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November 19, 2010

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How to power forward in China development 3.0

THE People's Republic of China celebrated its diamond jubilee last year. In retrospect, the past six decades can be seen as a dichotomy.

Recurring political movements were the hallmark of the first 30 years, which I would like to call China Development 1.0. The ensuing 30 years were characterized by rapid economic catching-up, or according to my logic, China Development 2.0. Right now the nation is at the dawn of what will be its third three decades, a period that shall be remembered as China Development 3.0, with its emphasis on scientific development.

After 30 years of sweeping economic reforms, China's GDP per capita has topped US$3,000, an increase of more than tenfold from the meager US$250 in 1980. If the current growth rate of 7 to 8 percent a year can be maintained, China's GDP per capita can certainly reach US$10,000 by 2030, landing it in the league of high-income countries.

However, at a time when the leadership's mantras of "scientific development" and "harmonious society" have gained broad currency, people are increasingly dissatisfied with the kind of economic growth seen only in figures over the last three decades. They expect future growth to be more quality-oriented.

Hence, serious questions can be raised as to how China can lift its GDP per capita above the benchmark US$10,000. In my opinion, China's development in its next 30 years, especially the first 10 years, should focus more on creating jobs, achieving low-carbon growth and improving the welfare system.

Full employment

The quality-oriented growth should aim at full employment. Although China's economy has grown at an average clip of 10 percent a year, employment hasn't risen in tandem - its growth averaged only 1 to 2 percent. Job scarcity has long been a headache for China, with a large rural population to relocate.

Three things can be done to narrow this gap. One thing is to strengthen the service industry, which has taken a backseat to manufacturing.

China's past growth miracle is built on its manufacturing power and skill, particularly in the export sector. But manufacturing in fact contributes less to employment than the tertiary or service-sector industry.

Those nursing the hope of expanding domestic employment through exports became disillusioned by the 2008 financial crisis, when falling consumption in rich countries drastically shrank imports from China. The service industry thus emerged as the main alternative to manufacturing that is vulnerable to global economic vagaries.

Another thing is to make Chinese cities more employment-friendly. For a long time the imperative to provide jobs - whether to students receiving higher education or to migrants working as laborers in cities - has been sidelined in the rapid push to urbanize the country.

Full employment, hence, should figure as the top priority of China's urbanization architects. To generate enough jobs, one thing they need to contemplate is systematically building satellite cities surrounding "hub" metropolises.

The third thing that can be done to guarantee full employment is to balance our approach to high-tech and labor-intensive, so-called low-end industries, the latter of which include segments of the service sector and eco-friendly manufacturing businesses.

We cannot count entirely on gigantic state-owned firms and multinationals, which are not known as big employers, to create jobs. Instead, small- and medium-sized businesses can be tapped to create job opportunities.

The formulation of a low-carbon economy is also important. China is now the largest emitter of greenhouse gases and its per capita emissions have exceeded the world's average. With the international community showing graver concerns about fossil fuel consumption and carbon emissions, China's future development is in desperate need of a low-carbon transition.

Tipping point

If we do not wish to repeat the developed countries' mistakes, it's high time we seized this low-carbon tipping point to trigger changes to our industrialization, urbanization and modernization.

This entails greater efforts than mere idolatry of higher GDP. Although China has done a good job in reducing its carbon intensity per unit of GDP, its progress pales next to the scale of its burgeoning economy. Therefore, China's green growth plan should shift its focus from reducing carbon intensity per unit of GDP to making carbon emissions per capita lower than the developed nations'.

Moreover, Chinese factories leave a much bigger carbon footprint than the general populace. This calls for polluting factories to increase the use of renewable energies in lieu of fossil fuels in rolling out their products.

At the same time, energy efficiency, especially in industry, transport and construction, should be raised. Forests, farm land and wetlands are to be expanded to better trap and store carbon.

China's economic locomotive has been powered ahead at nearly 10 percent every year. Whether it still needs to hurtle at such high speed is debatable.

In fact, the nation's per capita GDP can be projected to hit US$10,000 by 2030 even if the growth rate slows to 7 percent. What truly matters is whether citizens' income and welfare have been part of the rising tide. For most people, growth figures are relevant only when their own pay raises can outpace them and general affluence can trickle down.

Meanwhile, if government provision of public services like basic education, health care, affordable housing, mass transport and environmental protection can improve along the way, this will substantially elevate the standard of living.

Only in this way will China's potential entry in 2030 into the "US$10,000 club" be recognized as a testament not only to its economic competitiveness, but also to the quality and sustainability of its people's life.

(The author is director of the Institute of Governance for Sustainable Development at Tongji University in Shanghai. He can be reached at dajianzhu@263.net. Shanghai Daily staff writer Ni Tao translated his article from the Chinese.)




 

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