While China continues to enjoy rapid economic expansion, it faces mounting challenges to ensure stable, more balanced growth over the long term, experts told the May 21 Keizai Koho Center-Brookings symposium.
Long Guoqiang, a senior fellow and deputy director general of the Development Research Center of China’s State Council, said the most likely scenario is for China to maintain rapid growth in the years ahead.
Key factors that have supported its path to becoming an economic power “will still be there” in the decades to come, Long noted.
The Chinese government will be able to adjust its strategy and policies to meet such challenges as growing international friction over its exports, rising environmental concerns, as well as widening regional and income disparities inside the country, he said.
But Wing Thye Woo, a senior fellow at The Brookings Institution, said optimism as well as pessimism about China’s future course is “overdone.”
Woo categorized the risks that could slow down China’s economy into three types: failure in the economic mechanism, such as the weak banking system and inefficient state-run enterprises sapping the overall dynamism of its economy; failure in institutions of governance, such as growing domestic inequality and rising social expectations colliding with inadequate government response; and external factors such as growing protectionist pressures and environmental problems like water shortages.
Woo said it is apparent — given the Communist Party’s recent emphasis on “harmonious society” as the nation’s major goal — that the Chinese leadership is worried about the second and third types of risk.
Ryosei Kokubun, director of the Center for Area Studies at Keio University, said China is in the final phase of transition to a capitalist and market-based mechanism, which will necessarily entail the long-shelved question of political reforms as well.
As the gap widens between rich and poor — as well as between prosperous coastal areas and the more backward inland regions — China needs to build a mechanism to ensure a fair redistribution of wealth and to absorb the opinions of the socially weak, he said.
A key challenge for China, Kokubun said, is how to shift from its export and investment-driven growth to a domestic consumption-led economy.
To achieve that, China needs a “genuine local private sector and local middle class,” said Paul Hsu, a professor at National Taiwan University. Today, the middle class accounts for a tiny portion of China’s population, and transition to a consumption-driven economy requires the emergence of a more powerful middle class, which in turn gives “genuine stability to society,” Hsu said.