Before we go right ahead and see what China has to do to further its development, let’s focus first on what China is up against if it wants to become a developed country.
Leaving aside some oil exporters and the city-states of Hong Kong and Singapore, only three countries—Japan, South Korea, and Taiwan—have come from far behind to achieve per capita GDP of at least 70 percent of the developed-country average over the last 60 years. China hopes to do the same, but it faces a distinctive challenge: its sheer size,” wrote Adair Turner, chairman of the Institute of New Economic Thinking.
He identified three things the country must do to take the next step:
1. Stop Focusing on Exports
Turner thinks external markets are too small to import the production of 1.5 billion people. So efforts such as the new Silk Road and infrastructure construction projects are nice, but ultimately won’t solve the problem.
Jack Ma, executive chairman of Alibaba Group, said, “I think for the next 20 years China should focus on importing. They should learn to buy. They should spend money.”
2. Take Care of the Debt
Unsustainable debts used for infrastructure spending either need to be centralized or written off completely.
“It appears there has been a large buildup in nonproductive loans and nonproductive assets. That is going to take some time to be digested in the economy,” said Evan Lorenz of Grant’s Interest Rate Observer.
3. Boost Wages
“The good news is that wages are already growing faster than GDP—a trend that is likely to continue, as demographic change restricts the supply of new labor. Over the next decade, the number of Chinese aged 15–30 will fall by almost 25 percent,” wrote Turner.
He thinks that ultimately the Chinese people themselves will have to produce and consume their own production. Nobody else is big enough to take care of that.