ESRI Discussion Paper Series No.220
A World Economy in 2025 and Chinese Economic Situation
(China's Present Economic Policies can be maintained?)

Noriki Hirose
Economic and Social Research Institute, Cabinet Office

The full text is written in Japanese.

Abstract

When most populous nations like China and India become industrialized and globalized it will potentially open a new chapter in the human history. Under this major trend in the 21st century, there need foresights flexible enough to embrace non-linear changes and discontinued progress to depict future Chinese economy a quarter century from now. There are four major enterprises to do so in the last five years. Some presume continuation of present rapid growth in China for another twenty years. Others do not take global export-import relations explicitly into account, nor actions and reactions among trading partners if major driving forces of progress are exports.

In this paper we first attempt to extract the factors promoting economic development that enabled China grow very fast, and explore how they will change in new economic environment in the 21st century by explicitly accessing trends of production, international trade, and technological progress. There are three major topics to be discussed: (1) Is the export-led development policy, that China has chosen over a quarter of century, still the optimum policy in the 21st century? ; (2) Against ever increasing shares and effects of imports from China to developed countries and reactions to those, what kind of repercussions there would be? ; (3) What are better future policy choices domestically as well as internationally if domestic and international reactions are taken into account?

The analyses shed lights on the eventual impasses of "export-led development policy, that transformed China from a poor peasant country to an economic power and international effects form that policy in terms of domestic welfare, economic balance. They also indicate that it is China herself that would be most severely damaged from international trade turmoil and negative reactions by trading partners. To overcome these situations, China would benefit herself most if she can adapt domestic sector-led growth with a policy focusing on increasing economic efficiency. Incidentally, that policy would produce favorable effects internationally.

There need precautions when these scenario analyses are applied: A linear extension of the present trends is not necessary a forecast of the future; A future is inherently uncertain. However, global model analyses capture internal consistency of logic, such as the sum of exports is always that of imports and supply must be demand.

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