Global Times’ latest RoundTable Forum, hosted by the city of Qingdao, sought to address a range of problems that the Chinese economy will face in the future, ranging from how global markets react to China’s growth to the importance of getting urbanization just right.
The forum’s plenary session, hosted by CCTV personality Yang Rui, revolved around a subject close to the hearts of entrepreneurs, ministers and journalists alike, namely how China is going to ensure its long-term growth and development prospects.
Reasons for optimism
The country’s 4 trillion yuan ($634.4 billion) stimulus package at the onset of the financial crisis came under particularly close scrutiny.
Simon Cox, Asia economics editor for the Economist, said that the success of the stimulus early on showed that the government would now be reluctant to contemplate another similar package. For Cox, the fact that China’s growth rate was slowing did not dim optimism for its future prospects, as the authorities are now in a better position to take stock of long-term structural problems.
This optimism was echoed by David Li, country head for UBS China, who believes that some of China’s best advantages have yet to be fully tapped into, namely the trends of urbanization and globalization. Li added that China’s natural population diversity would also soon be seen pushing the development of many industries, leading him to remain bullish despite the slowdown.
The dynamic between globalization and the Chinese economy was a divisive issue, with Bruce McKern from the China-Europe International Business School commenting that beyond the advantages of globalization, it would also place stern entry barriers on Chinese companies. McKern lamented the disparity between China’s scientific achievements and numbers of patents to the international application of such discoveries, pointing to a potentially rough ride for Chinese firms seeking to make it big in external markets.
This focus on companies, rather than on the market as a whole, was picked up by John Russell, managing director of North Head. Russell explained that the ways in which companies cope with major changes to the economy should be a good measure of the feasibility of government plans and requirements. He gave the example of the city of Shanghai, whose current five-year plan demands a shift to a 70 percent services-based economy. According to Russell, given the continuing importance of manufacturing industries to the Shanghai economy, such an overhaul will demand huge changes from companies.
With the role of a government-controlled economy under discussion, Jia Kang, from the Ministry of Finance, offered a spirited defense of the government’s reforms. Jia said that it was easy to criticize the stimulus package without deep analysis but that to prevent government-led reforms now would invalidate much of the mission to lower inflation and help companies develop.
While Simon Cox admitted to being a fan of stimulus, he countered Jia by saying that the Chinese stimulus plan’s major flaw had been to go through the banks, making financial reform that much more difficult and inflating the housing price bubble. He remarked that the stimulus plan would have worked better had it been more focused toward specific issues such as pensions or healthcare.
Despite a back-and-forth debate, the mood in the room remained largely optimistic and bullish about China’s future prospects, leading China National Radio executive Fang Jun to speak up. Fang expressed his dismay at the positive tone the discussion had maintained, dismissing it as an effort by the speakers to comfort themselves.
Fang stated that, to his mind, the good times in China were almost gone, and that consumers, government and entrepreneurs would all have to prepare for a slowdown. This constant focus on growth was remarkably blinkered, according to Fang, saying that it omitted any focus being kept on SMEs and “township enterprises”, for which a constantly rising growth rate was no guarantee of a stable future.
Challenges of urbanization
The varying concepts of urbanization in China were the theme of one of the day’s sub-panels, with the example of Qingdao used as a model. Hui Xin’an, secretary of the CPC Shibei District Committee from Qingdao, pointed out that urbanization had to suit the model and needs of each city and that urbanization could not be separated from cultural development. He put forward the example of the old buildings and cultural heritage of Shibei district, which had to be protected and integrated into Qingdao’s drive to build its modern image and function.
CCTV commentator Liu Ge said that waves of urbanization had been seen throughout China’s recent history of reform and opening-up. The first phase saw special economic zones being built, with the iconic process of building skyscrapers atop small villages, as happened in Shenzhen. In the last two decades, tracts of farmland have been incorporated into new districts of existing cities. We are now in a new phase which sees the climax of urbanization as towns and villages across China change their economic structure and expand their scope.
River Lu, China country director for Duke Energy, sought to provide a concrete example of the problems urbanization causes, namely specific energy challenges posed by massive city building in China. Lu said that Western nations could provide China with some valuable lessons in dealing with these problems. Lu mentioned the case of urban sprawl in the US, a formerly encouraged model that became a negative example, given the rising energy demands caused by people living far away from city centers. China must avoid this model, given its vast population and limited land resources, he said. China must seek to build sustainable second- and third-tier cities and perhaps take inspiration from long-lived European buildings that would mark a step away from the traditionally short shelf-lives of many Chinese buildings.
River Huang, principal of Monitor Group China, said that a lot of cities or provinces spread themselves too thinly in their urbanization plans. He advised that they focus on one or two key industries to specialize in, raising their chances of success. However, he also cautioned that among the cities and provinces that had done this, many had chosen similar industries, leading to bottlenecks and development limits in high-tech sectors. He echoed River Lu by saying that the most successful cities, whether in China or abroad, were those that identified their core strengths and stuck to them, hailing Qingdao as a concrete example of this.