Chinese School - Economy to sustain fast growth for 2 more decades

BIZCHINA / Center

Economy to sustain fast growth for 2 more decades

By Chen Weihua (China Daily)
Updated: 2007-06-11 09:00

Michael Spence: China's economy will sustain its fast growth for at least
two more decades.

China has been in a high growth mode since it started economic reforms in
the late 70s. Its almost three decades of high growth is the longest
among the 11 high-growth economies in the world and part of "a recent,
post-World War II phenomenon". And the Chinese economy will sustain its
fast growth for at least two more decades.

These are the words of no less a person than Stanford University
professor Michael Spence, who shared the 2001 Nobel Prize for Economics
with Columbia University professor and former senior vice-president of
World Bank Joseph E. Stiglitz and University of California (Berkeley)
professor George A. Akerlof.

In the post-War period, 11 economies have recorded high growth, with
eight of them being in Asia: the Chinese mainland, Hong Kong, Taiwan,
Singapore, Indonesia, South Korea, Malaysia and Thailand, Spence says.
Going by gross domestic product (GDP) figures, "high growth" means above
7 percent expansion, and an economy is said to have "sustained growth" if
it keeps growing for 25 years or more. Growth at such rates produces very
substantial changes in income and wealth.

The Chinese mainland is not only the latest example of a high-growth
economy, but it has also seen the fastest and largest increase in growth
in terms of population, says the senior fellow of Hoover Institution, a
top US think tank. India too has attracted a lot of attention because it
is entering a period of high growth.

"Though each growth model is different, they share certain features,"
Spence told the Shanghai Forum 2007 at the Fudan University in late May.
"In all cases, there is a functioning market economy with its price
signals, incentives, decentralization and enough definition of private
property ownership to enable investment."

A labourer installs a steel bar at a construction site in Kunming,
capital of southwest China's Yunnan Province, June 8, 2007. China's
almost three decades of high growth is the longest among the 11
high-growth economies in the world, says Stanford University professor
Michael Spence. [Reuters]

The high levels of savings and investments both in the public and private
sectors, resource mobility and rapid urbanization are the important
characteristics of China's high growth, says Spence, who is also the
chairman of the independent Commission on Growth and Development. The
commission was set up last year to focus on growth and poverty reduction
in developing countries. China's saving rate between 35 to 45 percent is
among the highest despite the relatively low level of income of its
people. Resource mobility has generated new productive employment to
absorb surplus labor in a country where 15-20 million people move from
the rural areas to the cities every year.

The most important feature of sustained high growth is that it leverages
the demand and resources of the global economy, says Spence. All cases of
sustained high growth in the post-War period have integrated into the
global economy because exports act as a major high-growth driver.

"The systematic reduction of barriers to trade and investment in the last
55 years and the dramatic fall in costs of transportation, information
and communications technologies have combined to raise the level of that
integration. It is the combined effect of these trends that has made the
global economy an increasingly powerful source of potential growth."

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