CHINA: Growth forecast to continue for another decade
Updated
China's super-charged growth could continue until late in the next decade. That assessment of China's economic prospects comes from the latest China update - a collaborative work of Australian and Chinese researchers.
Presenter: Alexandra Kirk
Speakers: Professor Ross Garnaut, chair of the China and Economy Business Program at the Australian National University
KIRK: The world is in its fifth year of extraordinarily strong economic growth and China is now at the centre of what could turn out to be the strongest era of growth the world has ever seen. So says Australian economics professor Ross Garnaut. He calls it a "platinum age" because global growth is set to again exceed 5 per cent this year, higher than the four point nine per cent average of the so called "golden age" from 1950 to 1973.
Professor Garnaut has been a policy advisor, a diplomat, a businessman and academic. He's one of the editors and authors of the latest China Update, jointly produced by the Australian National University and Chinese researchers, some from the government think tank -- the Academy of Social Sciences.
He says Chinese officials talk privately of the economic system functioning better than at any time for five thousand years. So how long can China's 10 per cent plus growth continue?
GARNAUT: It will end one day, but it will not necessarily end until Chinese living standards are reasonably close to those of developed countries. Certainly over the next few years the things that have been driving very strong growth will still be there, the very high rate of savings and investment, the very rapid productivity growth on the back of absorbing ideas and technology from abroad and deeper involvement in the international economy. So I see a continuation of very strong growth for a number of years ahead.
KIRK: So how long can the rest of the world then look forward to the resources boom and the accompanying low inflation and low interest rates?
GARNAUT: Of course there are risks, there are things that can go wrong, but the most likely course is that Chinese growth will continue to be very strong, that that will be associated with strong growth in import demand for a wide range of minerals and agricultural products until late in the next decade.
KIRK: Now last year's China Update forecast industrial wages were about to rise sharply as the labour surplus in rural areas dried up. What's your prognosis now?
GARNAUT: Development in the last year has confirmed that judgement, not only development in the real economy but a lot of research has been done in the Chinese Academy of Social Sciences at Peking University and elsewhere that's confirming the story that one of the drivers of the pattern of Chinese growth in the past 20 years serving availability of huge amounts of relatively unskilled labour at low wage rates is going to change. Wages are rising, there's no longer such a super abundance of labour from rural areas, that's going to force a change in the structure of the economy and a change in the character of growth that won't necessarily slow down growth.
KIRK: And rural workers you point out migrating to the cities are discriminated against. Your colleagues warn of social conflict, how real a risk is that?
GARNAUT: Oh that's the judgement of our colleagues from the Academy of Social Sciences and what they're drawing upon is the experience of other countries that have gone through periods of rapid industrialisation, and in those countries at the point of which labour becomes scarce, more confident, better educated, unless there's room in the system for substantial concessions to labour in various forms you do get unrest. They're drawing attention to the experience of many countries and in this as in other ways Chinese need to be mindful of what's gone before them elsewhere.
KIRK: Professor Garnaut says one concession being made is the growth in wages.
But sustained super-charged growth is putting unprecedented stress on the global biosphere. Just last year China became the world's biggest greenhouse gas emitter. That's viewed as a potential threat to future global prosperity. Ross Garnaut says there's been a healthy discussion in China over the past 6 months but the world hasn't thought enough about this burgeoning problem.
GARNAUT: No I don't think the world as a whole has thought enough about a global approach to these issues, about how we can fit together programs in all of the major emitting countries that add up to a substantial and effective response to the issue. I think we've got a lot of thinking to do and the coming Bali UN meeting will be an important step in that process.
