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China’s Economic Prospects:2006 – 2020
Li Shantong
Growth Prospects for 2006 - 2020
• Areas of uncertainty– International
• Rise in protectionism• Dollar crash• Worsening terms of trade (cost of imports v. exports)• Financial liberalization leading to volatility
– Domestic• Savings patterns of aging of population• Persistent rural poverty• Sluggish employment generation• Shortage in strategic resource reserve and
environmental capacity will be of increasing constraints to economic growth
2005-2020 Population Growth
9
10
11
12
13
14
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Total population
Population aged 15 to 64
Population aged 65 and above(left axis)
2000-2020 Population Growth
Year Total
Population (100m)
Labor-age Population
(100m)
Ratio of Labor-age Population
(%)
Aged above 65 (100m)
Ratio of the Aged
above 65 (%)
2000 12.67 8.89 70.2 0.88 7 2005 13.06 9.18 70.3 0.99 7.6 2010 13.47 9.68 71.9 1.12 8.3 2015 13.87 9.97 71.9 1.33 9.6 2020 14.19 9.95 70.1 1.69 11.9
The Challenges of Economic Development in the Future
China total
Share(relati ve to the world,%) Per capi ta
Ratio to world average(%)
Populati on 12.8 20.7
Cul ti vated l and (104 hectare) 13004 9.3
0.101(hectare/person) 45
Water Resource (100 mi l l i on m3) 28255 7.0 2186(m3/person) 25.4
Forest Resource(100 mi l l i on m3) 124.9 2.3 9.7(m3/person) 11.1
The Challenges of Economic Development in the Future
Mining Resource per capita
Reserves Ratio to the World (%)
Production
Ratio to the World (%) consumption
Ratio to the World (%)
Crude Oil(kg) 1800 11 125 22 181 26 Natural Gas(m3) 1063 4.5 22 4.8 16.8 4.6 Coal (kg) 125000 79 822 110 990 133 Iron Ore (kg) 9880 42 187 113 230 129 Copper (kg) 13.2 18 0.41 20 1.06 46 Aluminum(kg) 283 7.3 6.9 33 2.3 60
Model Dimension
• 34 production sectors and 2 representative households– 1 agricultural sectors, 24 industrial sectors, 9
service sectors,– 2 representative households by rural and urban
• 5 production factors – agricultural land, capital, agricultural labor,
production worker, and professionals
• Emission of Pollutant– SO2, NOX,TSS, Soot
Recursive Dynamics
• The benchmark year: 2002
• Factor growth and accumulation– Labor and land growth
– Capital accumulation
• Change in productivity
Business-as-Usual
• Labor moves from agriculture to non-agricultural sectors at the rate of 1.21 percent per year
• Technological and intermediate input changes continue the trend of recent years
• Total factor productivity (TFP) growth follows the pattern of past 25 years, at 2.0-2.5 percent
Optimistic Scenario Labor moves from agriculture to non-
agricultural sectors at the rate of 1.36 percent per year
Technological and intermediate inputs reflect increased demand for service and high technology goods; the rate of value-added increases
TFP growth rate of service sectors is 1percent higher than BAU in 2005-2010 and 0.5 percent higher in 2010-2020
Energy utilization efficiency is 0.2-0.5 percent higher than BAU
Risk Scenario
Labor moves from agriculture to non-agricultural sectors at the rate of 0.91 percent per year
Household saving rate is lower than BAU TFP growth rate is lower than the level of
the past 25 years, at 1.5-2.0 percent
Economic Growth and Structure 2002-2020 (% , BaU)
2002-2005 2006-2010 2011-2015 2016-2020 2002-2020 2006-2020
GDP 10.1 8.9 8.3 7 8.4 8.1
Sources of growth
Labor 0.4 0.4 0.2 0 0.2 0.2
Capital 7.7 6.5 6.1 5 6.2 5.9
TFP 2 2 1.9 2 2 2
Source: DRCCGE2004
Economic Growth and Structure 2002-2020 (% , BaU)
GDP Employment
2002 2010 2020 2002 2010 2020
Primary Industry 13.6 8.1 4.8 50.0 40.1 34.6
Secondary Industry 45.2 46.2 45.6 21.4 22.9 21.5
Mining 4.9 4.3 3.4 0.9 1.0 0.9
Manufacturing 34.9 36.1 37.1 14.1 14.3 13.3
Consumer Goods 9.7 8.4 7.0 4.2 3.7 3.1
Intermediate Goods 13.8 14.6 16.9 5.0 4.9 4.5
Capital Goods 11.4 13.1 13.2 4.9 5.7 5.7
Construction 5.4 5.7 5.1 6.4 7.6 7.3
Tertiary Industry 41.1 45.7 49.6 28.6 37.0 43.9
Economic Growth and Structure 2002-2020 (% Optimistic Scenario)
2002-2005 2006-2010 2011-2015 2016-2020 2002-2020 2006-2020 GDP 10.1 9.5 8.8 7.6 8.9 8.6 Sources of growth Labor 0.4 0.4 0.2 0 0.2 0.2 Capital 7.7 6.6 6.1 5.1 6.2 5.9 TFP 2 2.5 2.4 2.5 2.4 2.5 Source: DRCCGE2004
Economic Growth and Structure 2002-2020 (% Optimistic Scenario)
GDP Employment
2002 2010 2020 2002 2010 2020
Primary Industry 13.6 7.8 4.3 50.0 39.8 33.8
Secondary Industry 45.2 45.0 43.6 21.4 23.0 21.5
Mining 4.9 4.1 2.8 0.9 1.0 0.8
Manufacturing 34.9 35.3 35.9 14.1 14.3 13.6
Consumer Goods 9.7 8.2 6.6 4.2 3.7 3.1
Intermediate Goods 13.8 14.0 15.3 5.0 4.7 4.0
Capital Goods 11.4 13.1 14.0 4.9 5.9 6.6
Construction 5.4 5.7 4.8 6.4 7.7 7.1
Tertiary Industry 41.1 47.2 52.2 28.6 37.2 44.7
Economic Growth and Structure 2002-2020 (% Optimistic Scenario)
2010 2020
SO2 -2.4 -10.2
NOx -2.2 -12.3
TSS -4.2 -5.6
Smog -1.7 -2.7
Source: DRCCGE2004
The changes in pollutant discharges for the optimistic scenario compared to the
baseline scenario
Economic Growth and Structure 2002-2020 (% Risk Scenario)
2002-2005 2006-2010 2011-2015 2016-2020 2002-2020 2006-2020 GDP 10.1 8.4 7.1 3.8 7.6 7.1 Sources of growth Labor 0.4 0.4 0.2 0 0.2 0.2 Capital 7.7 6.5 5.4 4.2 5.7 5.3 TFP 2 1.5 1.5 1.6 1.6 1.5 Source: DRCCGE2004
Economic Growth and Structure 2002-2020 (% Risk Scenario)
GDP Employment
2002 2010 2020 2002 2010 2020
Primary Industry 13.6 8.6 6.0 50.0 40.7 36.2
Secondary Industry 45.2 46.5 44.9 21.4 22.9 20.5
Mining 4.9 4.4 3.4 0.9 1.0 0.8
Manufacturing 34.9 36.2 36.7 14.1 14.3 13.0
Consumer Goods 9.7 8.6 8.1 4.2 3.8 3.6
Intermediate Goods 13.8 14.7 16.6 5.0 4.8 4.2
Capital Goods 11.4 13.0 12.0 4.9 5.6 5.2
Construction 5.4 5.8 4.8 6.4 7.7 6.6
Tertiary Industry 41.1 45.0 49.1 28.6 36.4 43.4
Growth Prospects for 2006 - 2020
• It is still possible for China to maintain its relatively fast economic growth in the next 15 years.
• Numerous challenges confronting future development• The opportunities and challenges in the next 15 years
will be not evenly distributed, and the period from 2005 to 2010 will be critical to the reform and development in China
Growth Prospects for 2006 - 2020Baseline Scenario
Labor
Capital
Total FactorProductivity
Optimistic Scenario
Labor
Capital
Total FactorProductivity
Risk Scenario
Labor
Capital
Total FactorProductivity
• Sources of Growth: 2006-2020– In all scenarios, capital accumulation
continues to drive growth– Growth in TFP varies according to
gains in efficiency– Contribution of labor does not grow
in any scenario (demographics)
Growth Prospects for 2006 - 2020
• The industrial structure will continue to be adjusted and become more rational thanks to deepening industrialization and urbanization. At the end of the 11th Five-Year Plan, the proportions of the primary, secondary and tertiary industries could be 8.1:46.2:45.7. During the 2010-2020 period, the main changes in industrial structure will be higher efficiency and greater proportion of the service industry. The proportions of the primary, secondary and tertiary industries will be 4.8:45.6:49.6
Growth Prospects for 2006 - 2020
• The simulation results indicate that if the national economy can post a coordinated and sustainable development, the damage of economic growth to the environment will be much smaller. Take 2020 for example. The discharge of the four major pollutants in the coordinated development scenario will be 2.7-12.3 percent lower than in the baseline
scenario • China still faces a possible slowdown in economic growth,
the negative impact of trade frictions on import and export, the slower rate of capital accumulation and the higher system costs arising from system contradictions could reduce China’s economic growth rate to about 7 %
Growth Prospects for 2006 - 2020• Returns to labor in 2020 relative to 2002
(percent change)
• Agricultural workers stand to gain the most but also face greatest losses relative to baseline if risk scenario materializes
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Agricultural labor
Growth Prospects for 2006 - 2020• Projected changes in household income in 2020 relative to
2002 (percent change)
• Rural households stand to gain the most but also face greatest losses relative to baseline if risk scenario materializes
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