Chinese Growth Model- will it survive?
July 20th, 2007 - by 2point6billion.comChina overtook Britain to be the worlds 4th largest economy in 2005. Predictions in January 2007 (considering China growing rapidly) were that it would go up the ladder to number 3 position by 2008. It’s mid of the year 2007, China has already reached there leaving Germany behind and there seems to be nothing stopping it.
So does China has an unstoppable growth or is it heading for a negative development?
Check out the article, ‘What might stall the “Great Chinese Growth Engine”? by the friend and contributor of 2point6billion, Shantanu Bhagwat of Global Themes blog as he shares his learnings from the lecture of Wing Thye Woo, Professor of Economies at the University of California, on “The Real Challenges to China’s Continued High Growth”. Professor Wing has compared the Chinese growth model to a speeding car which could lead to crash in the absence of required actions. These failures are hardware (breakdown of economic mechanism), software (societal disorders) and power (environmental degradation).
On the probability of occurrence of these failures, Professor Wing commented in one of his write ups- “ What are the High-Probability Challenges to Continued High Growth in China? “
“My assessment is that the highest probability event in hardware failure is the weakening of China’s fiscal position; the highest probability event in software failure is social disorder, and the highest probability event in power supply failure is water shortage. And my ranking of the probability of these three specific negative events in descending order is social disorder caused by outmoded governance, water shortage as a result of inept environmental management, and fiscal crisis generated by the repeated recapitalization of the state banks and the rapid aging of the population.”
China needs to gear up for necessary institutional reforms if it wants to continue shining at that 11 % plus GDP rate. China knows this and wants it, though might be surprising to many that it needs them while it has survived the 30 years of speed!
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July 22nd, 2007 at 10:45 pm
Interesting article in similar vein on the www.china-briefing.com/blog by Chris Devonshire-Ellis “Has China’s Economy Hit A Glass Ceiling ?” but from perspectives of the One Party State interfering with business and hence the ability of Chinese businessmen to graduate away from a cronyist way of conducting business and into a transparent globally accepting model. All fascinating stuff from Dezan Shira on both sites. Very good commentary.
August 30th, 2007 at 9:41 pm
A simple opinion…. China won’t crash! In my worst scenario I can see China slowing down a little bit when dealing with necessary reforms. Nothing too serious. I am a positive person!