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China can maintain an on average 7 percent gross domestic product (GDP) annual growth for another 30 years, as long as it can cure the policy-caused chronics of its state-owned enterprises (SOEs).
"This (prediction) is based on the 'latecomer's advantage' endowed to a developing China," Lin Yifu, a famous economist with the China Center for Economic Research at Beijing University, was quoted as saying by the Beijing-located China Business Times.
The driving force behind any economic growth, Lin thinks, is nothing but the sustained technological innovation. To achieve it, developed countries will mainly rely on themselves. But developing countries can do it not only through their own research and development, but also by introducing it from developed countries, which turns out by far cheaper than those self-supported innovations and inventions.
After analyzing the economic take-off by Japan following the World War II and the "four Asian small dragons" (including the Republic of Korea, Chinese Taiwan, Hong Kong and Singapore) from mid-1950s to late 1990s, Lin believes China is tracing now their tracks of 40 or so rapid economic growth.
"When China began to speed up its economic growth through introducing superior technical know-how from the advanced Western economies in 1979, the technological gap between the two sides was much wider than when Japan and the 'four Asian small dragons' did theirs," Lin said. "Given this, China should be able to lead a high-speed growth span of at least 50 years."
Lin's prediction is actually echoing a recent chorus of optimistic estimates about China's economy.
On Wednesday, Qiu Xiaohua, deputy director of the National Bureau of Statistics, said China's GDP will continue growing at an over 7 percent rate during the incoming 10 or 15 years, which will finally place the most populous country the fourth economic power by 2020 in terms of its GDP size.
By then, the per capita GDP of China should be around US$4,000 to 5,000, according to Qiu.
No expressway ahead
But Lin said China has to manage to surpass at least four hurdles ahead if it wants to maintain its economic steam, including the high percentage of non-performing assets in State-owned banks, the ever-broadening geographic economic gap between prosperous eastern provinces and the backward inner land, the ensuing impact in the wake of China's entry of the World Trade Organization (WTO), and an effective SOE restructuring.
To crack the four problems, the key is how to revitalize the emaciating SOEs, according to Lin.
Of the high piling bad loans in State-owned banks, a great proportion can be traced to State-owned firms, which have traditionally siphoned away nearly 70 percent banks' loans but cannot repay due to their bad profitability.
The economic disparity between eastern provinces and the hinterland can also be attributed to SOEs' inefficiency, according to Lin.
While realizing its socialist economic "frog leap", Chinese central government had to price its agricultural and mineral products, most of which were from central and western China, at very low levels to beef up its State-controlled manufacturing sector mostly located in coastal provinces.
Decades later, the latter have indeed accumulated a relatively strong economic basis but only at the sacrifice of the middle and western part of China.
As for the looming impact following China's accession of the WTO, it is a true threat more for SOEs than for the non-State businesses.
Mainly focusing on the light industry, Chinese non-State businesses have in fact already accustomed to foreign competition in matters of their institutional organization and management, Lin said in the newspaper.
With the government's tendering palm taken away, SOEs will find themselves more and more exposed to the throat-cut competition at home and abroad.
To date, SOEs have occupied about 60 percent of the industrial fixed assets and nearly 70 percent banks' loan, but have offered only about a quarter of the total industrial output, according to the newspaper.
If left unchanged, SOEs will eventually sap the entire economy of China, Lin said.
Where is the remedy?
The ailed SOEs apparently are a concern of the highest priority of Chinese central government.
Yesterday, Li Rongrong, head of the State Economic and Trade Commission, said that China is considering opening up the banking sector to allow in more local and private banks. But Li did not clarify whether foreign banks will be offered more leeway in this maneuver.
Analysts think the government is trying to promote the non-State sectors' thriving through muscling up non-State banks to maintain the viability of China's economy as a result of the daily pining State-owned firms.
On the same day, Li also reiterated China's determination to offer a seat to foreign firms in China's SOE restructuring efforts.
Early reports said that now there are under discussion two versions of draft guidelines for overseas investors' possible involvement in SOEs' reforming process.
According to Lin, the crux of the SOE reform lies in stripping off the policy-related duties imposed upon State firms by the government, which range from medical and old-age care to SOE employees to the government-planned industrialization drive, especially before China's market-oriented reform in the late 1970s.
All these policy-related duties have become SOE managers' assorted subterfuges while they fail to fulfill their responsibility, Lin said.
(People's Daily October 25, 2002)
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