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Prospects
An iconic billboard in the quintessential boom city of Shenzhen features Deng’s famous statement that China's “basic line will not waver for 100 years.” If Deng was right, we are less than one-third of the way into the era of “reform and opening.” But four challenges identified by Premier Wen Jiabao in 2010, that growth becomes “unbalanced, unstable, uncoordinated, or unsustainable,” threaten the boom. The key to balance lies in increasing the consumer share of GDP, allowing China to create a modern consumer economy. Stability will depend on the government's ability to address grievances as the gap between winners and losers widens. Coordination is the great test facing the ruling Communist Party, of whether it can manage the politics of growth without fundamental changes to the system. Sustainability is an issue that has global implications, as citizens of a warming planet watch anxiously to see if China is successful in greening the boom. The fifth great challenge, left out by Premier Wen, may be the external one: whether the world is successful in making room for China. |
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The Chinese-Indian Economic ModelPeriod: Prospects
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Click to expand So, the real problem in economy is trying to work out, if you wish, "Is that society, that economy, producing the means for sustained growth over long periods of time?" Surprisingly, it isn't too hard to produce really good growth rates for five years; almost any sensible government can plough resources in a manner to do that. The question is: Can you sustain that over 20 years or 25 years? That's the really difficult part. And that's where the India and China model are interesting, because China's been able to sustain this for almost 30 years. India's reforms began a little later, but we're now looking at about 20 years. And both of them have been able to sustain their growth rates at the way they're doing, but you can start looking at the fact that India is now looking at China and saying that, "Well, our domestic-driven internal consumption model, maybe if we can add one more engine to the driver, by adding an export-led, investment-driven model, like China does, then our economy will grow that much faster." And China is basically saying the same thing, "If we can add an Indian engine, which would be domestic consumption-driven, to our export, investment-driven model, then our economy will also move a little faster as well. And in a more stable, long-term manner." So, what I think you're starting to see is these two economies starting to get closer and closer together, because they will take a bit of each other's economic growth model and absorb it into their system. And when you talk to economists and say, "Well, which one got it right?" They say, "Well, they're both getting it right; there's no particular law that says you have to start with an investment, export model, and then switch to a domestic consumption model." You could do it either way, there's no reason that you should have it one way only and then they will do it another way and so on.
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