2018年CRI Expert predicts 8% economic growth for China in the next decade

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At an economic forum¹ just held in Washington D.C., one of China's most influential² economists³ has predicted an 8% growth rate for China in the coming decade.

Our Washington correspondent Liu Kun has the details. 

Justin Lin Yifu, professor at the National School of Development at Peking University, said compared with high income countries, China has great potential to tap into in the area of industrial upgrading and technological⁴ innovation because of late-comer advantage. 

He made the comment at an economic forum in Washington D.C. co-organized by Peterson Institute for International Economics and China Finance 40 Forum, a think tank in China. 

Lin explained that late comer advantage will push China to learn from high income countries to improve productivity, thus unleashing⁵ economic growth momentum⁶, which has already been shown in the cases of Japan, Singapore and South Korea. 

He said analyzing⁷ data from 2008 and relating that with the experiences of the above four Asian economies, he is confident to conclude that China will be able to achieve an 8% growth rate for the coming decade, but only on the condition that China fully⁸ utilizes⁹ this late comer advantage. 

"In 2008, the per capita GDP measured by purchasing power parity¹⁰ was 21% of the US. And it was similar to Japan in 1951, Singapore in 1967 and Korea in 1977. And these four East Asian economies, they achieved 20 years of 8-9% growth. If they can realize 8-9% growth for 20 years, that means China has 8% growth potential from 2008. And now ten years have passed but we still have ten years to come. I think the growth potential in China could be about 8% per year in the coming 10 years." 

Nicholas Lardy is the Anthony Solomon Senior Fellow at the Peterson Institute for International Economics. He said he agrees with Professor Lin, but also cautioned that China needs to address the financial instability brought by government directed lending to state owned enterprises. 

"So I do tend to agree with Justin that there's still very substantial potential for China to grow at 8% or maybe even a little bit more, but I don't think this is going to happen if the current situation persists. China needs to return to a system in which bank lending is more commercially driven, which it had been in the 90s, in the 2000s, before the pattern changed after 2011. And it would require substantial reform of underperforming state owned enterprises. " 

The reform of SOEs in China was hotly contested at the forum, with some arguing that it represents the successful story of the Chinese model while others said it reflects an unhealthy relationship between government and market. 

Qin Xiao is an academic advisor¹¹ with China Finance 40 Forum and former chairman of China Merchants Group & China Merchants Bank. He warned that if not taken care of, the problems with China's SOEs could not only wreck¹² China's economy, but also have socio-political implications. 

"State owned enterprises have been given the mandate¹³ to implement¹⁴ national strategies and serve as a tool for macroeconomic policy adjustment. As a result, they often obtain many explicit¹⁵ and implicit¹⁶ financial support and subsidies¹⁷, including low cost loan, free land allocation, fiscal¹⁸ of injection of assets and fund, and monopolies in many industries. All these advantages undermine fair market competition and deepen social inequalities." 

The forum, the 3rd of its kind, also released the Jingshan Report, addressing issues confronting China's financial sector¹⁹ and calling for a proactive yet prudent²⁰ opening up process for the sector.

For CRI, this is Liu Kun reporting from Washington D.C.