|
China's high-rate industrial growth will need to continue in order to bolster the country's long-term economic prosperity, despite the current measures to readjust the economy.
China has entered a development stage propelled by the dynamic growth of its heavy industrial and chemical sectors. This round of development could last another 20 years. Experts give a number reasons to support this argument. I will explain it from the perspective of industrial development.
The existence of some vigorous industries should be a gauge to determine whether an economy will grow continually at a fast rate. Economic development is proceeding at a rapid pace thanks to a number of booming industries.
China's economic growth in the 1980s was backed by light industry. Infrastructure, basic industries, power, transportation, ports, real estate and household electric appliances provided the economy with new opportunities for growth in the 1990s.
A new phenomenon then emerged from 2002. The "leading industries," namely real estate and autos, have pushed the growth of "intermediate investment industries," which mainly include the steel, non-ferrous metals, building materials, machinery equipment and chemical industries. They have delivered prosperity to the power, coal, petroleum, ports and energy industries, sectors which we call basic industries or infrastructure.
We can see from the above categorization that autos, urban infrastructure and the intermediate investment industries are all heavy and chemical industries. China has entered a development stage driven by the sustainable development of its heavy and chemical industries, featuring more technological support and higher added value than previous growth cycles.
During this process, the growth is supported by an upgraded consumer structure, which is market-oriented. This is the first time heavy industry has developed so fast in a market-oriented way in the history of New China.
The current development mode is also different from the past. Take the property market. The current real estate boom is commercially driven. It is closely related with the increasing demand from substantial consumers and is different from the 1990s' boom, which was highly speculative.
Some people worry that since the price index has kept rising since late last year, China may repeat its early 1990s story of economic overheating and inflation. They are ignoring the new features of this round of industrial development when making such a claim.
The fast-growing leading industries, namely auto and property, are largely consumed by consumers with real purchasing power; most of them are not speculators, with 80-90 percent of the products in the leading industries purchased by individual consumers, who have become the ultimate engine driving this new round of industrial growth.
This seems a simple judgement, but it is important to clarify the fact that the ordinary consumers are behind the rising output.
In recent months, the bubble theory seems to have become popular and controversies have arisen as to whether "bubbles" are unbearably large in certain industries.
Bubbles are there, but only short-term and in a limited number of fields. There have not been widespread long-term industrial bubbles, as I have mentioned earlier, the growth is backed up by real consumption.
China's industrial makeup is formed by three almost equally powerful forces: the State enterprises, Sino-foreign joint ventures and private enterprises. The proportion of foreign and private enterprises in industrial output has been rising rapidly in recent years, which is proof of the country's basically healthy industrial growth.
The leading position of the real estate and auto industries will lay solid foundations for China's relatively fast economic growth - around 7-8 percent - in the coming 10-20 years.
Based on international experiences, after auto consumption becomes relatively common in a large country, the auto industry will remain on the fast track for 20-30 years. In China, although the auto industry has a history of more than 50 years, it is only in the recent one or two years that a large number of families have begun to buy cars. Studies show that once the auto industry becomes a backbone of the economy, there will be another 30 years of rapid development. The real estate industry is expected to follow a similar growth track.
The structural imbalance in recent months, which features overinvestment and supply shortages in some sectors, has many causes. First, the supply cycles of the intermediate investment industries and basic industries are so long that they are unable to satisfy current market demand.
The intermediate investment and basic industries also feature the "investment multiplying" effect. For example, a rise in steel production needs more power. Increased power supply must be fuelled by more power generating equipment, which in turn drives demand for steel. In this way, coal, power, fuel and transportation have all suffered from supply bottlenecks.
The failure of some sectors to orient themselves towards the market is another factor. Basic industries are largely monopolized and, as such, always react slowly to changing market demand, which leads to supply shortages.
Policy-makers' miscalculation of the market supply of power, coal and steel is another reason for the bottleneck.
Rising international oil and steel prices have also exacerbated the situation.
Due to policy-makers' macroeconomic regulation, the development of some sectors, such as autos and real estate, has slowed down. But viewed from a long-term perspective, those sectors still have much potential for further growth.
The current slowdown can be seen as a period of adjustment. Macroeconomic policy-makers should tackle the problems in different sectors in different ways.
After this macroeconomic regulation, those industries will hopefully continue to grow fast in a more healthy way.
The author is a researcher from the Development Research Center of the State Council.
(China Daily December 1, 2004)
|
