Changes to development model
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The 12th Five-Year Plan period (2011-2015) is crucial for China. So it is essential that the decision-makers recognize the opportunities and challenges at home and abroad before drafting the new development plan to transform the country's growth model and industrial structure.
China will still have a labor advantage despite the growing pressure of an aging society. The high savings rate, which won't change much, is going to dramatically drive China's economic growth, together with the accelerating process of urbanization and the progress and opening-up of the Chinese market.
The global power shift to the East has been dramatically accelerated. The West has been traumatized by the financial crisis, while the emerging economies are recovering vigorously. According to the IMF, developing economies' share in global output, in terms of purchasing power, will surpass that of the developed countries, for the first time in history in 2013.
That is to say, China will be an indispensable partner actively participating in regional cooperation and global governance. This will provide China with a golden opportunity to internationalize its currency and gradually reform the global monetary system.
However, although opportunities abound, we should adopt a pragmatic attitude and pay attention to the challenges lying ahead. Since the early 1980s China has enjoyed a comparably cozy international environment in which to develop its economy, with the global financial crisis this is coming to an end. It will take a long time for the global economy to transform its structure and rebalance. Reforming the international financial architecture and discovering the new growth points amid the rise of trade protectionism will also take time. China needs to expand its domestic consumption, as external demand will continue to wither.
China has maintained 9.5 percent economic growth on average for more than three decades. Our research indicates over this period an average 1.3 percent of growth had environmental costs. This worrisome proportion climbed to 2 percent over the last decade. Given the restraints of a low carbon economy and the draining of labor resources, the potential growth rate for China may gradually fall below 8 percent in the next decade.
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