BOFIT Weekly Review 2016/47
BOFIT 25th Anniversary Conference raises insights into China’s structural adjustments and growth outlook
The first keynote address was delivered by professor Gérard Roland (University of California, Berkeley), who provided an overview of the transition in post-communist economies in Eastern Europe and China. Notably, the reasoning behind the transition in China and post-communist regimes in Europe was fundamentally different. In the European context, economic transition can be regarded as part of the dissolution of communist regimes, while in China market reforms were launched to preserve the power of the Communist Party of China. Reforms have strengthened the party apparatus, and it continues to be essential in implementing the reforms. Roland noted that the CPC is now probably the world’s most powerful organisation. Under market economy conditions, old ideology and corrupt behaviours are an issue. In China’s case, however, Roland said the sustainability of current system should not be underestimated. Roland saw only few hopes for any major political reforms.
The second keynote address was delivered by professor Justin Yifu Lin (Peking University), who analysed China’s current economic situation and opportunities for growth over the medium and long term. Unlike most observers, Lin does not ascribe the slowdown in Chinese economic growth in recent years to China’s structural issues, but rather that the slowdown largely reflects external business cycle factors related to the global financial crisis. Lin said the slowdown in growth was also evident in many other countries, so there was little reason to ascribe the slowdown to structural problems that would restrain China’s future growth.
Lin said China still has a way to go before it reaches the technology frontier of advanced economies, so it can still enjoy the catch-up advantage as Japan and South Korea did decades ago. Chinese per capita income is currently about a quarter of the US per capita income. If China follows the path of its Asian neighbours, Lin believes China could still enjoy GDP growth potential as high as 8 % p.a. until 2028. China’s current growth is supported by urbanisation, fixed investment, technological advances and economic reforms. Thus, China should have little trouble in achieving the government’s current 6.5 % p.a. growth target over the next four years.
Unlike professor Lin, most forecasters expect China’s growth to remain at its current level or slow in the final years of this decade.