China's next growth engine will be its own people, panelists said, but its population and economic profile make it clear that some things must change at the same time.
David Tao said consumption as a fraction of GDP in China is 37 percent compared with 75 percent in the U.S., with exports making up a large share of the difference. At the same time, demographic projections cited by Perry Wong show that, in 20 to 30 years, the average worker will have to support more than 3.5 elderly Chinese. With a high rate of savings and a decline in exports, these numbers will force China to restructure its economy.
China will have to deal with two areas that went unaddressed during its decades of export and infrastructure-driven expansion. One, the environment, has been receiving more attention in China in recent years. "China will run out of water before it runs out of capital," Timothy Dattels said.
The other area is social and human capital. China is already investing in human capital through higher education. McGregor said university enrollment has ballooned from 3.4 million in 1998 to 21 million in 2008. Wong said social safety nets, insurance and pensions are all key neglected areas. China's pension fund holds just $63 per capita, he said, while the admittedly troubled U.S. Social Security system has 100 times that per capita. As with education, the government is taking some steps, devoting a large portion of its economic stimulus package to insurance programs to drastically increase coverage, panelists said.
The group focused on the government's ability to solve problems with a strong hand. "The irony is, regulated industries are actually good places to invest in China," Dattle said. "Yes," McGregor agreed, while making clear the potential consequences: "But you can get thwacked."
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
