May 26, 2023
TOKYO – China is expected to overtake the United States by 2035 to become the world’s largest economy, based on both countries’ current growth trajectories, said prominent Chinese economist Zhu Min, a former deputy chief of the International Monetary Fund (IMF).
However, he added, rather than fixating on numbers or the timeline, what is more key is the quality of China’s future economic growth – one that will benefit more ordinary Chinese.
And the way to do that, he said, is for Beijing to push ahead with its new growth model. It is one driven by domestic spending rather than exports, value-added manufacturing through adopting digital technologies, and going green so that it can achieve carbon neutrality.
Dr Zhu was addressing a question on when the Chinese economy could overtake the US’ at a summit, Future Of Asia, organised by Japanese media giant Nikkei in Tokyo on Thursday.
He did some back-of-envelope calculations: Based on the assumption that America’s economy grows at 2 per cent to 2.5 per cent a year, and China’s at 4 per cent to 4.5 per cent, the milestone could take place in 12 years.
His prediction slightly lags behind other forecasts, which range from 2030 to 2033. But some of these projections have also been pushed back, largely as a result of the Covid-19 pandemic and ensuing lockdown in China.
Said Dr Zhu, who is now vice-chairman of Beijing-based think-tank China Centre for International Economic Exchanges: “Don’t pay too much attention to aggregate GDP.”
He noted that China’s per capita gross domestic product is just a quarter that of the US, with enormous room to improve individual lives.
“In China, we don’t make surpassing US the target. We want to make sure that the quality of growth is there, not necessarily the number or how fast we can pass it.”
What he is more seized by is how China’s current model – with its significant focus on investment, the property market and exports – “does not work very well”.
He outlined some of the problems: China no longer has an unlimited supply of cheap labour as its birth rate declines, and there is a global slowdown in demand for its goods.
Since dismantling Covid-19-era curbs, the Chinese government has moved to spur domestic demand to take on a bigger role in the economy. But this has proven to be an uphill task – most Chinese households still prefer to save than spend, due to job and income concerns.
To tackle this, said Dr Zhu, China will have to step up on healthcare and social security coverage “so that people feel safe about consuming today”.
Other efforts, such as in achieving carbon neutrality, are under way. For instance, solar power generated in Sichuan is now transmitted to Henan, where its cost is lower than that of coal power. Henan is a coal-producing province.
“That tells us that there can be a cost-effective way forward – that coal can be replaced, it will be replaced,” said Dr Zhu.