1. The Long-term Vision and Growth Strategies of China’s Economy LIU Yong Institute of Industrial Economics, CASS Seoul, Jan. 19, 2006

2. Content Perspective of China’s Economy Beneficial Factors Limiting Factors Growth Strategies

3. China ’ s Economy: Current Status & Growth Goal Current Status  GDP: 15.99 trillion RMB or 1.93 trillion USD in 2004  Per capita GDP: 12336 RMB or 1490 USD in 2004  Growth rate: 9.6 and 9.4 percent annually during 1979- 2004 and 2001-2004 respectively Growth Goal  Per capita GDP of 2010 will be $1900, calculated at constant prices of 2000, doubling that of 2000, $946.79.  Equal to GDP growing 7.3 percent annually during 2005-2010 regarding population increasing

4. China ’ s Economy: Estimation of Growth Rate Different Scenarios2005-20102010-20152015-20202005-2020 Baseline Scenario8.17.56.87.5 Coordination Scenario 8.58.27.78.1 Risk Scenario7.55.84.86.0 Source: “The Prospects of China’s Economic Growth,” Li, Zhai & Hou 2005, Working Paper of DRC. The long-term estimation of China’s economy growth rate Under the baseline scenario, China’s GDP, calculated at constant prices of 2000, will reach 2.55 trillion USD in 2010 and 5.32 trillion USD in 2020.

5. China ’ s Economy: Growth Impetus Capital formation still being the main impetus Labor force growth tending to be slow Total factor productivity steadily increasing

6. China ’ s Economy: Beneficial Factors Relatively strong foundation of material and technology International competitiveness of manufacturing industry being improved sharply Abundant labor resources and rapid accumulation of human capital Huge domestic consume market and tremendous growth potential Accelerating urbanization

7. China ’ s Economy: Limiting Factors Sustainable development facing the severe pressure of resource and environment Imperfect economic system restricting the efficiency of economic growth Increasing complicated social contradictions resulted from unbalanced development Increasing uncertain factors in international economic environment

8. China ’ s Economy: Growth Strategies Accelerating economic restructuring and change in the pattern of economic growth Developing cycling economy Independent innovation Promoting unisonous regional development Expanding domestic demand Building new villages Deepening reforms Raising opening level to the outside world

9. Relatively strong foundation of material and technology Per capita GDP: around $1500 GDP: No. 6 in the world FX reserves: No. 2 in the world Capital formation rate: 44.2% Foreign capital accumulated: $600 billion Bottleneck of undercapitalization broken through Huge domestic supply capability

10. International competitiveness of manufacturing industry being improved sharply Technology19801985199019952000 Resource based27.328.528.730.929.3 Low25.319.119.715.914.5 Medium & high47.452.451.653.256.1 Table 2 Technology structure of MVA in China Figure 1 Technology structure of China’s manufactured exports Source: “Industrial Development Report 2004,” UNIDO 2004.

11. Abundant labor resources and rapid accumulation of human capital Labor force over 0.8 billion by 2010 25 million people with bachelor and master degrees entering the workforce for the first time The strongest comparative advantage: huge-scale, quality-improving and low- cost labor resources, and astronomical human capital Figure 2 The average hourly wages in different countries in 2003 Source: Boston Consulting Group.

12. Huge domestic consume market and tremendous growth potential Per capita income growing annually, 2001-2005  Urban: 10.5%  Rural: 5.1% Household consumption expenditure growing annually, 2001-2005  Urban: 9.2%  Rural: 5.2% Engel coefficients for households varying, 2000-2003  Urban: -2.3%  Rural: -3.5% Items of expenditure1990199520002001200220032004 Medicine & medical2.03.16.46.57.17.37.4 transport, post & communication3.25.28.59.310.411.111.7 education, culture & recreation8.89.413.413.91514.4 Table 3 The structure changing of urban household expenditures, 1990-2004 Source: National Bureau of Statistics of China.

13. About 0.2-0.3 billion farmers will enter into urban areas in the next 15 years. The transfer of farmers will spur demand for urban infrastructure and investment, fueling secondary and tertiary industries growth. The increase of urban population is going to promote the growth of urban consumption demand. Figure 3 The urbanization rate of China, 2004-2020 Accelerating urbanization

14. China ’ s per capita storage of resources is far below the world ’ s average level. For example:  Arable land: 1/3  Water reserves: 1/3  Forest: 1/6  Petroleum: 11%  Natural gas: 4.5%  Iron ore: 42%  Copper mineral: 18% Currently the demand for steel in China has exceeded the sum of USA and Japan, with that for copper, nickel, zinc, iron ore and cement exceeding USA. Sustainable development facing the severe pressure of resource and environment

15. Imperfect economic system restricting the efficiency of economic growth Under-developing reform of investment system Immature financial market Irregular fiscal and taxation system Distorted price formation mechanism for resource and environment

16. Increasing complicated social contradictions resulted from unbalanced development All kinds of gaps becoming larger Different regions Urban and rural areas Different social classes Damaging the stable and harmonious economic growth

17. Increasing uncertain factors in international economic environment Frequent trade frictions Price fluctuation in international market Globalization bringing about new economic risks

18. Accelerating economic restructuring and change in the pattern of economic growth A new road to industrialization Using IT to propel industrialization with stimulating IT application Enhancing independent innovative capability Developing advanced manufacturing industries

19. Developing cycling economy Changing the concept of development Adjusting industrial structure and distribution Establishing technical supporting systems Perfecting related system and mechanisms Strengthening related laws and regulations Organizing and launching pilot projects Intensifying publicity and education Developing new and renewable energy resources

20. Independent innovation Establishing national innovation system Improving competition environment Adopting supporting policies Making use of global scientific resources Enhancing protection of intellectual property rights

21. Promoting unisonous regional development Improving the interactive mechanism of regional coordination More support to the central and western regions Defining the social functions of different regions Giving full play to the city groups

22. Expanding domestic demand Spurring rural consumption Regulating income distribution Improving social security system Optimizing consumption environment

23. Building new villages Promoting rural reforms Improving the rural productivity Developing rural social undertakings Promoting grass-roots democracy

24. Deepening reforms Pressing ahead reform of the government's administrative management system Upholding and improving the basic economic system Pushing forward finance, taxation and banking system reforms

25. Raising opening level to the outside world Accelerating the change of the trading growth pattern Continuing the policy of utilizing foreign capital Taking the strategy of "going global" and investing abroad

26. The End Thanks