By Ma Jiantang

Research Report Vol.21 No.4, 2019

Despite the emerging challenges and hardships we are going to face in the new journey, we are blessed with great momentum of economic growth, a supreme system and strong leadership of the Communist Party of China. With a comprehensive analysis of the economic fundamentals, industry system, market size among other supporting factors and an overall consideration of the market vitality and innovation unleashed by deepened reform across the board as well as the maturing macro control, it is safe to conclude that China is still and will remain in the stage of important strategic opportunities in the long term. There is massive momentum and potential for growth, creating favorable conditions and enabling China to maintain long-term stable growth and achieve high-quality development.

I. Development Potential Derives from a solid Material Foundation and a well-developed Industry System

An appropriate combination of labor force, technology, capital and other factors of production lays the foundation of economic growth. The evolvement of these factors and how they are combined form the inherent mechanism underpinning economic development. To assess economic growth potential, we must learn how the mechanism works and analyze the material foundation and industry system accumulated over time. This year marks the 70th anniversary of the founding of the People’s Republic of China. Over the past 70 years and through the 40-odd years’ reform and opening up and especially since the 18th National Congress of the CPC, a solid material foundation and a fully-fledged industry system have been established, guaranteeing a sufficient and premium supply of labor force, capital, infrastructure.The socialist market economy efficiently mobilizes and organizes these factors, cementing the foundation for sustained economic growth and unleashing enormous potential.

A gigantic economy.In 2018, China’s GDP surpassed RMB90 trillion. At constant prices, China saw the GDP grow by 174 times compared to that in 1952 at an average annual growth rate of 8.1%, sustaining the high-speed growth for the longest time around the world. In the same year, per capita income reached USD9,732, higher than the average level of middle-income countries. Now China has become the second largest economy, the biggest manufacturer, the largest commodity trader, the second largest consumer, the second biggest destination of foreign capital in the world. By the end of 2018, the balance of foreign exchange reserves stood at USD3,072.7 billion, ranking first for 13 consecutive years around the world. By 2019, Chinese companies that made to the list of Fortune 500 outnumbered their American counterparts. As the economy grows, we have witnessed an increasingly big edge in stable economic performance and scale economies effect to effectively guard against all the external impact and create favorable conditions to upgrade the economy.

Abundant human resources.China is home to nearly 1.4 billion people, equivalent to the population of developed countries combined. The working-age population is over 900 million, the size of the populations of the USA, Japan and the EU put together. The quality of human resources in China has been improving. Every year there are more than 8 million university graduates, over 5 million secondary vocational education graduates and more than 500,000 returnees from overseas study. Since 2009, the number of scientists and engineers of China has overtaken that of the USA. China’s researcher population has been ranking the first globally. Efforts have been stepped up to cultivate talents in STEM(science, technology, engineering and maths). A big talent pool and unified and efficient labor market alongside continuously improved policies to incentivize entrepreneurship and innovation help to promote the engagement of human resources in economic growth and provide a strong impetus to development.

Ample financing.The savings rate in China, though experiencing a descent from its peak, still hovers above 45%, far higher than that of developed countries such as the USA. By the end of 2018, the Chinese government liability ratio stood at 37%, way lower than the EU redline of 60%, a universal benchmark in the international community and below the level of major market economies and emerging markets. An ample supply of capital and low liability risks create enabling conditions for sustained and sound economic growth.

A well-developed industry system.China boasts an independent and well-developed industry system and is the only country in the world that has all the industry sections listed in the industrial classification by the UN. In China the production of more than 200 industrial products topped the world in 2018, and the added value of the manufacturing industry has been ranking first in the world since 2010. China’s economy has been deeply interwoven into the fabric of the global industrial distribution. A complete industry system and well-developed industrial supporting services are the bedrock to ensure the global industry chain functions stably. This is also a great advantage China’s economy possesses and will provide strong support to China’s sustained economic growth.

Excellent connectivity in infrastructure.Since the founding of the PRC and especially after the start of reform and opening-up over the past 40-plus years, historic achievements have been made in developing infrastructure. A moderately-advanced and well-coordinated modern infrastructure network has been established. By the end of 2018: the railway and highway length reached 131,000km and 4.85million km respectively; high-speed railway and expressway length reached 29,000km and 143,000km respectively, ranking first around the world; China had 24,000 quay berths for production use and 235 civil airports, placing China among the top countries in this regard.The interconnected infrastructure network has made China’s economy more resilient and buffered against the economic shocks.

II. Development Potential Stems from the Massive Market Size and Expanded Demands

The market size and structure exert important impact on the capacity and room of economic development. China enjoys a unique advantage in this aspect. On the one hand, a big market size and intricate structure will help to form a more advanced, highly-distributed and better-structured economic system. On the other hand, China’s economic development is yet to be balanced.We must speed up efforts to address the unbalanced and inadequate development. Balanced development means enormous demands in our society and optimized economic structure.

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