Why China’s economic growth is worthy of envy, never mind the scaremongers
Andrew Yao says the Chinese economy has entered a positive cycle, as it transitions to a consumption and innovation-led model, and the entrepreneurial spirit can be sensed in the air of its fast-rising urban centres
Shanghai has been my home for over a decade. In that time, I have witnessed many ups and downs, but rarely have I seen so much scepticism over the Chinese economy.
Column inches are increasingly dedicated to the depreciating renminbi, rising credit and excess industrial capacity. But if you walk around Chinese cities, you will sense the vibrancy, excitement and entrepreneurial spirit in the air.
The numbers also speak for themselves – gross domestic product grew at 6.7 per cent in the first seven months this year. So, in many ways, I feel Western observers are missing the bigger picture, wallowing in bad news just to grab headlines.
True, China has lost its competitive labour cost advantage as wages of Chinese factory workers are now more than double that of their Bangladeshi and Vietnamese counterparts, and Chinese exports are down by some 8.7 per cent this year. But, in my opinion, the country has more than made up for its depressed exports with its rising domestic consumption and investment, particularly in the environmental, tourism, arts and culture, sport, health and senior care industries.
Job creation has also remained a stabilising factor, with unemployment at just 4 per cent. Investment from foreign companies, meanwhile, continues to flow in, registering a 4.7 per cent year-on-year hike in 2015 as investors shift their focus from traditional to hi-tech manufacturing and service sectors, including financial service and internet applications. In particular, hydro, farming and environmental sectors have all seen 20 per cent investment growth this year. With the central government’s income at 10 trillion yuan (HK$11.4 trillion) this year, we are seeing an uptick in the curve.
There’s no doubt China is entering a positive cycle, transforming from a labour-intensive economy to a consumption and innovation-led one. I have seen Shenzhen and Shanghai make this transition successfully. Beijing, Suzhou (蘇州), Hangzhou (杭州), Chengdu ( 成都 ) and Wuhan ( 武漢 ) follow close behind. Given the country’s size and scale, this shift will take some years, but government reforms and economic numbers thus far point to a compelling narrative.
CEOs in China are on top of this evolution. According to KPMG’s “China CEO Outlook – Now or Never” report released earlier this year, company chiefs surveyed identified innovation as a crucial driver of growth over the next three years. Almost half of China respondents placed fostering innovation as one of the top three strategic priorities for their companies, compared to just 21 per cent worldwide. Those same CEOs identified new product development, increasing data analysis capabilities and the internet of things, including machine-to-machine technology and other aspects of technology, as the top three focus areas for further investment.
There is further good news. Millions of Chinese are becoming more educated and skilled, and better prepared than ever before to tackle the challenges of white-collar jobs. Last year, the Chinese spent 1 trillion yuan on higher education alone. There are currently 36 million tertiary students and 1.57 million higher education teachers at close to 3,000 institutes and universities in China.
It is clear the Chinese government’s strategy to invigorate China through science and education, first started some 20 years ago, is finally yielding dividends. Advances in higher education and investment in technology have generated greater productivity, higher GDP growth and better value addition for the economy. Despite all the scaremongering, China’s development still remains the envy of most major economies.
Andrew Yao was educated in the US and was elected to the National People’s Congress in 2012 as one of 36 Hong Kong deputies