Prof. Justin Yifu Lin from Peking University delivered a lecture to a full auditorium at Goethe University (Frankfurt, Germany) on the new Era of the Chinese Economy, on this Jan. 21st. The event was made possible by IZO, the Interdicsciplinary Eastern Asian Studies, on its 10th year aniversary. Professor Lin acquired his PhD from the University of Chicago, and was the Chief Economist of the World Bank between the years of 2008 and 2012, currently working as a professor at Peking University.
Prof Lin started his talk by reminding us of how, 40 years ago, China started its reforms and openned up to the global economy. In 1978, China’s GDP per capita was 156 USD a year, according to the World Bank. Back then, 90% of its production was not linked to global production. However, nowadays, China is considered to be the second largest economy in the world, the largest exporter, and the largest trading country in the world. In 2018, the country reached 9.740 USD GDP per capita.
“China has entered a new era”, stated Prof. Lin, questioning about the implications of such transformation. According to him, people will have different interpretations, but his talk was to give voice to his own. He continued by acknowledging that the Chinese growth in recent decades was very impressive, especially if you compare it to other traditional economies in the Western world, that collapsed with the forces of the global crisis. Meanwhile, China mantained its stability and continues presenting itself as the only country in the world that did not experience a financial crisis in the last 40 years.
Prof. Lin considers this phenomenon a result of a pragmatic gradual reform in the Chinese economy, and he believes that these reforms will continue to be taking form on the long run, in order to maintain stability. He also believes that the secret behind the the country’s economic stability was its competitive advantage in specific sectors of the economy.
But China also paid some costs. The Chinese economy grew alongside with widespread corruption and income disparity in the country, and the Chinese people are not happy with these two factors, creating great social discontent.
But even after 40 years of continuous economic growth, China still has huge potential. According to him, developing countries have the “late comers advantages” – you can input technology by buying new technology from developed countries. This explains why China could achieve the high growth rates. A high income country already has the highest income, productivity and technology in the world. They would have to invent the new technologies. But new inventions require huge capital input, and are of high risk.
He mentioned that a study done in 2010 showed that there’s a potential for China to achieve 8-9% growth until 2028. Now it’s 2019, so there’s still 10 years of this potentil growth. But in a scenario where the global economy doesn not pick up from the 2008 crisis (which most countries have not yet recovered completely (US, Japan and countries in Europe), China can still mobilize resources internally and achieve 6% growth, continuing to be a major driver of economic growth in the world.
Closing his talk, Prof. Lin sounded very optimistic, mentioning that China serves as an inspiration for other developing countries. The experience of China demonstrates that once you have the right policy and ideals, a country can be changed. The country will have to continue deepening its reform, and though it has huge potential for growth, the external situation will be very challenging. The country will also have to show more responsibility for the world (i.e. developing international aid programs). Its growing economic significance implicates greater political significance as well.
Author’s note: My observation is that Prof. Lin failed to address the issues of environmental and health impact that the economic growth brought to its country. He was very enthusiastic about presenting China as this growing economic and political force at global scale, but his analysis – at the event – lacked some of the emerging reflections over the importance of performance indicators other than capital in a country’s development initiatives. This stagnant mindset seems to be leading to the same problems of traditional development policies, which can be only be accentuated by China’s worrying demographics.