US-China economic competition: What determines Beijing’s strength and position?

The following article belongs to Described as the foundation that will determine “China’s strength and position in the world”, the country’s manufacturing industry has become a key driver of economic growth, which could help China surpass the US, become a become the largest economy in the world.

Forecasts from Bloomberg Economics suggest that China may even become the number one economy as soon as 2031. (Source: Global Times)

“Savior” for economic growth

“Savior” for economic growthIn the context of increasing competition with both developed and developing countries, China is trying to restart the manufacturing sector, and at the same time get out of the “old game” of relying on real estate and infrastructure. infrastructure for economic development.

According to Deputy Secretary General Gao Gao of the National Development and Reform Commission (NDRC), China is still lagging behind “heavyweights” in high-tech manufacturing such as Japan and Germany.

He added: “China’s 14th Five-Year Plan focuses mainly on raising wages in the manufacturing sector, developing new manufacturing industries, and integrating manufacturing and services. All are aimed at increasing the attractiveness of the manufacturing industry to workers.”

Last week, China’s State Council also aimed to provide subsidies to train more than 75 million workers, with the aim of increasing the number of skilled workers.

Deputy Secretary General Gao said: “In the long term, the demographic structure is undergoing deeper adjustments, the number of people of working age is decreasing and the labor supply is also decreasing. Many young people may be reluctant to find work in manufacturing and prefer to work in service industries, where work is more flexible.”

Earlier, China stated that, after the end of the five-year plan for 2021-2025, the country could become a high-income country and aim to double the size of its economy by 2035. That means this country will overtake the US and become the largest economy in the world.

In July 2021, a forecast from Bloomberg Economics said that China could even become the number one economy as soon as 2031.

In the past, China’s economic growth has depended on investment in infrastructure and real estate. But for now, Beijing wants to control growing debt levels and direct spending to the manufacturing sector.

As consumption has not yet fully recovered from the impact of the Covid-19 pandemic, production is seen as a “savior” for the country’s future growth.

The NDRC adds: “The high-quality development of the manufacturing sector is important for high-quality economic development. Manufacturing is an integral part of China’s plan to become a prosperous society and is strategic with the country’s goal of becoming a ‘modern socialist country’. Besides, production is the foundation that determines the country’s strength and future position in the world.”

Xia Le, chief economist for Asia-Pacific at BBVA, said that in order to achieve the growth target of about 5-5.5% in the next 10-15 years, the contribution of the manufacturing industry to total output China’s gross domestic product (GDP) should not fall further.

“Policy makers can easily accept a slowdown in other sectors of the economy, but their main goal is to maintain growth in the manufacturing sector in the coming years,” Le stressed. next year”.

The contribution of manufacturing to China’s GDP has declined over the past four years. Specifically, down from more than 30% to 27.7% in 2019.

The NDRC report shows that the number of new registrations in the manufacturing sector decreased by an average of 5.2% between 2017 and 2019, while the number of closed manufacturers increased by 24.6. % in the same period.

George Magnus of Oxford University’s China Center assessed that China can develop a manufacturing industry to compete, even surpassing countries such as the US, Japan, South Korea and Germany. However, the industry still lacks innovation in some areas.

“I think China will need to combine production and reform,” Mr. Magnus said.

China is working to restart the manufacturing sector. (Source: Bloomberg)

Need to promote new growth on “home field”

China’s 14th Five-Year Plan marks a departure from the traditional growth focus of Beijing’s previous strategies. Instead, the plan emphasizes “quality development”, driving the economy more inward.

This raises concerns that China will lessen its interest in international trade, pushing back on promises of increased market efficiency and further opening up.

However, Zhang Ming, deputy director of the Institute of Finance at the Chinese Academy of Social Sciences (CASS), believes that, while the reform and opening-up formula has worked, China needs to promote new growth on its own. “home yard”.

US-China relations have deteriorated. That means the world’s second-largest economy cannot rely on external demand. Washington has tightened high-tech exports to Beijing due to a host of political issues.

According to Zhang, China needs to utilize its resources by closely connecting cities to pool resources and prevent industries from falling into the hands of other developing countries.

The expert found that obstacles in the movement of capital and assets in China have hindered the development of the industry. Local governments always want to retain resources.

Analysts also believe that China’s ability to become a technology powerhouse will depend on the distribution of local governments.

Some local governments tend to focus more on short-term economic growth, said Li Xiaohua, Associate Professor at the Institute of Industrial Economics at CASS. They tend to focus their resources on high-tech industries, but this often leads to overcapacity and cutting-edge development being turned into low-quality projects.

Mr. Li Xiaohua emphasized: “In addition, some localities only consider building a small market in the region and participating in the local small economic cycle without being interested in building a unified market. and help develop the country’s economy”.

Leave a Reply

Your email address will not be published.

Translate »