China’s economic growth: Quality as well as quantity?

The opinions expressed here are those of the writer and do not represent the views of China Daily and China Daily website.

According to the National Bureau of Statistics last week, China’s GDP (Gross Domestic Product) grew 6.9% in 2017, above initial estimates. Reflecting China’s shift to a middle income country over the past decades, agriculture grew slightly. Manufacturing grew in line with overall growth while the service sector grew faster. Restructuring within the industrial sector was illustrated as mining output dropped 1.5%. More knowledge-intensive high-tech and equipment industries grew by 13.4% and 11.3% respectively. This all points to progress in moving towards higher value added goods and services, which are less energy intensive. Nationally energy consumption per unit of GDP fell by almost 4%.

The balance between investment and consumption also reflected progress towards a more developed economy. Investment continued to be relatively high, but retail sales grew faster at around 10%, with high end products growing faster than low end ones. Trade also moved a step more towards balance with imports growing faster than exports. The high rate of growth of trade shows ongoing globalisation of the Chinese economy.

At a high level, GDP clearly shows broadly how well-off a country is and GDP growth reflects China’s rapid prosperity over past decades.

But GDP focuses exclusively on the monetary value of economic activity – so activities like volunteer work do not contribute to GDP. That means that grandparents looking after children does not increase GDP but sending children to a fee-paying kindergarten does. Such issue raises the big question of how to measure not only GDP but also the ‘quality of economic growth’ which reflects how prosperous a country really is from the viewpoint of its people. This is much more difficult and controversial than measuring GDP. For example, according to the UN Development Programme, “Defining the ‘quality of economic growth’ is a much more difficult task than defining economic growth itself.”

In China, what could this mean? Above all it suggests a more systematic approach to looking at the quality of growth alongside conventional measures of economic growth like GDP. This has two aspects: first the quality of economic development and second the quality of human development. Developing and publishing national indices (and international comparisons) could help focus attention on what being more prosperous means and on achieving qualitative improvement in people’s lives.

What could be covered by the ‘quality of economic development’? One major aspect is the shift towards a more advanced economic structure through growth in productivity and a growing proportion of high tech and advanced services in the economy. Another is international competitiveness of China’s products and services in international markets, as well as two way investment to and from China. Others relate to environmental sustainability: reducing the energy intensity of GDP, as well as reduction of pollution and urban congestion. Sustained levels of investment and avoiding high levels of debt are further economic aspects, while inequality between households and between regions could complete an all-round picture of the quality of economic development.

Complementing this should be an index of prosperity from the viewpoint of people. At a basic level, reduction of households in absolute poverty and of unemployment are a foundation, as is gender equality. Access to healthcare and education can form part of such an index, as well as the overall health of the population and educational levels. A further important aspect, especially in China’s top cities is affordability of housing and of everyday living costs. And looking to a future with an aging population, the adequacy of long term savings and pensions for retirement are of growing importance.

In short, China’s 2017 economic growth reflects growing overall prosperity but more attention is needed on the quality of economic growth and its measurement.

Professor Martin Lockett is Dean of the Faculty of Business at the University of Nottingham Ningbo China, the first Sino-foreign university.