One growth model won't work across China
Dan Steinbock says no single economic growth model will work across China, given that its cities are at varying stages of development. Consumption and investment are both critical
When China's new leadership met at the Central Economic Work Conference in mid-December, it set the tone for economic policies for the year ahead. The key tasks include efforts to boost consumer spending, expand public spending on infrastructure projects, promote urbanisation and increase its quality.
Beijing is initiating a change in its growth model, but this transition is unlikely to be abrupt and singular. That approach was tested and discredited in post-Soviet Russia in the 1990s, where it caused a drastic collapse in growth and substantial instability.
The current debate on China's growth model lacks realism. In China, the transition is likely to be gradual and dualistic - that is, requiring both consumption and investment.
Considering the mainland's continental-sized economy, any substantial change in its growth model will require time. Moreover, just as consumption is vital in the more prosperous first- and second-tier cities in coastal regions, investment is critical in third- and fourth-tier cities and rural regions.
No nation in history has been able to change its growth model overnight.
It was textile manufacturing in Manchester that unleashed the first industrial revolution. As the British city evolved into the world's first and largest industrial marketplace for cotton in the early 19th century, it was dubbed "Cottonopolis".