{"id":8010,"date":"2021-06-25T06:30:16","date_gmt":"2021-06-25T06:30:16","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=8010"},"modified":"2025-04-23T09:52:17","modified_gmt":"2025-04-23T09:52:17","slug":"the-chinese-economy-stephen-l-morgan","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/the-chinese-economy-stephen-l-morgan\/","title":{"rendered":"Why a lack of innovation will hamper the Chinese economy"},"content":{"rendered":"

Stephen Morgan\u2019<\/span>s new book charts China’s extraordinary growth over the past four decades, examining issues of sustainability, ageing and urbanisation alongside traditional indicators of economic growth. But will a lack of innovation hold them back? Paul French finds out more<\/h2>\n

Stephen L. Morgan is Professor of Chinese Economic History at the University of Nottingham and Associate Provost for Planning at the University of Nottingham Ningbo, China. He was seconded to the university\u2019s Ningbo campus until last year. After visiting China in 1981 as a journalist, he worked as a foreign correspondent and newspaper editor in Australia, China and Hong Kong before moving into academia and teaching at the University of Melbourne. <\/span><\/p>\n

His new book \u2018The Chinese Economy\u2019 (Columbia University Press) looks at 40 years of Reform and Opening Up and 40 years of political leadership in China, with a focus on China\u2019s efforts to ensure it is the first developing economy to avoid the <\/span>\u201c<\/span>middle-income trap\u201d. The book looks back over China\u2019s recent economic decision-making to see how the economy got where it is today, and then fast forwards to the challenges and stresses it faces in the immediate future. <\/span><\/p>\n

Paul French caught up with Stephen Morgan to ask him his views on China\u2019s economy today and what the next few years might yield.<\/span><\/p>\n

\"launchpad<\/a><\/p>\n

You show clearly that China has become \u2018an upper-middle-income economy.\u2019 Could you explain briefly how that happened and what that means to people and businesses in terms of spending power and consumption?<\/span><\/h4>\n

China\u2019s great transformation from a very poor country in the 1970s to an upper middle-income one in the 2020s was the product of recurring structural change. First, rural reform unleashed peasant market-based incentives, raised output and incomes, and set the stage for market-oriented reforms of the moribund urban state-run economy. Second, China re-joined the world economy, welcoming foreign direct investment (FDI) and multinational enterprises (MNEs). This coincided with the expansion of MNE production networks, which we now call global value chains<\/a>. Millions of workers left agriculture for jobs in factories and services. That accelerated after China joined the WTO in 2001, which forged a new urban middle class.<\/span><\/p>\n

Nothing demonstrates this better than private car ownership, which increased from 3.7 million vehicles in 2000 to 207.1 million in 2019. Despite talk of consumption-led growth, government policies promote state investment. That needs to change if China\u2019s debt, about 280% of GDP, is not to balloon further. Increased household consumption<\/a> will raise demand for products and services. Without such changes, China\u2019s growth might slump to reign in debt and Chinese consumer<\/a> spending power will fall dramatically. That won\u2019t be good for domestic or international firms.\u00a0<\/span><\/p>\n

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Stephen Morgan in China in 1981<\/p><\/div>\n

You chart the issues around the sustainability of China\u2019s economic modernisation \u2013 pollution, effluent-filled waterways, contaminated farmland. Many of these have arguably been tackled, so what are the sustainability threats in 2021?<\/span><\/h4>\n

The \u2018airpocalypse\u2019 that shrouded Chinese cities in poisonous smog in the winters of 2012 and 2013 might have been largely controlled, but China still faces big environmental challenges. <\/span><\/p>\n

Economic growth means increased energy use and more greenhouse gas (GHG) emissions. China is an energy giant and the largest emitter of greenhouse gases. It is the largest producer and user of coal, the largest importer of oil, and the largest producer of \u2018clean\u2019 energy (wind, solar and hydropower generation). On a per-capita basis, China consumed 2.4 tonnes of oil equivalent (TOE) in 2018 \u2013 about one-third the level of the US, half that of Russia, two-thirds that of Germany and 81% of the UK. But it is hugely inefficient, burning 0.3 TOE for each $1000 of GDP, which was 2.5 times the US, 3.5 times the EU and 4.1 times Japan.<\/span><\/p>\n