China’s late paramount leader Deng Xiaoping put in place a pragmatic reform and opening-up policy, paving way for the nation’s economic miracle. In terms of economic development, China has taken only 40 years to complete the industrialization path that the West had spent 200 years in achieving.
China has now become the world’s second largest economy. And the nation is already the world’s No.1 in terms of GDP based on purchasing power parity (PPP). China’s nominal GDP is likely to surpass that of the US within 7 to 10 years. But its per capita GDP is still way below that of developed economies. If China can sustain a 4 percent growth in real GDP for next 20 to 30 years, its economy may exceed that of US plus EU. Imagine what sort of global influence China would have by then.
US President Donald Trump has taken various measures against China. Vice president Mike Pence, in many speeches, had even described China as America’s biggest enemy. It has become clear that Washington will spare no effort to contain China’s rise.
Trump has launched a war against China in relation to trade and technology. Meanwhile, monetary policy adjustments by the US Federal Reserve had given China a hard time.
However, Trump is not clear about his strategic goal and he is unwilling to pay the price — economic recession and a bearish stock market due to backlash from the trade dispute.
Michael Pillsbury, a senior fellow and director for Chinese strategy at the Hudson Institute, said in an interview with Hong Kong media that as long as the US keep economic, military and technological supremacy, and “it is a good China, it is not a bad thing that China surpasses the US.”
In my opinion, the situation may not be as per Washington’s expectations in the long run as China is set to challenge America’s supremacy in all areas sooner of later.
“If China really succeeds in its reforms, and if it reduces the role of the Party and really reforms its economy, society and government, that would be a good China,” Pillsbury said. I don’t believe Beijing will meet all these requirements either.
That said, I would applaud some of China’s recent policies, such as the tax cut. Also, deleveraging efforts since 2017 have managed to cap the overall debt at 270 percent of the GDP.
Sale of state-owned assets is another good move.
Top air-conditioner maker Gree Electric Appliances Inc. of Zhuhai (000651.CN) said recently that its state parent intends to sell a 15 percent stake. There will likely be more similar asset sales in the future.
Consumer goods is one area where I believe private firms would do better. In the technology sector, if the government can reduce control over some of the state-owned players, it can help make the firms more efficient and also ease foreign concerns.
The full article appeared in the Hong Kong Economic Journal on April 17
Translation by Julie Zhu
[Chinese version 中文版]
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