What explains the growth miracle of the most populous developing nation in the world – one that has economically transformed itself through unprecedented growth rates over the shortest period by any nation in world history?
By 2014 the country’s Gross Domestic Product (GDP) had crossed USD 10 trillion, making it the second nation in the world to achieve this feat (the US having achieved it in the year 2000). Per capita income of the Chinese people had climbed from a mere USD 190 in 1980 to a high level of USD 6,629 in 2013, thereby reducing the gap with the US per capita income, from roughly 1/54 to about 1/8 over the same period.
It is even more surprising to note that the Chinese are today the biggest spenders in the global luxury market, with sales from mainland China, Hong Kong and Macau accounting for a fourth of the global sales in 2012, overtaking the US which accounted for a fifth of the sales.
After the figure of ninety-seven million trips by Chinese international travellers in 2013, hit the news, the Chinese tourist became an attractive commodity, and many foreign diplomatic missions in Beijing suddenly started using Youku (China’s YouTube) to upload tourism promotion films of their respective countries!
Even more surprising is the nature and geographical spread of Chinese investments globally, ranging from investments in companies in the United Kingdom and European nations to ports in Greece, Belgium, Nigeria, Pakistan, Sri Lanka and Singapore, to name a few. Investments from China include interests in oil and gas in Canada, mining and gas in Australia (with investments in agriculture, real estate and energy fast catching up, too).
Chinese companies are fast becoming important employers of Americans in the United States, with investments in energy, telecom, IT, electronics, home appliances, logistics, consumer goods, real estate and so on. In the African continent, Chinese investments in mining, manufacturing, construction, financing are well documented. Chinese direct investments overseas were reported at USD 621.5 billion at the end of March 2014, by the country’s State Administration of Foreign Exchange (SAFE).
The Economist Intelligence Unit (EIU) expects that by 2017 China would become a net investor in the world, as Foreign Direct Investment (FDI) outflows are fast catching up with inflows to the country. This last bit of news underlines the reversal of fortunes of the country compared to the situation in 1978 when it invited FDI inflows from the rest of the world to help it grow and develop.
These are signs of how significant China has become to the world economy, and also how far it has come from being the image of a country with cheap labour as its most defining force, while developing on the back of FDI inflows. As China’s foreign exchange reserves touch an unprecedented USD 4 trillion, and foreign trade deficits dominate trade with most nations, economies in both the developed and developing worlds are understandably keen on developing strategies to attract Chinese investments, despite the fierce domestic debates that often accompany it.
Many of us still think China is a place where millions contribute cheap labour and manufacture goods that flood the world markets. This is, however, just a small part of the story today, as the dragon transforms itself in a surprising and significant manner with intriguing intricacies many of us may not be familiar with at all. As discussed, more and more number of global employers, purchasers of real estate and investors seeking joint ventures in the developed world, are none other than Chinese nationals.
China has become an integral part of lives all over the world, much beyond simply the “made in China” goods entering our homes. With Chinese growth rates driving world markets, and Chinese tourists boosting global tourism and the luxury goods markets, it suddenly becomes more important than ever to understand China better. Most of us read an article in a magazine or a newspaper and form our opinions about the country. Yet, China intrigues most of us, and we remain curious about the country and its people, about the miracle of its economic and developmental transformation, about the tremendous growth story of China and its likely future path.
There are fascinating facets to an understanding of the world’s most populous nation. By one projection made in April 2014, China would overtake the United States in terms of the nominal size of its economy by the year 2030.
However, there was a surprise in Purchasing Power Parity (PPP) terms. China was likely to overtake the economy of the United States by the end of 2014 itself! Lo and behold, come December 2014, and the IMF data for the world economy revealed China accounted for 16.5 per cent of the global economy in real purchasing power terms, compared to 16.3 per cent of the US! China’s GDP (PPP) was USD 17.63 trillion in 2014, as estimated by the Central Intelligence Agency (CIA) in The World Factbook, vis-à-vis that of the United States at USD 17.46 trillion for the same year.
What did this mean? Had China really become an economic superpower, ahead of the United States? It is not so simple, though.
Many point out to the greater living standards of the average American people, far ahead of the Chinese. To take the simple criterion of the United Nations (UN) Human Development Index (HDI) that measures human well-being in terms of life expectancy, literacy, quality of life and so on, it is seen that while the US has a very high human development ranking of 30 (in 2014), China is still at a rank of 91 in the same year.
As one expert in the field put it, “The day China surpasses the US remains in the future.” It has been estimated that if China grew at an average annual growth rate of 5 percent, it would take another twelve years before it could overtake America in terms of the size of the economy at market exchange rates, assuming no significant change in exchange rates.
Thus, despite the extraordinary economic event of China overtaking the American GDP in PPP terms, the country with its billion-plus population still has a per capita GDP many times below that of the US. Chinese Premier Li Keqiang in his speech at the World Economic Forum in Davos in January 2015 had stated that China is still a developing nation, with the growth gear shifting from high speed to medium-to-high speed.
However, at the same time, it is clear that China will not remain a developing country with huge marginalised population for long, either. Where exactly is China on the development continuum, and what are the economic challenges that the country faces as it grows and develops, are some of the important questions that intrigue the minds of developmental economists and the general world population.
Excerpted with permission from China: Behind The Miracle, Sumita Dawra, Bloomsbury.
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By 2014 the country’s Gross Domestic Product (GDP) had crossed USD 10 trillion, making it the second nation in the world to achieve this feat (the US having achieved it in the year 2000). Per capita income of the Chinese people had climbed from a mere USD 190 in 1980 to a high level of USD 6,629 in 2013, thereby reducing the gap with the US per capita income, from roughly 1/54 to about 1/8 over the same period.
It is even more surprising to note that the Chinese are today the biggest spenders in the global luxury market, with sales from mainland China, Hong Kong and Macau accounting for a fourth of the global sales in 2012, overtaking the US which accounted for a fifth of the sales.
After the figure of ninety-seven million trips by Chinese international travellers in 2013, hit the news, the Chinese tourist became an attractive commodity, and many foreign diplomatic missions in Beijing suddenly started using Youku (China’s YouTube) to upload tourism promotion films of their respective countries!
Even more surprising is the nature and geographical spread of Chinese investments globally, ranging from investments in companies in the United Kingdom and European nations to ports in Greece, Belgium, Nigeria, Pakistan, Sri Lanka and Singapore, to name a few. Investments from China include interests in oil and gas in Canada, mining and gas in Australia (with investments in agriculture, real estate and energy fast catching up, too).
Chinese companies are fast becoming important employers of Americans in the United States, with investments in energy, telecom, IT, electronics, home appliances, logistics, consumer goods, real estate and so on. In the African continent, Chinese investments in mining, manufacturing, construction, financing are well documented. Chinese direct investments overseas were reported at USD 621.5 billion at the end of March 2014, by the country’s State Administration of Foreign Exchange (SAFE).
The Economist Intelligence Unit (EIU) expects that by 2017 China would become a net investor in the world, as Foreign Direct Investment (FDI) outflows are fast catching up with inflows to the country. This last bit of news underlines the reversal of fortunes of the country compared to the situation in 1978 when it invited FDI inflows from the rest of the world to help it grow and develop.
These are signs of how significant China has become to the world economy, and also how far it has come from being the image of a country with cheap labour as its most defining force, while developing on the back of FDI inflows. As China’s foreign exchange reserves touch an unprecedented USD 4 trillion, and foreign trade deficits dominate trade with most nations, economies in both the developed and developing worlds are understandably keen on developing strategies to attract Chinese investments, despite the fierce domestic debates that often accompany it.
Many of us still think China is a place where millions contribute cheap labour and manufacture goods that flood the world markets. This is, however, just a small part of the story today, as the dragon transforms itself in a surprising and significant manner with intriguing intricacies many of us may not be familiar with at all. As discussed, more and more number of global employers, purchasers of real estate and investors seeking joint ventures in the developed world, are none other than Chinese nationals.
China has become an integral part of lives all over the world, much beyond simply the “made in China” goods entering our homes. With Chinese growth rates driving world markets, and Chinese tourists boosting global tourism and the luxury goods markets, it suddenly becomes more important than ever to understand China better. Most of us read an article in a magazine or a newspaper and form our opinions about the country. Yet, China intrigues most of us, and we remain curious about the country and its people, about the miracle of its economic and developmental transformation, about the tremendous growth story of China and its likely future path.
There are fascinating facets to an understanding of the world’s most populous nation. By one projection made in April 2014, China would overtake the United States in terms of the nominal size of its economy by the year 2030.
However, there was a surprise in Purchasing Power Parity (PPP) terms. China was likely to overtake the economy of the United States by the end of 2014 itself! Lo and behold, come December 2014, and the IMF data for the world economy revealed China accounted for 16.5 per cent of the global economy in real purchasing power terms, compared to 16.3 per cent of the US! China’s GDP (PPP) was USD 17.63 trillion in 2014, as estimated by the Central Intelligence Agency (CIA) in The World Factbook, vis-à-vis that of the United States at USD 17.46 trillion for the same year.
What did this mean? Had China really become an economic superpower, ahead of the United States? It is not so simple, though.
Many point out to the greater living standards of the average American people, far ahead of the Chinese. To take the simple criterion of the United Nations (UN) Human Development Index (HDI) that measures human well-being in terms of life expectancy, literacy, quality of life and so on, it is seen that while the US has a very high human development ranking of 30 (in 2014), China is still at a rank of 91 in the same year.
As one expert in the field put it, “The day China surpasses the US remains in the future.” It has been estimated that if China grew at an average annual growth rate of 5 percent, it would take another twelve years before it could overtake America in terms of the size of the economy at market exchange rates, assuming no significant change in exchange rates.
Thus, despite the extraordinary economic event of China overtaking the American GDP in PPP terms, the country with its billion-plus population still has a per capita GDP many times below that of the US. Chinese Premier Li Keqiang in his speech at the World Economic Forum in Davos in January 2015 had stated that China is still a developing nation, with the growth gear shifting from high speed to medium-to-high speed.
However, at the same time, it is clear that China will not remain a developing country with huge marginalised population for long, either. Where exactly is China on the development continuum, and what are the economic challenges that the country faces as it grows and develops, are some of the important questions that intrigue the minds of developmental economists and the general world population.
Excerpted with permission from China: Behind The Miracle, Sumita Dawra, Bloomsbury.