically viable.
Innovation is a broad concept; its scope not only includes a technology or a product, but the entire definition of technology, process, operation, management and marketing. We should continue to concentrate on traditional industries. We can take a greater share in the world market until we are able to create a reputable international brand. Our traditional industrial advantage could last for dozens of years yet.
From this point I view, I don't agree with the idea of upgrading the industrial mix, but we can expand industrial mix. We should encourage rural migration to source workers for industry. As for high-tech industries, we should work hard to learn more and create more jobs. Only by doing so can we resolve the problem of rural development, farmer employment and agricultural development in order to narrow the income gap between rural and urban areas and realize the dream of overall economic development.
Sufficient rate of employment has not been achieved
Q: How do you think high growth will help to ensure the sustainable development of the Chinese economy?
Fan Gang: Judging from global economic development, China is still backward, and there is still a long way to go before China achieves sustainable growth. We must consider economic and enterprise development issues from a domestic perspective.
China hasn't completed its first stage of development, and that is the stage of adequate employment. There are still 200 million laborers who need to be transferred from rural areas. We haven't finished this process. We still have a labor advantage. Why don't we continue to use such an advantage to make more money? As long as people want to wear shoes and socks, we will be able to make money from our advantage. We need those employment opportunities. Labor-intensive industries can play a major roles in solving our social, rural and employment problems. These problems are fundamentally linked to low income earners. When these people begin work, they do not start as IT engineers, they join labor intensive industries.
I think there is still great opportunity for development in labor intensive industries in China, which will help meet the demand for jobs. We shouldn't regret what we have done. Take for example American supermarket chain Wal-Mart, one of the richest companies in the world. Although the family that founded and control Wal-Mart have divided their property, if they combined their wealth, they would be one of the richest groups in the world. I think China's labor intensive industries also have the potential to be some of the richest in the world. Currently, per capital GDP in China is less than US$2000. Our GDP structure should not be the same as the US': if it was the same, it might be a failure. When we think of our future, we have to think about what is consistent in our changing world to ensure stable, sustainable development. If we are not persistent, even a viable industry may not be sustainable.
China is still a backward and poor country. Forty percent of its labor force still lives in rural areas. It is a tremendous task to create jobs for those people. If China develops faster, it is possible the size of the economy can again be doubled in the next five years, which help to solve many problems.
By People's Daily Online