Focus on China's role in global economy

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Mauro F. Guillen, a professor of international management and director of the Lauder Institute at the Wharton School of the University of Pennsylvania

A1 The Chinese economy has not only become a manufacturing powerhouse, but it has become a service economy. China will need reform to ensure its economy grows. So competitiveness is important. Until now, China has been competing on the basis of relatively low wages, so from now on, it will compete on the basis of innovation. China has been doing well in certain industries such as telecommunications, but it still has to do more in, for example, energy and retail, in the Chinese market.

There are many other areas in the next year or two that may need more reforms. One is the financial services and banking sector. The other one is to make sure that the infrastructure for the domestic consumer market develops, so that the Chinese economy can be more balanced over time.

The problem with the domestic market is that there are all sorts of regulations, not only at the national level, but also at provincial and local level. They will need to be better coordinated to make sure the domestic market is big and efficient. That should be the goal of reform when it comes to distribution and retail.

A2 Emerging markets have been contributing to most of the world's growth. Japan and Europe, and recently the US, were not growing that much. China used to contribute more than 30 percent to world growth, which is still quite large. It's positive. It's really important for China to continue growing, but with less exports and more domestic consumption.

As China grows more through domestic consumption, that will also contribute to global growth. It's just that the source of growth will be internal rather than external. It's the best way to make sure the Chinese economy continues to grow at a rate of about 6 to 7 percent.

A3 The growth rate in China will probably be between 6 and 7 percent. Depending on the outcome of some events, like the elections and the timing of the Fed's interest rate increases, the Chinese economy could grow a little less or a little more. It's important to continue the structural reforms, especially to reduce China's dependence on exports as a source of growth. One important issue will be that US president-elect Donald Trump has been talking about protectionism. It's important for the Chinese government and companies to keep their options open and to have in mind alternative markets in which they could sell their products in case the US becomes more protectionist.

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