The Shape of China’s Future Growth: Challenges and Reforms
This analysis explores the current and future growth trajectory of China's economy, highlighting critical factors such as the transition from low-cost, export-led growth to a model emphasizing quality and innovation. It addresses issues like the urban-rural divide, environmental degradation, and the dominance of the public sector. Key reforms in fiscal policy, financial markets, and social security are discussed as necessary steps towards sustainable development. The relationship between Hong Kong and Guangdong is also examined for insights on economic integration and cooperation.
The Shape of China’s Future Growth: Challenges and Reforms
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Presentation Transcript
The Shape of China’s Future Growth KC Kwok 8 September, 2008
Many of the success factors have/about to run their course • Low cost, export-led growth • Investment-led growth • Emphasis on manufacturing • Catching up with technology • Quantitative expansion, crude growth • Growth comes first • The capacity of the world to accommodate China’s growth
Unbalanced economy • Increasing disparity between • urban and rural • the east and the west • haves & have-nots • Investment driven growth • Dominance of public sector • Environmental degradation • Increasing trade surplus and foreign reserves
From “Fast & good quality” Low cost as competitive edge Emphasis on manufacturing Attracting in Economic growth comes first To “Good quality & fast” Raise innovative capability Improve economic structure (develop services industries) Going out Harmonious society; improve citizens’ livelihood; enhance administrative capabilities Changing the mode of economic development
Key ongoing reforms • Further administrative reform • Fiscal and taxation reform • Financial market reform • SOE reform & facilitating non-state sector development • Development of factor markets • Build up social security system • Incentive system for environmental improvements
Financial market reform & development • Financial market reform & development lagging behind rest of the economy - costs and risks • Benefits of financial market development • Role of Hong Kong • Relationship between HK & Shanghai • Other financial centres
Need to grow the private sector • Public sector still getting a disproportionate share of China’s growth • SOE dominance in many sectors • rising share of government revenue in GDP • rises in asset value accrue largely to public sector • The development of private sector helps to • improve efficiency • increase private investment • increase consumption of services
Regional development • Yangtze River Delta • Pearl River Delta (Pan PRD) • Bohai region • Revitalizing the Northeast • Developing the West • Rise of the middle • Taiwan Strait economic region • Other sub-regions
Medium-term growth drivers • Demand side drivers • Quantitative and qualitative improvements in consumption • Urbanization • Investment in infrastructure and industrial upgrading • Supply side drivers • Further liberalization of economy • Economic re-structuring • Further reform of government
Guangdong-HK economic integration • complementary economic relationship under“one country, two systems” • momentum for further cooperation • GD’s economy is at a turning point • GD is HK’s market, hinterland & possibly conduit for the rest of China • HK is Guangdong’s international contact • HK’s services capabilities could help GD to restructure its economy • HK’s public services are something GD could learn from
