China’s May exports rose 1 percent from a year earlier, down from 14.7 percent in April, while imports dropped 0.3 percent from a year earlier. The median estimates of analysts were for 7.4 percent export growth and 6.6 percent import gains. The $20.4 billion trade surplus compared with forecasts for $20 billion.
The slowdown in May’s trade figures was partly the result of “arbitrage trade” with Hong Kong being curbed, the customs administration said in a statement yesterday. Appreciation in the yuan and the worsening trade environment, as well as a domestic slowdown, weak external demand and high business costs.
There are several longterm forecasts for China’s economy.
World Bank Forecast for China now to 2030
China’s long-term outlook is expected to be shaped by three structural transformations that are key in terms of their potential impact onto the developing world. The first among these is a gradual structural slowdown that China is expected to undergo, as the economy’s traditional engines of growth fade in strength. The second transformation concerns a change in China’s economic structure, where the patterns of expenditure, production, and employment are all expected to change significantly as China rebalances. The third transformation involves the technological sophistication and human capital intensity of production as China is expected to respond to rising wage pressures by moving up the value chain, and, while doing so, also redefine its competitive advantage in the global marketplace.
Hu Angang, dean of the Institute for Contemporary China Studies, one of China’s leading think tanks, makes a prediction in his new book, China 2030 of a strong China. Hu predicts China’s economy will become twice as big as that of the United States and larger than both the US and the EU combined within just 17 years.
He believes China will be driven forward by what he terms five engines: accelerating industrialization, its major role in a new globalized world, its dominance in information technology, the rapid modernization of its infrastructure in areas such as electricity supply and high-speed railways, and the growing internationalization of its own economy.
He points out that China’s workforce of 780 million is five times larger than the US’ 153 million and that it now devotes 3 million person-years to research and development, twice the deployment of the US, both adding to its growth momentum.
Goolam Ballim, group chief economist of Standard Bank Group based in Johannesburg, said it is not inconceivable the Chinese economy will be double the size of the US’ by 2030. His own forecast is that it will achieve that position by at least 2040.
“The United States is likely to retain a strong global influence, even if it does not have a podium place in the top three. By 2050, the three largest economies in the world could be China, India and Brazil and after the United States, the fifth spot might be taken by Nigeria, as bizarre as that might sound now.”
Miranda Carr, head of China research at London-based investment research firm NSBO, is more conservative than Hu, predicting China will become the biggest economy between 2025 and 2030 and double the size of the US by 2050.
Duncan Innes-Ker, senior China analyst for the London-based Economist Intelligence Unit, argues that there would have to be significant improvements in China’s business environment before China could make such a rapid advance.
“There needs to be major reform of the legal system and regulatory environment to put China on a level with developed countries.”
He believes the Chinese economy faces significant future headwinds, particularly with its labor force shrinking by 11 percent from 798 million in 2013 to 718 million in 2030. He expects China to catch up with the US by 2023; but as to when it is double the size, he said is out of his forecasting range.
“Growth won’t be easy in the coming two decades and I expect it to slow to 3.7 percent in the 2020s as the labor force shrinks. China has experienced the classic catch-up when it was easy to grow by just catching the low-gathering fruit. It now needs to up its game.”
Xu Bin, professor of economics and finance and associate dean at CEIBS in Shanghai, insists China’s SOEs are actually a barrier to growth and that many ought to be privatized.
“There is little doubt that the success of the Chinese economy will be closely associated with the reform of the State-owned sector. Without a vigorous private sector, there is no future for the Chinese economy.
“It needs to be driven by innovation and there is no way that this can be accomplished by State-owned enterprises.”
Xu, who nonetheless believes China’s GDP will overtake that of the US by 2018, believes growth could fall below 4 percent in the 2020s as the economy suffers from the “convergence effect” – the nearer it gets to the world’s technology frontier, the slower its growth rate becomes.
“The export-led model has come to an end for China. China is already an upper-middle-income country, and the room for catch-up is significantly smaller than 30 years ago.”
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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