According to The World Bank, China has had a remarkable period of rapid growth shifting from a centrally planned to a market-based economy. However, new information suggests China’s economy is set to gradually slow down over the next few years, and may require action to ensure this has a productive outcome. At the G20 conference held in Shanghai last week, many economists and global finance ministers met to discuss the impact of China’s economy on the rest of the world, as well as addressing how Asia may drive global growth. China’s economic performance over the past 30 years has been astounding and a report from The World Bank suggests China is well-positioned to join the ranks of the world’s high-income countries over the next 15-20 years.
China has the largest population in the world, and the majority live in top-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen. As China has a large agricultural industry, these cities provide more opportunities for work beyond farming in the rural parts of China. Through industrialisation, China has become the world’s manufacturing hub, as well as a major trading nation. Besides agricultural production, China is also a major mineral producing country and is the number one producer of coal. Overall, China produces one third of world agricultural products and supplies nearly 50 per cent of global industrial goods. According to a recent publication, China offers the golden opportunity to rethink the entire theory of economic development as the country has achieved much success during the industrial revolution.
The G20 meeting summarised the changes in China’s economy were as a result of reform measures and new regulations which have limited some aspects of growth. This may be productive for the country, as it may re-focus the government on other areas such as helping enterprises reduce costs to protect against financial risk as well as promote more sustainable growth. Furthermore, China is attempting to move from an export-led nation to one led by consumption and services, which may require some work to rebalance the economy following this change in direction. An innovative aspect of China’s transformation from manufacturing to services is the environmental benefits, such as minimised pollution in major cities such as Beijing or Shanghai. As a major producer and user of coal, many cities in China are smoggy due to the number of factories in the area and the use of coal for energy. Therefore, changes in the manufacturing industry may have a productive impact on the health of Chinese people living in urban areas.
According to the Chinese Ministry of Finance, they intend to work with the G20 to strengthen growth, investment and financial stability into the future. They intend to achieve this by utilising policy tools to support economic activity and ensure price stability. In addition to this, they claim to be aware of the environmental challenges facing China today and intend to work on improving this by implementing an agenda for sustainable development. Their transition from manufacturing to a services economy may facilitate them to achieve balanced growth and support in create a more innovative, flexible and resilient economy than it is at present. As China may still be considered a developing country despite its rapid growth, the Ministry of Finance claims their new framework with the G20 addresses specific challenges associated with developing countries.
Going forward, China may face a number of challenges as the economy continues to transition, however, China’s track record in rapid transformation suggests it may possess the strength to persevere through changing times and evolve to meet new regulations.
What are the productive aspects of rapid industrialisation in China?