Understanding China's Economic Indicators

Since 1979 (when economic reforms began) to 2017, China's real gross domestic product (GDP) grew at an average annual rate of nearly 10%. According to the World Bank, China has “experienced the fastest sustained expansion by a major economy in history and has lifted more than 800 million people out of poverty.

China's economic system before the late-1990s, with state ownership of certain industries and central control over planning and the financial system, has enabled the government to mobilize whatever surplus was available and greatly increase the proportion of the national economic output devoted to investment.

Ever since initiating market reforms in 1978, according to the World Bank, China has shifted from a centrally-planned to a more market-based economy and has experienced rapid economic and social development. GDP growth has averaged nearly 10% a year, the fastest sustained expansion by a major economy in history, and has lifted more than 800 million people out of poverty. China reached all the Millennium Development Goals (MDGs) by 2015 and made a major contribution to the achievement of the MDGs globally. Although China’s GDP growth has gradually slowed since 2012, it is still impressive by current global standards.

With a population of 1.3 billion, China is the second largest economy and is increasingly playing an important and influential role in development and in the global economy. China has been the largest single contributor to world growth since the global financial crisis of 2008.

Yet China remains a developing country (its per capita income is still a fraction of that in advanced countries) and its market reforms are still incomplete. According to China’s current poverty standard (per capita rural net income of RMB 2,300 per year in 2010 constant prices), there were 55 million poor in rural areas in 2015.    

Rapid economic ascendance has brought on many challenges as well, including inequality; rapid urbanization; challenges to environmental sustainability; and external imbalances. China also faces demographic pressures related to an aging population and the internal migration of labor.

Significant policy adjustments have been made and understandably many are still required in order for China’s growth to be sustainable. Experience shows that transitioning from middle-income to high-income status can be more difficult than moving up from low to middle income.

China’s 13th Five-Year Plan (2016-2020) forcefully addressed these issues. It highlighted the development of services and measures to address environmental and social imbalances, setting targets to reduce pollution, to increase energy efficiency, to improve access to education and healthcare, and to expand social protection. The annual growth target in the 13th Five-Year Plan is 6.5 percent, reflecting the re-balancing of the economy and focus on the quality of growth while still maintaining the objective of achieving a “moderately prosperous society” by 2020 (doubling GDP for 2010-2020).

Building on a cooperative relationship spanning over 35 years, the World Bank Group’s Country Partnership Strategy (CPS) back in November 2012 supported China’s goal of a harmonious society. It was affirmed by a joint study, China 2030 , prepared by the World Bank and the Development Research Center of the China State Council. The Bank Group’s CPS focused on three main areas of engagement:

• Supporting greener growth, by helping China shift to a more sustainable energy path; enhancing urban environmental services; promoting low-carbon urban transport; promoting sustainable agriculture practices; piloting sustainable natural resource management approaches; demonstrating pollution management; and strengthening mechanisms for managing climate change.
• Promoting more inclusive development, by increasing access to quality health services and social protection; strengthening skills development programs, including for migrant workers; enhancing opportunities in rural areas and small towns; and improving transport connectivity for more balanced regional development.
• Advancing mutually beneficial relations with the world, by supporting China’s South-South cooperation and China’s role as a global stakeholder.

China is a populous nation in East Asia as you may realize, whose vast landscape encompasses grassland, desert, mountains, lakes, rivers and more than 14,000 km of coastline, with a:

• Gross domestic product: 12.24 trillion USD (2017) World Bank
• GDP per capita: 8,826.99 USD (2017) World Bank
• GDP growth rate: 6.9% annual change (2017) World Bank
• GNI per capita: 16,760 PPP dollars (2017) World Bank
• Gross national income: 23.24 trillion PPP dollars (2017) World Bank
• Internet users: 38.4% of the population (2011) World Bank

China's GDP grew 6.8 per cent year-on-year in 2018, and was 13200.00 USD Billion by year's end. According to Trading Economics global macro models and analysts expectations. In the long-term, the China GDP is projected to trend around 14500.00 USD Billion in 2020, according to econometric models.

China is not classified as a a developed country, despite having the world's second-largest economy and third-largest military. The biggest reason: Its per capita GDP remains below any accepted minimum threshold set for developed-country status.

So where is China’s Edge?

In the past 15 years, the advance of technology has affected all of our lives. In many ways, what we previously saw only in sci-fi movies is becoming our reality. Software and programs can learn and become smarter. Hardware and machines can interact with each other and improve. Artificial intelligence (AI) technology, is penetrating the real world and permeating business operations and individuals’ lifestyles without us even noticing.

Whoever rules in 5G technology rules the world or so Beijing and Washington seem to believe. In the next decade, more than 50% of jobs in the world will be replaced by AI, ranging from translators, editors, assistants, stock traders, securities, drivers, salespeople, customer service reps, accountants, nannies and so on. Many experts predict that the emerging 5G wireless technology will revolutionize the world's economy. China as a critical hub in the global development of AI.

India and China, the world’s two most populous countries, have long had a competitive relationship and have emerged as major economic powers. But in the digital space, China has a clear advantage.

China is already far ahead and the 5G initiative is a government initiative not a private sector one. The US stands no chance to take the lead by any honest and legitimate methods. Instead what you will see will be more akin to mafia tactics whereby Washington will attempt to stop China from becoming the 5G global leader.

Ian Bremmer, a foreign affairs columnist and editor-at-large at TIME writes: 'China's state-dominated economy is built to win the future.'

In context: The Chinese authoritarian-capitalist model wasn’t supposed to survive in a global free market, let alone thrive. As recently as five years ago, there was consensus that China would one day need fundamental political reform for the state to maintain its legitimacy and that China could not sustain its state capitalist system. Today China’s political and economic system is better equipped and perhaps even more sustainable than the American model, which has dominated the international system since the end of World War II. While the U.S. economy remains the world’s largest, China’s ability to use state-owned companies to boost the party’s domestic and foreign influence ensures that the emerging giant is on track to surpass U.S. GDP in 2029, according to the Center for Economics and Business Research.

The U.S. is hardly irrelevant. The dollar remains the global reserve currency, an exorbitant privilege that will likely last for years to come. Wealthy Chinese continue to invest in U.S. real estate and send their kids to U.S. schools.

At the same time, the leaders of other emerging powers, not just Russia but also democracies like India and Turkey, are following China’s lead in building systems where government embraces commerce while tightening control over domestic politics, economic competition and control of information. This process has been in motion for many years, but China now has its strongest leader in decades, and the U.S. has its weakest. Americans and Europeans have always assumed that the long arc of human development bends toward liberal democracy. What if they’re wrong?

There’s an old, likely apocryphal story that, during a visit to China several decades ago, economist and free-market fundamentalist Milton Friedman visited a site where workers were building a canal. When he asked his host why the workers were using shovels and wheelbarrows rather than modern equipment like tractors, he was told that the project’s purpose was to create jobs. If it’s jobs you want, Friedman asked, why not give the workers spoons instead of shovels?

Times have changed since then, but not all that much, the reality remains that it is far easier for President Xi to command Chinese officials to create and protect jobs than, for example, it was for Presidents Obama or Trump to persuade lawmakers to bail out any U.S. industry in the wake of a U.S. financial crisis. Beijing offers direct financial and political support for its strategic industries, 365 days a year. The government protects Chinese companies charged with acquiring intellectual know-how from foreign firms. It provides direct funding for strategic sectors. It writes laws designed specifically to help them grow.

This level of protection and support is evidently crucial in an age when the most important variables globally will be the pace and scale of technological change. Automation has already upended labor demographics in the developed world; 87.8% of manufacturing jobs lost in the U.S. between 2000 and 2010 were the result of automation and improved technology, according to a 2015 study by Ball State University. Technological upheaval is now poised to displace hundreds of millions of workers in the developing world, including many who have only recently risen from poverty. But the Chinese government’s finer control of its economy will help absorb some of the shock that will have bigger effects elsewhere.

Take China’s big three oil companies. CNOOC, PetroChina and Sinopec have each benefited from large infusions of cash from the state via state-owned banks. Similarly, the heavily indebted state-owned chemical giant ChemChina was able to acquire Swiss firm Syngenta and its biotech assets for $43 billion only because the Chinese government made clear that food security in China is a strategic priority–and that the state would guarantee ChemChina’s financial stability. Private firms benefit too. Telecoms firm Huawei is poised to dominate the global deployment of fifth-generation mobile infrastructure, particularly in developing countries, thanks to a hefty credit line from China Development Bank, which lends in support of the Chinese government’s policy agenda. President Trump can only envy the Chinese government’s ability to use policy and subsidy to decide which companies will win and which will lose, and the power that that reflects on the ruling party.

But jobs and industry are not the only ways that China’s leaders ensure political unity. They also use technology to bolster the ruling party’s political control in ways that Western governments can’t. As we embark on the world’s biggest social experiment ever, entire generations interacting with society primarily through smartphones, we’ll see enormous power for institutions that have the means to control those interactions and the data they produce.

In the West, companies use algorithms to expand profitability, while citizens use them to become better-informed consumers. In China, companies use algorithms at the behest of the government to ensure that citizens remain within the rules of order set by the political leadership. There is no better example of this than the “social credit system” or “cashless autopay system” that China is developing, that allows state officials to assess any person’s financial data, social connections, consumption habits and respect for the law to establish the citizen’s “trustworthiness.”

Imagine a credit report that reveals whether you’ve ever committed a crime, been caught cheating on a test, been drunk in public, missed an alimony payment, been fired from a job, signed a petition, visited undesirable websites, been photographed at a protest or written something on the Internet that led administrators to question your loyalty to the state. A good social credit score could lead to a promotion, a raise, a better apartment, admission to a good school, access to state-approved dating websites, better stores, better doctors, the right to travel, a more generous pension and important opportunities for your children. A bad score could at its limit put you in jail.

Managing 1.4 billion in population is no easy task! The potential from intrusion into 1.4 billion personal lives is unprecedented. Published information on the plan by China’s State Council says it is intended as a safeguard against, among other things, “conduct that seriously undermines or disrupts normal social order” thereby endangering national defense interests.” The plan’s ultimate purpose, according to Chinese officials, is to “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”

For Westerners, this could be a shocking abuse of state power and an unthinkable invasion of personal privacy although western governments covertly do the same. In China, these are simply tools officials do use to build a more “harmonious society.” China’s largest dating site, Baihe, already allows users to display their credit scores in their dating profiles.

But China’s most important ambitions are in artificial intelligence. This is the space race of the 21st century, but one with a much more direct impact on the lives and livelihoods of citizens. The biggest technological breakthroughs in AI will demand the kind of planning and investment that the U.S. once poured into the Manhattan Project or the race to the moon. However, the U.S. government no longer has the political will to muster this kind of sustained long-term commitment and has outsourced innovation to Silicon Valley. U.S. tech firms will have the advantage if the race to develop AI depends mainly on experimentation and innovation in multiple areas at once.

To argue that China’s system is better able to withstand the shocks of today’s world is not to claim that it’s better for those who live within it. Unmistakable sporadic political repression and the lack of rule of law in China now-and-again still creates injustice at every level of society. As local governments and companies in China struggle with debt, the state’s ability to bail them out is not inexhaustible.

Despite its investments in new technologies, automation and machine learning will displace large numbers of Chinese workers over time, creating long-term risks of social unrest. But for the foreseeable future, China is likely to remain strong and stable. Its international presence will continue to grow, and it is not short of ambition.

In October, President Xi said: “it was time for China to take center stage in the world”

The China striding into that spotlight is not guaranteed to win the future. In this fragmenting world, no one government will have the international influence required to continue to set the political and economic rules that govern the global system. But if you had to bet on one country that is best positioned today to extend its influence with partners and rivals alike, you wouldn’t be wise to back the U.S. The smart money would probably be on China...

Food for thought!