The second stage of China’s development promises to be no less momentous.
Consumption will take over the growth baton from investment. Services will grow as a share of the economy, while industry shrinks. Commodity-intensive mass manufacturing based on cheap labour will give way to greener, cleaner ways of making things.
More of the value added by a better-educated, more productive workforce harnessing new technologies will stay in China instead of going to multinational companies. That’s the plan, anyway.
China will remain the most powerful engine of global growth for the next couple of decades, but it will no longer be just processing imported raw materials and components for re-export, said Li Jian with the Chinese Academy of International Trade and Economic Cooperation, the commerce ministry’s think tank.
“China has realised that it cannot blindly rely on investment and exports as the main drivers of growth. So China’s demand will be more balanced,” Li said.
To show it is serious about more sustainable growth, China deliberately engineered the first-half slowdown that unnerved markets in order to address these longer-term structural priorities, according to President Xi Jinping.
Xi and the other new leaders of China’s Communist Party are expected to approve a blueprint for reform at a plenum in November. Overcoming vested interests opposed to the new economic model will be a stern test of their credibility. A lot is at stake for the global economy too.