In this episode of China Money Podcast, guest Yukon Huang, Senior Associate at Washington D.C.-based Carnegie Endowment and former World Bank China Director, shares with our host, Nina Xiang, his observations on China’s next leadership, the possibilities of any bold reforms and the Chinese economy’s long-term trend in the coming decade. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt.
Q: China’s economy has been growing at an average of over 10% for the past twenty years. No economy can grow that fast forever. Third quarter GDP was out at 7.4%. Do you think the turning point has finally arrived?
A: Over twenty years, China has actually never grown lower than 7.8% for the annual basis. So it’s very likely that, of course, this year’s growth is likely to be lower than anything that has been experienced over the last two decades. But over the last month, there are some positive signs. Investment seems to be responding, or picking up. Retail sales is a little bit better. The export picture improved a little bit. So, some would guess, and I think it’s probably true, that some time over the next month or two, the economy will bottom out, and will actually turn upwards. But even a rebound will probably not lead to GDP growth next year much higher than 8%, because the global environment is still lackluster.
Q: Does that mean China is going to enter a phase where lower economic growth is the norm?
A: China’s economy is a maturing economy, a middle-income economy. It’s going to move to upper middle-income (economy). Ten or fifteen years from now, China will enter what you would call high-income (economy). You don’t find high-income economies growing at 10%, or even 8%. A 5% or 6% is actually a very strong performance. Why should China want to grow at a higher rate? Ten years ago, China wanted to grow at 9% or 10% because it had a major employment concern. But China today is quite different. It’s an aging society. The labor force is already shrinking. So China doesn’t need to grow very fast to generate jobs, but to create better-paying jobs with higher value. So now, it is the quality of the growth that matters, not the quantity…. ……
Yukon Huang is Senior Associate at Washington D.C.-based think tank, Carnegie Endowment, where he researches on China’s economic development and its impact on Asia and the global economy. He has a rich and long history studying the Chinese economy and policy issues, having served as the World Bank’s China Director from 1997 to 2004. Previously, he worked at the U.S. Treasury. Mr. Huang holds a B.A. from Yale University and a M.A. and Ph.D. from Princeton.