According to the latest information published by the Financial Times, China accounted for 17 percent of global production in 2015, up from only 2.3 percent in 1980, while the United States accounted for 16 percent, and Brazil, India and Russia only 13 percent if put together, suggesting that China has already become the world’s largest economy.
China’s economic size might have surpassed that of the US by 1 percent, but let’s not forget that there are 1.3 billion people living in China, compared with only 300 million in the US, which means with both countries having a similar number of dishes on their dinner tables, there are 13 people in China to share them, while there are only three in the US.
Therefore, the two major economic questions facing China right now are: 1. How to increase the number of dishes, or simply put, how to raise production efficiency? 2. How to distribute these dishes among the entire population?
Last year, prominent French economist Thomas Piketty pointed out in his latest 700-page book that for most of the time in the 20th century, the biggest beneficiaries of the continued growth of the global capitalist economy were those who controlled the capital market rather than the average individual in the workforce.
In other words, the unequal distribution of wealth dominated world economic development throughout the last century. Piketty’s conclusion is simple: while world leaders are focusing on facilitating development and raising economic efficiency in their countries, they should also be more mindful of the negative implications of unequal distribution of wealth for their people.
There are a lot of ways to boost economic efficiency. Many capitalist economists take the view that once labor and capital are allowed to flow freely, the free market will start to take on a life of its own, and automatically achieve efficiency in production using scarce resources.
In general, Hong Kong is more economically efficient than cities on the mainland. However, although Hong Kong has a free labor and capital market, our market actually isn’t that “free” when it comes to land sales.
Despite the fact that Hong Kong is three to four times bigger than the mainland in terms of GDP per capita, and the monthly salary of our chief executive is 27 times higher than the president of the People’s Republic of China, it remains uncertain whether Hong Kong’s economic performance can stimulate growth on the mainland, as there are still a lot of unquantifiable elements that can affect the outcome.
There are a lot of uncertainties on the mainland, too, as there are numerous, equally important and sometimes even conflicting priorities on the agenda of Beijing, such as keeping the economy growing at a rate of 7 percent annually, reducing the share of manufacturing industry in the overall economy and increasing that of the service industry, internationalization of the renminbi, reducing the country’s reliance on exports and boosting domestic demand, deregulation of the capital market, and the recent “one belt, one road” strategy.
The degree to which Beijing is able to balance these priorities will determine the future of China’s economy.
On the other hand, if China really wants Hong Kong to exert more positive influence on its economic development, then it must make sure it is able to utilize our local talent carefully and appropriately.
This article appeared in the Hong Kong Economic Journal on Sept. 24.
Translation by Alan Lee
[Chinese version 中文版]
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