“Learn Chinese if you are in business.” Today, not a single serious international business forecast can do without an analysis of China's development prospects. In 2011, the Chinese economy officially became the second largest in the world after the United States, leaving Japan behind. And by 2040 it will become the largest on the planet, says Nobel laureate in economics Robert Fogel

Do you predict that the gross domestic product By 2040, China will grow from the current $6.5 trillion to $123 trillion. To achieve this, the Chinese economy needs to grow at a 10 percent annual rate. But the Chinese government recently said it expects the economy to grow at 7% in the coming years. How might this data affect your forecast?

No way. My estimates are based on the annual growth rate of real capital - human and physical, and not on the price level. I carry out all measurements in 2000 dollars, so I expect the real growth rate of the Chinese economy to be 8–10%.

Growth prospects

Due to what?

The level of return on invested capital per worker, that is, the efficiency of production in China, is today very low. Through the introduction of advanced and more effective technologies labor productivity, capital productivity and business profitability can increase tenfold. In addition, there is a process of cheap labor flowing from agriculture to industry and the service sector - this provides about a third of China's GDP growth. If in the main industries China manages to maintain growth rates at 5–6%, then another 2–3% will be achieved through internal migration in the labor market. This will result in 8–9% growth per year, which will allow the country’s GDP to increase almost 20 times over 30 years. China is developing according to the Western model, repeating the path that all the richest countries in the world have taken. For example, at the beginning of the 19th century in the United States, 80% of workers were employed in agriculture, but today only 2% * * In China today, about 50% of the economically active population is employed in agriculture, 20% in the service sector and approximately 10% in industry.. Another issue is that the Chinese economy, unlike the United States, is growing due to the borrowing of existing Western technologies and their application in local production processes. And this model will continue for the next 30 years.

Do you rule out apocalyptic scenarios - that the world will face wars for resources and new territories, primarily from China?

I think that the Chinese authorities will not agree to military adventures: they are interested in becoming rich as quickly as possible. Every Chinese leader dreams of being able to say: “In my lifetime, China has transformed from a very poor country to a very rich one." This is the goal that Chinese policymakers will be focused on in the coming decades.

Notice what percentage of GDP they spend on military needs - 2%! Compared to the US or EU - very modest * * According to the Stockholm Peace Research Institute, Americans spend about 4% of GDP on military needs, Russia - 3.5%, the EU - about 2%..

Shakespeare vs Confucius

Chinese is the most widely spoken language in the world, with more than 1.3 billion speakers. However, English is still the main language of business. Could it happen that in the next half century the language of Shakespeare will be supplanted from business circulation by the language of Confucius?

I always tell my students: learn Chinese. And if someone is going to do business and build partnerships with Chinese entrepreneurs, then knowledge of the language will be a competitive advantage compared to those who do not speak it. But you shouldn’t expect English to disappear from the world stage so quickly: it is widely spoken in China, and children in schools learn it for about 6–7 years.

You will be surprised, but to a certain extent China today is a more capitalist country than the United States of America

Chinese students and scientists can be found at universities in almost every developed country. In 30 years, will the flow reverse, and will Americans and Europeans flock to Chinese universities?

No, in 30 years this will definitely not happen, because the Chinese are borrowing technologies. However, in the next decades we will see that Chinese scientists will take leading positions in a number of branches of natural science.

For now, the Americans are educating the Chinese, but not vice versa. For example, some professors from China teach in the USA for six months and at home for six months. Moreover, according to my estimates, about 2 thousand professors and associate professors do this economic science. Famous American economists advise senior Chinese government officials.

You will be surprised, but to a certain extent China today is a more capitalist country than the United States of America. The Chinese discovered the free market and believed that such a market was their best engine. economic growth. For the past 40 years, they have been methodically reducing the size of the public sector in the economy: if at the end of the 1970s it reached about 40%, today it is about 20%.

What will happen to the yuan? Should we expect its devaluation, and if so, how could this affect the dollar, which today performs the function of the world currency? reserve currency?

This question is purely political. But even if the Chinese leadership decides to devaluate, the effect will not be as formidable as experts imagine: Chinese goods will not become more expensive than American ones. Remember that only 15% of all goods consumed in the United States are imported from abroad. Therefore, the increase in prices for Chinese goods will be at the level of the average price increase in the United States - about 1%. It may be objected to: everyone around is just talking about the fact that Chinese manufacturers, due to the undervalued exchange rate of their currency, have an advantage over American manufacturers, so we must erect trade barriers against them, increasing duties on foreign goods. In fact, Chinese manufacturers do not have such an advantage, and American politicians and congressmen are engaged in pure populism and misleading their voters. As for the American dollar, in the foreseeable future nothing threatens its status as the world reserve currency.

The question is not new, even, to be honest, it is already quite old, but some people who are not particularly interested in economics may have it. What are the reasons for the success of the Chinese economy and why such development could not be achieved in Russia?

[Article updated 6/26/2019]

Preface

This article, like all articles on the Econ Dude blog, is not a scientific source of truth. This is just my private and subjective opinion, my analytics and my view on this issue. Of course, I try to collect sources, analyze the issue in detail and write interestingly, but such a huge topic as the reasons for China’s economic success is actually impossible to cover in one article.

They will laugh.

Now that we're done with the introduction, let's move on to the analysis.

Only the lazy didn’t talk about China’s economic miracle

On this moment China's GDP is about 11 trillion dollars, China according to this indicator is the second economy in the world, after the United States.

China's economic growth

Third, if we consider the European Union to be an integral economy, but I would not think so, since its integrity after Britain left is slightly broken and can also be violated by other countries at any time.

China's GDP growth has been 8-11% or higher for many years, only beginning to slow down slightly in recent years. Although, curiously, the US is growing faster than China. I wrote about this separately:

It should be noted that GDP per capita is not the same thing as population income. GDP is, as it were, the value of all assets per person, although this is a rather rough definition, but it makes no sense for us to go deeper now.

The fact of China's success in recent decades rarely causes controversy, and this despite the fact that China is formally a communist-socialist country. This is what breaks many patterns, and this is why I want to compare China a little with Russia and the USSR. How did China manage to achieve such success and what was the reason for the rapid growth of the Chinese economy?

Success story of the Chinese economy

History is also educational for Russians, since we have an example of “how it could have been” hanging right next to us. After Mao's death in 1978, reforms began in China - Reform and opening up policy. And the key person in this whole story was Deng Xiaoping, about whom everyone definitely needs to know, how he almost single-handedly brought China out of oblivion and turned it into a world leader.

Often history is changed not by the people as a whole, but by very specific individuals.

can move mountains and change history, both for the better and for the worse. Therefore, it is not always fair to blame something on lazy people or some general processes that no one can control. The right person in right time and in the right place can change history. Remember Jobs, Geitz, Trump, Elon Musk, Napoleon, Peter the Great and many others.

Fine. Let's look at the specific steps and actions that led China to success. There weren't that many steps.

Reducing the role of the state in the economy

The first steps were to reduce the role of government in the economy. Paradoxical for a supposedly communist/socialist country. This is not the first example where one can see a direct correlation between economic growth and the general prosperity of the people after the role of the state in the economy has been reduced.

The correlation is direct, even at the tax level.

. This also includes all licenses, obstacles to business, inspections, registrations and everything else. Any bureaucracy harms the economy, and the destruction of this bureaucracy gives the economy a second wind. Officials add nothing to GDP.

Once you cut taxes, like Trump did just recently, you leave more money business and people, and this is a plus for the country.

Joint ventures with foreigners

The state began to encourage the merger of local firms with foreign ones. the main problem China was then lagging behind the West in terms of technology and knowledge; two things were urgently needed: money and technology.

I worked there for some time.

This Russian economic game simulates everything quite well. Why in the game did players-politicians think of making a special place for profitable production - Uzbekistan, zeroing out duties and reducing taxes to 5%? And all the players guessed to move all game production there, but in reality, it turns out that it is not clear to anyone what harm can be caused by high duties and taxes.

At least one region in the country should be preferential, where taxes and duties are low. In China there are such special economic zones full, and no one will suddenly cancel this policy tomorrow, so they are investing there.

Example with low taxes from the game

Why, even in the game, ordinary people successfully modeled and used this, sometimes even young people understand everything perfectly.

Well, in reality, this is not clear to anyone.

What other restrictions are there on economic activity?

• Taxes;
• Fees;
• Licensing;
• Checks;
• Problematic labor legislation;
• Crime;
• Lack of government stability and predictability.

There is no need to talk about predictability, stability and predictability of Russia. Russia is famous in the international arena for the fact that absolutely no one in the world is able to calculate the next step of the Russian Federation.

This may be good for some things, but not for the economy.

Crime is also a very serious factor.

If there is even the slightest crime, even the smallest, then this is a huge negative factor for investment in the country. And what can we say about countries where crime is at the highest level. Where it is sometimes difficult to distinguish an official from a bandit and it is unclear who came to you to demand something from you.

Respect for private property also goes into this point. In China there is a death penalty for corruption, but in Russia what do they do with corrupt officials?

Promoted?

There are also interesting things, for example. It is known that excess and Massive alcohol consumption increases crime, reduces ability to work, etc. In China, of course, they also drink, but by Russian standards this is a child’s level. True, there are exceptions here, for example There's a lot of drinking in South Korea, even more than Russians, you will be surprised, but the economy there is ok.

Export orientation

I wrote about this here:

Disadvantages of the Chinese system

The world is lucky to have people like the Chinese.

A billion people with zero claims and minimal ambitions who do not know how and do not like to fight. Everyone has been mocking the Chinese for centuries. The British mocked in the Opium Wars, the Mongols mocked, the Japanese mocked. The Russians mocked me many times, biting off pieces along with everyone else during the Russian Empire. For centuries, China has been pressed, used and squeezed out, the people there are so downtrodden and submissive, but you can do anything with them, which is what was done.

But the people are now awakening to a national consciousness that has never completely died. For all their downtroddenness and outward modesty, such a population and such a sample, of course, gives rise to geniuses.

Appetites are growing.

China has long since changed and the West is penetrating deeper and deeper.

Nowadays, many Chinese women in cities are so proud and arrogant that even Russians and Ukrainians can learn from them how to be TPs. The people fell in love with money and there was no communism left there.

However, all these tons of production have greatly, very much polluted the atmosphere, this is a huge and real problem.

In the cities it’s almost impossible to breathe, everyone wears masks.

Due to the one-child policy, the population is aging, world money is also not endless, and it has all been in China for a long time. Global investors are the smartest people in the world, they are very nervous and have enormous paranoia.

If something suddenly happens tomorrow, for example the Chinese government does something (of course, there are few chances, since they don’t like multi-move moves and forks), or for example, data about a slowdown in growth comes out, then trillions of dollars will be taken out of China in the same way as they were taken there, in a matter of days. Capitalists are not interested in anything other than the rate of growth of capital in this world.

Now the growth there is 7% and they have long been starting to slowly transfer the money to other places. You may increasingly notice clothing and food produced in Vietnam, Turkey and even Russia. There is less space, all the fatty pieces have already been sawed off and eaten, competition is growing. And if 10-30 years ago foreign markets were ready to digest billions of tons of cheap and bad Chinese products, foreign markets are also not bottomless, they are filling up, and people increasingly prefer quality and many are willing to pay for quality. And “made in China”, as you know, is a guarantee of price, but not quality.

The guarantee of quality is Germany, whose economy has been doing well for many years.

Look at the dollar-yuan exchange rate over 10 years.

Now it is 1 dollar = 6.8 yuan. Do you see what's happening?

China strengthened the currency until 2013, now it is weakening again. This is a signal that there may be problems with exports, although the trade balance does not seem to be falling. The exchange rate greatly affects the trade balance and the same Trump said a billion times that China likes to play with the exchange rate. (China, china, china)

If export earnings fall, you simply weaken the currency. What Russia did after the fall in oil prices to balance the budget.

Since 2013, the yuan has been weakening, and this is a bad sign for the economy. They are trying to rebuild it to accommodate domestic demand and in many ways this is successful, but even now, and never really, the Chinese could not be real leaders in terms of innovation, the United States has always beaten them because the core of the US political and economic system is better. China can catch up and be one step behind the leader, but as you know, the Chinese adapt and copy, they rarely come up with something really new, although of course they come up with something and much more than many other countries, but from the United States in this regard they are lagging behind. Although after writing this I wanted to test my thoughts.

The check refuted me:

2014, China is the first in the number of applications for scientific patents.

However, according to grants (approval of the application, as I understand it) The USA is in the lead. As you can see in the top, Japan and South Korea are countries with a fate similar to China and a leap in development, but Korea and Japan are still very different from China.

Thousands of guns from the north, loaded with nuclear warheads, are aimed at Seoul.

They don't have much fun there.

But in Japan everything is pretty normal, except for the giant government. debt and the risk of flooding and destruction from the next volcanic eruption, plate shift or some other crap, but overall in Japan and Korea the situation is many times better than in China.

Russia manages, even with relatively weak support for science, to hold sixth place in the world in terms of the number of patents, which inspires some hope, but of course it’s sad, since one can only imagine what would happen in Russia if ever history, the state gave normal money for science, or if there was a large private business who would support this science.

Science in China, by the way, is strongly supported by business.

Another problem with China is the whole core of their ideology and government. Yes, most Chinese don’t give a damn about power, they are used to living in a gigantic system of suppression, they have much more experience than the Russians and they are not fools, but the government has complete control and can stumble at one moment and lose everything. In China, there is wise leadership at the highest level, China is ruled by geniuses after Mao, that is why they managed to outplay everyone, however, everyone makes mistakes.

Some ships in some wrong seas?

Any desire to return some islands?

Tibet? Chinese firewall? Executions?

And a bunch of other terrible things that are happening in China have been pushing smart Chinese out of the country for decades. The scale of the brain drain is colossal; Russia has never even dreamed of it. All smart Chinese have been in the USA, Europe and Canada for a long time.

They will never return, and they take away not only their brains, but usually also a lot of money. Half of Canada has been bought up by the Chinese, half of the west coast of the USA belongs to the Chinese. But don't think that this is being bought by Chinese capital in the sense of the Chinese government.

This is bought by individual Chinese who raised it in China; this loot has nothing to do with China. It's like buying apartments in Miami by you know who. The same situation is happening in China, but only hundreds of times larger.

Russia with her (and mine, in this blog) Constant talk about thieves and bad government is nothing compared to China. There, too, everything is rotting from the inside and much is rotten. I have Russian friends who went to China to study, we talked. I can’t tell you what nasty things he told me about. The man returned home.

If you think that there is censorship in Russia, write something bad about their government on the Chinese Internet and we will see how quickly you will have problems. The problems are quiet, and no media will cry for you later, simply no one will know about it. I would never be able to create such a blog in China and write such things, for example talking about the shortcomings of China in comparison with the USA.

Although it is still possible to raise a lot of money in China, although not everything is absolutely terrible there, and the country is still actively developing and is already a world leader, there are problems there too. I just wrote the last point for this purpose, so that you don’t think that China is ideal. Don’t mix the economy and power of China and ordinary Chinese into a heap. You don’t mix up, for example, the authorities of Russia/Ukraine and the people of these countries?

If, for example, the Russian authorities have 80 yards of dollars in US Treasury bonds (UPD, not anymore, hooray!) and the country is supposed to be rich, this has nothing to do with ordinary people. For the average Chinese, China is far from ideal. They are still poor, the competition is enormous, there is work, but not enough normal work. Although incomes are growing, in Russia people still have more money and assets, each individual.

The censorship there is cruel, the living conditions are disgusting, the environment is bad.

I would look at those who greatly admire China, how much they would like to be born Chinese in this day and age. Oh, I'd like to see it.

All the loot in China is the loot of foreigners, who can withdraw it at any time, or the loot of the government, which is not so kind and fluffy. And in general, if they don’t do something urgently about the environment, it will simply become impossible to breathe there.

If anyone thinks that the United States will start a war with China, then it is obvious that such a war is not beneficial to anyone. Their economies are highly dependent on each other, and even considering how Trump scolded China, they stupidly won’t let him fight with it, and he himself does strange things, leaving various partnerships that were previously created clearly against China.

The United States is addicted to cheap Chinese goods like a drug, and without the United States China will very quickly come to a complete end.

All supposed US/China tensions are being blown up by the media, it's a political game.

By the way, it’s quite interesting that sanctions against the Russian Federation are also a political game for the United States, but there was a way to protect yourself from this. How?

It was necessary to release as much American money into the country as possible; this is a clear guarantee that the United States would not be able to do anything with the Russian Federation economically, if it were 5-10% of trade turnover.

That is, guaranteed protection from the United States is the presence of American money in the country in large quantities. U American money most powerful (most powerful) in the world of lobbying and this would be an ideal defense. This is exactly what China did, tying itself to the United States with thin threads, perhaps not even consciously.

That's all. The article is already a little outdated and I am for some mistakes. I later returned to this article several times and improved it, but did not completely rewrite it. In any case, I'm glad if you enjoyed reading.

You will find my other articles about economics in a special section.

Just four decades ago, a country like China had a rather weak, lagging economy. The economic reforms that have taken place over the years, which have made the country's economy more liberal, are generally considered to be Chinese economic miracle. The rate of economic growth over the past 30 years is incredible and amazing: on average, the country's GDP increased by 10% per year, and GDP per capita grew by 9%. Today, China occupies a leading position among world economies. Let's consider how this country managed to achieve such indicators, how the economic miracle happened, what were its reasons and what was the situation that preceded it.

China in the middle of the twentieth century

After the end of World War II, China stood at a crossroads and did not know what to choose: a liberal capitalist or, following the example of the great power of the USSR, a socialist path of development. The civil war that rocked the country until 1949 led to the separation of the island of Taiwan and the creation of the People's Republic of China, led by Mao Zedong.

With the advent of the Communist Party, the painful construction of socialism begins: the nationalization of property and the implementation of agrarian reform, the implementation of five-year plans for economic development... Accepting help from the USSR and focusing on the political and economic system of its socialist neighbor, China is industrializing the economy. Sometimes we had to resort to tough and uncompromising methods.

"Great Leap" to nowhere

However, after 1957, relations between China and the USSR cooled down, and Mao Zedong, who did not share the views of the then Soviet leadership, decided to implement new program, called the “Great Leap Forward”. The goal of the ambitious program was to dramatically develop the economy, but the new direction turned out to be unsuccessful and had tragic consequences both for the people and for the Chinese economy as a whole.

In the 60s, the country experienced severe famine, cultural revolution and mass repression. Many government instruments ceased to function, and the communist party system collapsed. But in the early 70s, the government set a course for restoring party organizations and improving relations with the United States. After the death of the “Great Helmsman” Mao Zedong in 1976, the country found itself in difficult economic situation, unemployment increased, a card system was introduced.

Since the end of 1976, Hua Guofeng has become the head of China. But the actual reins of power are taken by Deng Xiaoping, a politician who fell into the millstones of the Cultural Revolution and was restored to the post of Vice Premier of China in 1977.

Decisive plenum

Considering the Great Leap Forward program to be largely erroneous, Deng Xiaoping, relying on the support of the Communist Party, began implementing a program to modernize the economy. In 1978, at the next plenum of the Communist Party, the course towards a socialist market economy was officially proclaimed, which would combine two economic systems: planned-distributive and market.

The new government path is called the reform and opening up policy. Xiaoping's liberal reforms are based on the gradual transition of economic structures to market ones and the preservation of the communist system. assured that all transformations will take place under the leadership of the Communist Party, and the dictatorship of the proletariat will be strengthened.

Highlights of transformations and reforms

Briefly speaking about the new reforms, the Chinese economy should be focused on export production and massive attraction of investment. From this moment on, the Celestial Empire proclaims itself a country open to expanding ties with other states, which has attracted foreign investors. And liberalization foreign trade and the creation of special economic zones for foreign entrepreneurs led to an unprecedented increase in export indicators.

First of all, Xiaoping reduces state control over many sectors of the economy and expands the management functions of business leaders. The development of the private sector was encouraged in every possible way, and stock markets appeared. Serious changes affected the agricultural sector and industry.

Four stages

During the entire reform of China's economy, four temporary stages can be distinguished, carried out under a certain slogan. The first (from 1978 to 1984) stage, implying transformations in rural areas, the creation of special economic zones, had the following slogan: “The basis is a planned economy. Addition: market regulation.”

The second (from 1984 to 1991) stage is a shift in attention from the agricultural sector to urban enterprises, expanding their field of activity and independence. Market pricing is being introduced and reforms are being carried out social sphere, science, education. This stage is called “Planned Commodity Economy”.

The third (from 1992 to 2002) stage took place under the slogan “Socialist market economy.” At this time, a new one is formed economic system, implying further development of the market and defining the instruments of macro-regulation of state control on a new basis.

The fourth (from 2003 to the present day) is designated as the “Stage of Improving the Socialist Market Economy.”

Transformations in the agricultural sector

The Chinese economic miracle began with the transformation. The essence of the agrarian reform was the abolition of the then existing people's communes and the transition to family contracting with a single collective property. This meant the transfer of land to Chinese peasants into ownership for a period of up to fifty years, and part of the products received from this land was given to the state. Free pricing for peasant products was also introduced, and market trade in agricultural goods was allowed.

As a result of such transformations Agriculture received an impetus for development and came out of stagnation. The new established system of collective ownership and family contracting qualitatively improved the living standards of peasants and helped solve the food problem.

Transformations in industry

Economic system industrial enterprises was almost freed from directive planning; they were supposed to be turned into self-sustaining enterprises with the possibility of independent sales of products. Large strategic enterprises remain under the control of the state, while medium and small enterprises are given the right not only to manage their business, but also to change their form of ownership. All this contributed to the fact that the state focused on improving the situation in large state-owned enterprises and did not interfere with the development of the private sector.

The imbalance in the production of heavy industry and consumer goods is gradually decreasing. The economy is beginning to turn toward increased production of goods for domestic consumption, especially since China’s large population contributes to this.

Special economic zones, tax and banking systems

By 1982, as an experiment, some coastal regions of China declared themselves special economic zones, and after the 1984 plenum, a total of 14 cities were approved as special economic zones. The purpose of forming these zones was to attract foreign investment into Chinese industry and the development of new technologies, acceleration economic development these regions, the country's economy entering the international arena.

The reforms affected tax, banking and monetary system. Value added taxes are introduced, a single income tax for organizations. The central budgets began to receive a large part of the income thanks to new system distribution between local administrations and the central government.

The country's banking system is divided into state banks, carrying out the government's economic policy, and others credit and financial organizations on a commercial basis. Courses foreign currencies now they set off on a “free float”, which was regulated only by the market.

The fruits of reforms

The Chinese economic miracle began to manifest itself in the late 80s. The results of the transformations had a qualitative impact on the lives of ordinary citizens. Unemployment rates are reduced by 3 times, retail trade turnover doubles. The volume of foreign trade by 1987 increased 4 times compared to 1978. Billions of dollars of foreign investment were attracted, and by 1989 there were 19,000 joint ventures.

Speaking of China, it manifested itself in a decrease in the share of heavy industry and an increase in the production of consumer goods and light industry. The service sector is expanding significantly.

It was amazing at its unprecedented growth rates: 12-14% in the early 90s. During these years, many experts spoke about the phenomenon of the Chinese economic miracle and predicted China's role as an economic superpower of the 21st century.

Negative consequences of reforms

Like any coin, Chinese reforms had two sides - positive and negative. One of these negative points became the threat of inflation, which followed as a side effect of the growth in labor productivity after reforms in the agricultural sector. Also, as a result of the price reform, the situation in the industrial sector worsened. Unrest began, resulting in student demonstrations, as a result of which Secretary General Hu Yaobang resigned.

Only in the early 90s did Deng Xiaoping propose a course of acceleration and recovery economic environment helped to overcome the overheating of the economy, create systems for controlling inflation and the development of the country.

Chinese economic miracle and its reasons

So, now about the reasons. Studying the phenomenon of China's economic miracle, many experts put forward the following reasons for the economic recovery:

1. The effective role of the state in economic transformations. At all stages of reforms, the country's administrative apparatus adequately responded to the tasks of economic modernization.
2. Significant labor resources. Demand in the Chinese labor market is always greater than supply. This allows wages to be kept low while productivity is high.
3. Attracting foreign investment in Chinese industry, as well as in high-tech industries.
4. An export-oriented development model, which made it possible, through foreign exchange earnings, to increase the knowledge intensity of the economy and the development of the latest technologies.

However, China's main economic progress was the abandonment of “shock therapy” and the gradual formation of a market mechanism, which improved the economy through effective market regulation.

China today

What have China's four decades of wise reforms led to? Let's look at the main economic indicators below. Today's China is a powerful nuclear and space power with modern industry and developed infrastructure.

Some numbers

Over the three quarters of 2017, China's GDP reached about 60 trillion yuan. This amounts to 6.9% in annual terms. The increase in China's GDP in 2017 is 0.2% compared to the previous year. The share of the agricultural, industrial and service sectors in GDP is increasing by an average of 5-7%. In 2017, the growth trend in innovative and high-tech sectors of the economy continues.

In general, despite a slight slowdown in growth rates, the Chinese economy (it is quite difficult to briefly describe this phenomenon) today retains the potential for long-term growth and continues structural reforms.

Forecasts for the development of the Chinese economy

Having created a market mechanism in the economy, the Chinese government plans to further improve it, while showing the advantages of socialism. However, experts make both optimistic and pessimistic forecasts for the development of the Chinese economy. Some are confident that it will be difficult to resist the growing economic, political and social problems, maintaining communist power. Growing emigration to the developed countries, the gap between rich and poor can reduce the effectiveness of government and the role of the party. In contrast to them, other experts argue that, after all, a hybrid of socialism and the capitalist market is possible due to the originality of the Chinese nation and the mentality unique to it. All that remains to be said is that time will put everything in its place.

According to the latest official information, the growth of China's economy has developed so rapidly that today everyone unanimously confidently declares that China's economy has become the second in the whole world! The question of what explains the rapid growth of China's economy is not too difficult in the modern world, since after analyzing market prices and parity purchasing power this country, it immediately becomes clear that China must lead the world rankings.

How can we explain the rapid growth of China's economy?

World experts in the field of economic development argue that the growth rate of China's economy has increased so much recently that even exchange rates, especially the dollar, cannot in any way affect the fluctuation of the Chinese economy in a leading position in the world. Some of them are of the opinion that soon this country will even be able to surpass financial indicators Japan GDP.

More recently, the director of the State Administration of Foreign Exchange of China announced that it was his country that became the owner of the second economy in the world. But despite this, he noted that the Chinese government is ready for the subsequent growth economic situation in the country, China will have to experience some slowdown in such a rapid trend in the development of the national economy.

But, despite the speech of a representative of the Chinese government, it is still impossible to say with certainty that the country will be able to surpass the economy of Japan, which has held a leading position in the world for four decades. Today it is clear that purchasing power parity is a clear indicator that China is, in fact, the second largest economy in the world. The reason why it has not yet been officially said that this particular country is one of the leaders of the world economy is that at the moment China’s economic indicators are constantly underestimated.

Rapid growth: China's economy

Today, in the comparative table, China's GDP has almost reached GDP indicators Japan: $4.900 trillion vs. $5.080 trillion. As for Chinese economists, they say that in order for their country to finally be able to surpass Japan in the world ranking of economic development, it is necessary to eliminate the main obstacle, which is the yen.

According to a United Nations report, it is China, together with India, that will become the areas where the most rapid economic growth will occur. In addition, it should be noted that the main thing that explains the rapid growth of China’s economy is that the country’s government itself has set such a promising goal for itself. Without a doubt, Chinese officials have achieved clear success towards achieving their final goal: already in 2010, the Chinese economy became the third largest in the world. Today, the trend towards rapid and explosive growth is increasingly increasing.

Thus, economic growth was 8%, as planned by the Chinese government. In the same time, industrial production increased by as much as 11%, as previously promised by the Chinese Minister of Industry.

Despite the fact that during a constantly developing economy, China was acutely threatened by recession, it nevertheless managed to maintain quite impressive rates of growth of the national economy. The government began to improve the state of the economy by adopting a special economic stimulus package and a sharp increase in bank lending.

Today, the rapid growth of China's economy is planned due to an increase in foreign trade turnover, especially exports, by 15%. Due to China's rapid economic growth, the unemployment rate in other countries is increasing. In addition, for the same reason, other countries are losing their influence in the world market. That is why financial experts predict that in the near future:

1. China faces numerous trade-related disputes;
2. the Chinese government will have to answer for violations of free trade rules;
3. The Chinese government will have to combat economic overheating, which consists of rapid influx and growth of the money supply.

The violations of free trade are already known today: Beijing is forcing its American counterparts to sell books, films and music exclusively in cooperation with Chinese state-owned companies.

But, despite some problems that appear in the Chinese economy, the government is successfully managing to combat them. Thus, the expected results have already been observed recently, that is, consumers are increasing their spending. According to official information, the Chinese government plans to increase consumption by its population in order to transform the national economy into an engine of economic growth.

In addition, it should be noted that the government is currently implementing a large-scale program for government stimulation of GDP growth. Thus, it prepares the entire economy of the country for very strict structural reforms that can liberate the economy from the role of exports and investments in them. In the future, it is planned to increase investments abroad in order to ensure sufficient profitability of its foreign exchange reserves. In addition, the government is determined to purchase securities owned by commodity companies.

Video: China's GDP Growth

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The main factors behind the phenomenal growth of the Chinese economy are as follows.

The first factor is the effective role of the state in the economy, which actively influenced and influences ongoing processes at all stages of economic reform. In Chinese reform theory, the term “ complex system macroeconomic control, carried out through economic levers.” Chinese leaders gradually, step by step, as the need arose, built the market (institutions, competition, private property) and at the same time supported and modernized state-owned enterprises.

Supporters of “shock therapy,” which includes four main elements: price liberalization, liberalization of foreign trade and exchange rates, denationalization and privatization of state-owned enterprises, and the implementation of a non-inflationary macroeconomic policy, believe that this is enough to quickly align the price structure to the world level and construction market institutions, and then the market itself will regulate economic processes. Followers of the shock model understand that the privatization of state-owned enterprises will inevitably lead to increased unemployment until the private sector begins to absorb excess labor. Therefore, the shorter it is transition period, the sooner, according to supporters of “shock therapy,” the economy will stabilize. For example, Jeffrey Sachs argued this way: “if you are going to cut off a cat’s tail, it is better to do it in one fell swoop than to cut it into pieces.” It is believed that, since the pain will be short-lived, political opposition to the reforms will soon fade away, without having time to lead to the repeal of the reforms.

Chinese proponents of "gradualism" argue that the four above-mentioned elements of "shock therapy" do not need to be administered simultaneously and instantly. They believe that the process should take place gradually, sector by sector, stretching over many years, and during this time (before the launch of the market autopilot) the role of the state is extremely large. The "gradualist" approach can be characterized by four principles. First, price reform may be incomplete and gradual (parallel price system in China). Secondly, the emergence of foreign competitors in domestic market must be gradual so as not to lead to the collapse of national industry. Thirdly, privatization of state-owned enterprises is not necessary at the first stage of reforms, and private property can develop not instead of state property, but together. Fourthly, the transition to a market economy can be carried out without overly strict macroeconomic policies: “ money-credit policy may not be hard or soft, but support the production the country needs.” Fifthly, the order (priorities) of reforms is important; synchronization does not mean the simultaneity of all reforms, but their consistent mutual influence. In China, rural reform preceded urban reform, and price reform preceded property and property rights reform. At the same time, it is impossible for certain links of reforms to be too ahead of others, and for some, on the contrary, to lag behind.

Depending on the stage of formation market mechanisms The functions of the Chinese state and especially the forms of their implementation changed. Direct management methods were replaced by indirect ones, directive planning - by indicative planning and forecasting, the center of gravity of government intervention was transferred from the microeconomic level to the level of macroeconomic regulation and, most importantly, administrative methods of regulation economic processes replaced by market ones.

The analysis shows that the system of public administration that existed at all stages of Chinese reforms was adequate to the tasks of economic modernization of the country, which made it possible to transform China into a modern powerful state.

The second factor is significant resources / labor / with a constant increase in their quality and low wages (excess labor in the labor market allowed and allows to retain wages at a low level). Physical population growth and the movement of labor from labor surplus areas to new growth points ensured in the period 1978-1988. about a third of GDP growth.

The third factor is a high share of savings and investment (above 30% of GDP), complemented by effective strategies for attracting foreign investment, primarily in high-tech industries. According to many Chinese experts, investments also provided about a third of GDP growth.

The fourth factor is the openness of the economy (kaifang zhetse), based on an export-oriented development model, which, due to the growth of foreign exchange earnings, involves increasing the technology and knowledge intensity of the economy, mastering the latest information and communication technologies, and introducing modern industrial logistics schemes.

The fifth factor is an advantageous territorial and natural location. Of no small importance in China's successes is geographical position its territory. In the historical process of forming its territory, expansion in the southern and northwestern direction gave the country access to the Pacific Ocean; its territory contained the shortest land routes from the shores of the Pacific Ocean to European countries. China has the third largest territory in the world (after Russia and Canada).

On the territory of China there are a number of large fuel (oil, coal, gas), various ore and non-metallic mineral deposits (tungsten, lead, zinc, vanadium, titanium, tin, molybdenum, nickel), as well as building materials(gypsum, barite, phosphate ores, mica, asbestos, kaolin). China ranks first in the world in terms of potential hydro resources. However, on a per capita basis, China is not very rich in natural resources, especially water, forest and land (arable) resources.

Thus, the Chinese practice of economic growth is simple and does not contradict the theory: using the savings of the population and overseas Chinese (huaqiao), the state developed infrastructure and stimulated the creation of new jobs in the private sector parallel to the public sector, which exported its products, and foreign exchange earnings directed towards the purchase of new technologies and modernization. The level of consumption gradually increased, which increased domestic demand and stimulated the influx of new investments in the form of global multinationals, which were eager for access to the giant Chinese market.

Thanks to a long period of consistently high growth in GDP (the highest in the world) and exports (Fig. 1.5), absolute and relative amounts of savings and investments, including foreign ones, and the involvement of millions of people in industrial production and the service sector (Table 1.1), China managed to create a modern industry, significantly expand and improve the infrastructure (Box 1.1), create a variety of industrial sectors, previously absent in the country and thereby significantly increase the share of industry and services in GDP (Table 1.1).

* National Income Savings Fund.

** According to Chinese statistics, the primary sector is agriculture and forestry, the secondary sector is industry, energy, construction, and the tertiary sector is services, transport, education, healthcare.

Source Chinese Statistics Yearbooks.

This article is from the section- success factors of economic reforms in China, which is dedicated to the topic - China's economic growth - drivers of phenomenal growth. I hope you appreciate it!

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