Professor Lin Yifu, dean of the Institute of New Structural Economics of Peking University, recently delivered a keynote speech through online video at the Second Forum on Peaceful Development hosted by the Federation of Peaceful Development on both sides of the Strait in Hong Kong and co-organized by the China Review News Agency, analyzing in detail the priorities and prospects of national development during the "14th Five-Year Plan" period. Lin Yifu pointed out that China can overcome difficulties through the new national system and solve the "stuck neck" problem of the United States. He predicted that by 2049, China's per capita GDP will reach half of that of the United States, and the total GDP will be twice that of the United States, at which time, the world will come out of the pattern of "unprecedented changes in a century" and produce a new and stable international political and economic structure.
China's economy will continue to grow at a high speed in the future
When introducing the 14th Five-Year Plan and the 2035 long-term goals, General Secretary Xi Jinping proposed the goal of doubling the total economic volume or per capita income by 2035. Lin Yifu said that to achieve this goal, Chinese mainland will grow at an average annual growth rate of 4.7% from 2021 to 2035. This is entirely achievable. He explained that in 2019, the average GDP of Chinese has reached $14,129 in purchasing power parity terms, which is equivalent to the level of Germany in 1971 and Japan in 1975. Germany grew at an average annual rate of only 2.3 percent from 1971 to 1987; Japan grew at an average annual rate of 4.4 percent from 1795 to 1991. Therefore, some scholars are pessimistic about China's development prospects, believing that China's economic growth rate will be below 5% in the next 16 years by 2035; at the same time, China is facing the problem of population aging, and the economic growth rate of the world's aging countries is generally below 2%. As a result, some scholars are more pessimistic about China's development prospects.
Lin Yifu said that to understand China's future development, it is necessary to understand the reasons for China's rapid growth in the past. Generally, the annual economic growth rate of developed countries is 3%-3.5%, and after the reform and opening up, China has lasted for 42 years, with an average annual growth rate of 9.2%, the main reason is to use the advantages of latecomers in developing countries to introduce, digest, absorb and re-innovate as a source of technological innovation and industrial upgrading, which is lower and less risky than the developed countries themselves to invent and innovate technologies.
Lin Yifu said that in 2019, the average GDP of Chinese was 14129 US dollars, which was 22.6% of the per capita GDP of the United States in the same period, equivalent to the situation in Germany in 1946, when Germany's per capita GDP was about 22% of the United States, from 1946 to 1962, Germany's average annual growth rate was 9.4%; equivalent to Japan's situation in 1956, when Japan's per capita GDP also accounted for 22% of the United States, from 1956 to 1972. Japan's average annual growth rate is 9.6 percent; it's also the same as South Korea's in 1985, when South Korea's per capita GDP was also 22 percent of that of the United States, and from 1985 to 2001, South Korea's average annual growth rate was 9 percent. Therefore, judging from the advantages of latecomers and the experience of other countries in the world, Chinese mainland in the next 16 years, the average annual growth rate can reach 9%.
Speaking of population aging, Lin Yifu pointed out that population aging generally occurs in developed countries. The average annual growth rate of developed countries is between 3% and 3.5%, which consists of two parts, one is the average labor productivity and average income level brought about by technological innovation and industrial upgrading, which is about 2%, and the other is population growth, which is about 1% to 1.5%. However, China is still a developing country, even if there is no population growth, it can use the economic development ladder to upgrade low-value-added industries to high-value-added industries, and continuously improve the level of labor productivity to achieve economic growth.
For example, Lin Yifu said, referring to the contribution of population growth to economic growth in Germany, Japan and South Korea, which have been at the same level of development as China in the past. Germany's average annual growth rate between 1946 and 1962 was 9.4%, and the average annual population growth rate was 0.8%, so Germany's annual growth rate was 8.6% due to the increase in labor productivity brought about by technological innovation and industrial upgrading; similarly, Japan's average annual growth rate between 1956 and 1972 was 9.6%, the average annual growth rate was 1%, and the economic growth rate brought about by the improvement of labor productivity was 8.6% South Korea's average annual growth rate between 1985 and 2001 was 9%, and the average annual population growth rate was 0.9%, indicating that the economic growth brought about by the increase in labor productivity level was 8.1%. From these experiences, china still has the possibility and potential to grow by 8% per year until 2035.
The centenary of change in 2049 will come to an end
Lin Yifu pointed out that in the actual development process, China's economic growth should also take into account factors such as the environment, carbon peaking, carbon neutrality, green economy, and the US "card neck" hindering China from exerting its latecomer advantages, of which the US "card neck" is a very big challenge. But the Technology that the United States has, as do most other developed countries, requires a lot of money to invest in research and development, and profitability depends on the market, and China is the largest market. If companies with these advanced technologies cannot enter the Chinese market, they may face low profits or even losses, and they will not have the ability to continue to invest in research and development, and they are likely to lose their technological leadership.
"If you want to get China's neck, it is to kill a thousand enemies and lose eight hundred, and these eight hundred are borne by the enterprise." The United States should safeguard its hegemony from a political point of view, intervene in the economy with politics, and not allow high-tech enterprises to sell technology and products to China, but if these European and American enterprises do not sell technology to China, they will lose eight hundred to themselves, but in exchange for maintaining US hegemony. Lin Yifu said that in this case, the vast majority of enterprises and countries will not be willing to follow the "card neck" of the United States. Therefore, the technology that can jam China's neck is a technology that only the United States has and other countries do not have. China has the ability to use the new national system to carry out research and development, and the vast majority of technologies can achieve breakthroughs within a few years.
Lin Yifu predicts that from 2021 to 2035, China can reach a growth potential of 8%, and can achieve an average annual growth rate of 6%. If it can be achieved, in 2025, the average GDP of Chinese can exceed 14535 US dollars, entering the ranks of high-income countries, which is an important milestone in the great rejuvenation of the Chinese nation and will also double the world's high-income population from 18% to more than 36%. By 2030, China's economy will surpass that of the United States; in 2035, the average GDP of Chinese will reach about $23,000, which is the level of a moderately developed country. From 2036 to 2050, China's average annual growth potential is 6%, and it is also necessary to solve the problems of carbon peaking, carbon neutrality, aging population and "stuck neck", so the average annual growth rate will be about 4%. At this rate, by 2049, China's per capita GDP can reach about 45,000 US dollars, half of the United States, and China's overall size will become twice that of the United States, which is an important symbol of the great rejuvenation of the Chinese nation; at the same time, the world can also get out of the pattern of major changes that have not occurred in a hundred years and enter a new pattern of stability and peace.
Lin Yifu analyzed that the economy is the foundation of the great changes that have not occurred in a hundred years. In 1900, the combined GDP of the Eight-Power Alliance was 50.4% of the world's; in 2000, the G8's combined GDP was 47% of the world's. It can be said that throughout the 20th century, eight countries dominated the world's political and economic pattern. In 2018, President Xi Jinping put forward the thesis that there has been no major change in a century, because in 2018, the G8 accounted for 34.7% of the world's GDP, losing the ability to influence the world pattern, the most obvious of which was the 2008 international financial crisis, the eight countries were no longer able to cope, and the G8 was replaced by the G20.
Lin Yifu continued that china's economy has surpassed that of the United States in terms of purchasing power parity; according to market exchange rates, China's economic size is about 70% of that of the United States. The United States found that its influence was declining, And China's influence was rising, so Obama proposed a "return to the Asia-Pacific", Trump proposed a trade war and a technology war with China, and the Biden administration continued its policy of restricting China's development.
Lin Yifu believes that the conflicts and contradictions between the first and second powers have brought a lot of uncertainty to the world, and this situation will end in 2050. By 2050, China's per capita GDP will reach half that of the United States, and its economy will be twice the size of the United States, and the United States will accept China's rise. Because when the average GDP of Chinese is half of that of the United States, the per capita GDP of coastal provinces and cities is the same as that of the United States, and the per capita GDP represents the industrial and technological level, and the United States has no technology that can be used to card China's neck; at the same time, there are 1 billion people in China's midwest, and the per capita GDP is about 1/3 of the United States, and it also has the advantage of a latecomer. So in general, China not only has a large economy, but also develops rapidly. The United States must accept this fact and must accept the great rejuvenation of the Chinese nation. On the other hand, the United States must rely on the Chinese market to solve its own development problems.
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Author: Lin Yifu Dean of the Institute of New Structural Economics, Peking University
Source: China Commentary Agency, Institute of New Structural Economics, Peking University