An objective understanding of China’s development
- By Zheng Xiwen
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E-mail People's Daily, January 4, 2013
China will still be the best place for the world to invest
The “2012 World Investment Report” of the United Nations Conference on Trade and Development (OECD) named China as the most popular host country in the eyes of multinational companies. China has confidence and conditions to remain the most attractive to international investors. It will attach great importance to and properly deal with the “middle-income trap.” However, the view that China will fall into the “middle-income trap” is unfounded and irresponsible. The reasons are as follows:
First, China will further promote the cause of Reform and Opening up. 2012 is the 20th anniversary of the speeches by Deng Xiaoping, the chief designer of China’s Reform and Opening up. Not long ago, General Secretary Xi Jinping had an inspection tour in Guangdong and Shenzhen, sending a strong signal that China will continue to push forward the process of the Reform and Opening up, which is also good news for international investors.
Second, China will further accelerate the release of domestic demand. In 2011, China’s final consumption expenditure was about 22 trillion yuan, equivalent to one-thirds of that of the United States, so it still has huge upside potential. Since China’s per capita GDP reached 5,400 U.S. dollars in 2011, the consumption structure and industrial structure had entered a new period of rapid escalation. The 18th CPC National Congress set the ambitious goal of doubling residents’ per capita income of 2010 by 2020, so Chinese market will release a purchasing power reaching 64 trillion yuan. The McKinsey & Company of the United States estimates that consumption will be the largest driving force of China’s GDP growth by 2020.
Third, China will accelerate the pace of industrialization and urbanization. China currently is in the middle and late period of industrialization, with the level of urbanization only reaching about 51 percent, so it needs at least 20 years or more to reach 70 percent, the level of high-income countries. By then, over 300 million people will transfer from villages to cities. It is predicted that the urbanization will contribute 2 percent to 2.5 percent to GDP growth and create unprecedented consumption potential and market expansion.
Fourth, China’s demographic dividend will continue to exist for some time. Admittedly, its demographic dividend is weakening due to population ageing. However, China’s old-age dependency ratio will remain at relatively low levels, and the country will maintain a huge work force over the next 20 years, according to forecasts by related U.N. institutions. Furthermore, the overall quality of Chinese workers has increased significantly, and the country still has the world’s largest and best trained work force.
Fifth, China has great advantage in infrastructure and other aspects of “hard environment.” Many countries, including developed ones, do not have the complete transportation and information networks or mature division of labor system China possesses. After decades of rapid development, China has closely integrated into the global value and supply chains.
Sixth, China has constantly improved its policies, systems, and other aspects of “soft environment.” Over the past 30 odd years since the Reform and Opening up, China has established a policy mechanism and legal system suitable to both domestic and international conditions by studying its own national conditions and drawings on the experience of foreign countries. According to the 2012 China Business Climate Survey Report released by the American Chamber of Commerce in China, 78 percent of respondents rank China among their top three destinations for global investment, and 82 percent plans to increase investment in China. Most importantly, China has long maintained political and social stability, forming a sharp contrast to many turmoil-hit countries and regions. Overall, China remains an ideal tourist and investment destination.
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