The global impact of China's continued 'reform and opening up'
- By John Ross
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E-mail China.org.cn, March 15, 2016
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Same goal [By Gu Peili / China.org.cn] |
China's 13th Five Year Plan, running from 2016 to 2020, presented to this year's National People's Congress session, sets the framework not only for China's domestic development, but for other countries' economic interaction with it. Consequently, it is important that other states accurately judge the main effects that China's "reform and opening up" process will have on them. The key trends confirm China will continue to show the greatest prospects for international cooperation with any major economy.
The first key point is that the 6.5 percent minimum annual GDP growth target over the Plan's entire duration is more important for China and other countries than 2016's individual 6.5 to 7.0 percent target. Some commentators have suggested that while China may achieve a 6.5 percent growth target in 2016, this will be followed by a significant slowdown - to 5.0 percent or below by 2020. If this occurs, China would be drifting towards, in the worst case scenario, the "middle income trap." The Plan's arithmetic makes clear that China is not prepared to let this happen, while the key features of China's economic structure show there is no reason for it to do so.
The decisive target of the 13th Five Year Plan is to achieve a "moderately prosperous" society - in numbers, this means doubling China's GDP between 2010 and 2020. Growth in the first half of this decade averaged 7.8 percent. Therefore, to achieve the decade's target average annual growth throughout 2016-2020, the rate must equal at least 6.5 percent. As 2016's target is 6.5 to 7.0 percent, this means no significant slowing will be accepted in the Plan's later years.
More important than verbal commitment is that China's fundamental economic parameters show this target can be achieved - China's fixed investment is over 40 percent of GDP, more than double the U.S., while statistics confirm China's efficiency of investment in generating growth is higher than that of the U.S.
This means China will maintain its present position as the world economy's strongest development point throughout the Plan. U.S. GDP growth in 2015 was 2.4 percent, in line with U.S. average annual growth for the last 20 years. Even assuming U.S. growth does not slow further (it has been decelerating for several decades), in the next five years, China's economy will expand by 37 percent compared to the U.S.'s 13 percent.
The second key impact for other countries is created by the combination of China's rapid growth, with China being a more "open" trade economy than the U.S. The latest internationally comparable data shows that trade constituted 40.1 percent of China's GDP compared to 30.1 percent for the U.S. China's greater openness means its growth generates a proportionately greater increase in international trade than equivalent U.S. growth.
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