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Will China Maintain High Economic Growth in the Coming 18 Years?
2004/05/22

  

       Compared with various economic quotas of developed countries, China still falls far behind, but there is much room for its economic growth.

       Figures listed by Xu Xianchun, an official with the National Bureau of Statistics, indicate that there is much room for China's economic development.

       --In terms of the per-capita GDP, which reflects the level of affluence of a country and the people's living standards, China ranks 140th in the world, although the global ranking of its aggregate economy comes sixth. In 2000, China's per-capita GDP averaged US$856, which was equivalent to 2.29 percent of' that of Norway, the champion; 2.32 percent of Japan, the runner-up; 2.44 percent of the United States that ranked third; and 2.49 percent of Switzerland that came fourth.

       --In terms of industrial structure, the tertiary industry of the United States takes up more than 70 percent of its GDP, while the rates of Britain, France, Germany and Japan have all exceeded 60 percent. The rate of China only stands at around 33 percent.
       
       --In terms of consumption demand, which is in direct ratio to economic development, the consumption rate (the proportion of consumption in the GDP) of the United States tops 80 percent and its investment rate is less than 20 percent, while the consumption rate of China only slightly exceeds 60 percent.

       The appropriate handling of the problems related to farmers and rural areas will boost the development of the national economy.

       China's rural areas have the biggest room for economic growth. Of the 16 basic monitoring quotas for a well-off society set by the Chinese Government in 1991, three had not reached the required standard 'by 2000. These include the per-capita net income of farmers, per-capita daily protein intake of farmers and the proportion of counties meeting the requirements for the rural elementary health care system. Since all the problems concentrate in rural areas, will the agricultural sector be a drag on China's effort to quadruple its GDP by 2020?

       Chen Xiwen, deputy director of the State Council's Development Research Center, assured that if the rural surplus laborers can transfer to other sectors and if the non-agriculture income of farmers can increase year by year, the agricultural sector, instead of hindering the development of the national economy, would become a positive factor to ensure economic growth.

       According to Chen, the GDP of the United States, Japan and some other developed countries was doubled in less than 10 years after it had reached USS1,000 billion. The circumstances of China, however, greatly vary from those of these countries after its GDP hit USS1,000 billion. First, while the majority of the people of these countries live in cities, nearly two-thirds of the Chinese people live in rural areas. Second, in terms of the ratio of agriculture in the GDP, that of Japan and the United States is less than 10 percent and less than 6 percent respectively, while that of China is 16.4 percent.
   
       The high proportion of rural population and the high ratio of agriculture in the GDP are both advantageous and disadvantageous to China's fulfillment of the goal of quadrupling its GDP by 2020. As the growth rate of agriculture is lower than that of the secondary and tertiary industries, the high proportion and slow growth of agriculture make limited contributions to the growth of the GDP. However, the proportion of agriculture in the GDP will decline gradually along with the steady development of the national economy. Large numbers of farmers will migrate to cities and towns, which suggests fairly great potentials exist for the growth of secondary and tertiary industries.

       To maintain the momentum of sound development, the employment of rural population should be handled properly. If the problems related to the employment and income of farmers are not well handled, the rural areas can hardly maintain stability and the tremendous potential for consumption in rural areas cannot be tapped.

       The process of urbanization should be quickened, in order to solve the problems of farmers and rural areas and explore room for further economic development. According to Chen, Chinese and foreign scholars have reached consensus that the Chinese economy has three growth points in the 21st century--new and high-tech industries, development of the western region and urbanization. How big is the room for urbanization? According to calculation, the per-capita investment is at least 40,000 yuan for completing a town with a population between 40,000-50,000. Take Longgang town in Wenzhou City, Zhejiang Province, for example. The predecessor of the town was three fishing villages with a combined population of 3,000. A total of 7 billion yuan was invested in the construction of the town, which began in 1984. The current population of the town has exceeded 120,000. "It will be an amazing achievement if China can create several thousand towns like Longgang," said Chen.

       China's persistence in reform and opening-up provides important guarantees for preventing the drastic fluctuation of the national economy.

       China enjoys good prospects for economic development. Between 1978-2002, the Chinese economy kept a high average annual growth rate of 9.5 percent. Will the momentum of rapid growth be maintained in the coming 18 years?
   
       The history of the development of Japan and the "four small dragons in Asia" shows that the growth rate of all these countries declined to varied extent after experiencing a high growth rate of around 9 percent for 20 years. The annual economic growth rate of Japan plummeted to only 2.81 percent between 1973-2000. Singapore, the Republic of Korea and China's Taiwan Province continued to maintain a relatively high annual growth rate of 7 percent, 5 percent and more than 6 percent respectively. Low or negative growth rate appeared only after the Asian financial crisis.
   
       China, also an Asian country, is experiencing the process of economic growth as the aforementioned countries and regions. Xu Xianchun, based on his own research, concludes that the Chinese economy can void the prolonged low growth of Japan after experiencing swift development. This is not only because China has tremendous potentials and vast room for development, but also the guarantee provided by its persistence in reform and opening-up.
   
       Moreover, China has accumulated a great deal of precious experiences and has strong capacity to control its economy, which enables it to prevent the drastic fluctuations of its economy. The chart of the growth of China's GDP presented by Xu indicates that big ups and downs had dominated prior to the 1970s, and that the tendency of steady growth has become increasing strong in recent years. "Though China still faces many problems, it has acquired a considerable material foundation and accumulated rich experiences over the past years. As long as the country maintains social stability, its economic growth rate won't decline suddenly," Xu concluded.


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