Advertisement
Advertisement

China as a Leader of the World Economy

Mark O'Neill

China as a Leader of the World Economy
by Gregory Chow
World Scientific

China's GDP will continue to grow by at least eight per cent for another decade and will overtake that of the United States by 2019.

That is the prediction of Chinese-American economist Gregory Chow in his new book, China as a Leader of the World Economy, which presents a favourable analysis of the mainland's planning model.

Professor of economics at Princeton University, Chow is the author of 15 books and more than 200 articles, specialising in econometrics, dynamic economics and the Chinese economy, with which he has a long-standing involvement. He has lived in the US since 1948 and is a US citizen.

He has been an adviser to government figures and institutions on the mainland and Taiwan, and holds honorary posts at nine mainland universities.

There are four parts in the book, dealing with China's economic institutions, economic issues, economic policies and quantitative studies.

Chow believes the mainland has adopted a state-led model as the key to its success and developed three factors to create rapid growth: an abundance of high-quality human capital, a functioning market economy, and the existence of a technology gap that enables a developing country to catch up.

He praised the gradualism and pragmatism adopted by the Communist Party since the 1980s. 'They did not have a blueprint for reform because they simply did not know what market institutions to adopt, although they had learnt that the existing planning system did not work. Deng Xiaoping had the genius to advocate 'seek truth from facts'.'

The absence of democratic politics has been a blessing, Chow says. 'The Chinese government is much more efficient in making decisions affecting the national economy [than the US government] ... Chinese financial institutions are not allowed to take such high risks as US institutions. Chinese consumers cannot use credit cards without sufficient deposit nor can they purchase houses without a down payment.'

He discusses the mainland's five major social problems - corruption, income disparity, rural poverty, health care and environmental protection - but concludes that they will not block the country's rise.

'Education and health care problems require simple changes in economic policies that can be easily achieved if the central government is willing,' he writes.

'Corruption and violation of environmental protection laws are political problems that are difficult to resolve. Fortunately for China, these problems will not do sufficient harm to create serious social instability that would impede further growth. In other words, the rising China will keep rising.'

He sees China's foreign investment abroad as very positive. 'Many developing countries welcome Chinese more than US investment. China maintains a neutral position of non-interference with internal affairs of other countries. The US has changed course from supporting the undemocratic governments of Tunisia, Egypt, Libya and other Middle East and African countries.'

This is a book by a senior Western-trained economist who has been an insider to the extraordinary changes in China over the past 30 years, and it is both authoritative and well-argued.

Post