On the whole, I personally deem that humankind has anyway prevented the worst thing from occurring during the current financial crisis, though I’m not so optimistic with the global crisis as some others. To date, the most crucial thing people should think of is not today, but the post-crisis days. I hereby sum up five major trends of global economic growth in the post-crisis era, which pose not only challenges but also opportunities.
First, the consumption rate will cut and savings rate will rise in leading developed nations around the world. One of the deeper reasons for the high consumption rate and lower savings rate in the United States over recent years was owed to a huge financial bubble and an extremely-imbalanced economic structure in existence under its previous financial setup.
After a huge bubble burst in the crisis, people have come to see drawbacks intrinsic in the financial setup and once again attached importance to the financial monitoring, or the supervision of financial activity, financial institutions and leverage rates. Consequently, the savings rate will relatively rise and consumption rate will relatively decline in the U.S.
As for China’s economy and enterprises, the greatest challenge they face is how to cope with such changes and how to adjust or regulate the savings rate and consumption rate from the setups of Chinese taxation and distribution and from the long-term development policies. In so doing, Chinese economy will go on relying on the export market to spur its growth on one hand and, on the other hand, it will hinge on its own consumption demands and proceed to open up the country's domestic market.
Second, China should naturally promote its banking sector. For decades, the global expansion of banking business has been at risk as the financial sector broke away from the basis of real economy. The nation’s financial industry is quite backward and needs to be developed, and this is beyond any doubt. China is still in need of further expanding its manufacturing industry. Despite a slow profit return and a low profit revenue ratio, the industry faces smaller risks however. The global financial crisis has negatively affected the manufacturing industry, but the banking sector and high-end service industries like finance and entertainment were hit most seriously.
Does China’s manufacturing sector still have an adequate space for expansion? General speaking, service industry as a whole depends on or is aided by the rapid urbanization and industrialization of economies. As is known to all, a gradual expansion of the banking sector depends on an increase in the income of most of the population. As the manufacturing industry is much more difficult to develop with a smaller space, so the space for the growth of financial institutions and other trades will also become increasingly limited.
China should work hard to develop newly emerged industries, including service business, but the low-end industries is the basis for the long-term growth of its economy. As long as needy people on earth account for the majority of the population, low-end industries will have a bigger market share and, as a matter of fact, the biggest global market is still the small commodities market. So, people should proceed from this industry to develop top brands so as to gradually replace such exquisite luxuries as Italian shoes and hosiery.
Third, with increasing fiercer market competitions around the globe, China is sure to face more serious and much tougher competitions since other newly emerged economies are also seeking their own expansion, and so special attention should be given to the development of every trade.
Fourth, low-carbon economy is the irreversible trend which will create a new economic growth point. In order to embrace the era of low-carbon economy, a great deal of existing production equipment or facilities has to be renewed or replaced. So, China will also take the new road and this initiates a great trend, and the country should seize opportunity to gain a market share accordingly.
Fifth, since newly-emerged nations will take a greater market share in the post-crisis era, people should widen their worldwide vision and be acquainted with more up-to-date knowledge on these markets, so as to help Chinese enterprises seek a big expansion on the global market, and this is also a more vital, crucial area for the advancement of Chinese economy in the post-crisis period.
By People’s Daily Online and contributed by Dr. Fan Gang, vice-president of the Chinese Economic System Reform Research Association and director of the National Economic Research Institute.