China’s New Era: Beginning & Sustainability
Apr 06, 2018 03:14PM ● Published by Makayla Gay
By Xiaobo Hu
Director, Center for China Studies, Clemson University
China’s New Era under President Xi started at a high point for continued economic development. The statistics early this year also presented a very positive economic performance at 6.9 percent annual growth rate for its GDP. The growth rate rebounded after a couple of years of slower growth and this time it even improved on the government’s soft target rate of 6.5. China is not slowing down.
Indeed, in a recent article, Jim O’Neill, former chairman of Goldman Sachs Asset Management and former commercial secretary to the UK Treasury, listed some impressive facts about China. For instance, China grew another $1.5 trillion last year, counting a strengthening yuan.
Putting in a comparative perspective, by this growth, China in 2017 alone created a new economy the size of South Korea in nominal terms. It is twice the size of Switzerland and three times the size of Sweden. According to Jim O’Neill, Chinese consumers have added about $2.9 trillion to the world economy in the past seven years since 2010, which is larger than the entire economy of the United Kingdom. Along the expansion of China’s middle class, Chinese consumers travel around the world for products and services, luxury or basic, while their fast-growing domestic markets just could not catch up with their robust demands.
As the Year of Dog started, China’s economy, according to Jim O’Neill, was already two-and-half times larger than Japan’s, five times larger than India’s, six times larger than Brazil’s, and eight times larger than Russia’s. It is also larger than the entire Eurozone. As Jim O’Neill recalls, the four BRIC countries – Brazil, Russia, India, and China – were roughly on the same path for rapid development in 2000, and Japan was a way ahead of these emerging markets.
While China is not slowing down, however, this does not mean that China will have an easy path for further development. As Xi continues with his second term of office, China’s New Era faces challenges in maintaining a high speed at a high level of economic development. The size of the economy is no longer as what it was decades ago, and to maintain the same high speed of economic development means that China has to create the size of South Korea’s economy every year.
It seems that Xi is trying to exert a clear control over the policies and the government apparatus in order to ensure continual and smooth economic development. Whether China can continue to produce or not, the appetite of the Chinese middle class has grown tremendously. Now it constitutes close to 40 percent of China’s GDP and this proportion is still growing.
The growing Chinese market does help China to sustain its continual economic development. It is transferring China from solely a production house to a better balance between high production and high consumption. This in turn helps sustain healthy economic relations between China and the United States. It was recently reported that President Xi’s top economic envoy was in Washington, D.C. in early March to offer U.S. companies greater market access to the Chinese market, the bandwagon South Carolina companies should get on.
As a Brit, Jim O’Neill offered his advice to Britain: “British trade negotiators should take note: after Brexit, the Chinese market will be more important to the UK economy than ever.” He is right that “as China becomes increasingly important to the global economy, its upside and downside risks will continue to have far-reaching implications for the rest of the world.”