Economic structure needs adjustment
By Sun Lijian (China Daily)Updated: 2006-12-21 11:27 The unreasonable economic structure of China is the real culprit behind many ongoing challenges troubling decision makers, including overheated investment. The urgent task is to ease the conflicts caused by the "dual identity" of China as a giant in trade but a small player in financial services.
After more than two decades of economic reform and opening up, the Chinese economy has developed into a structure that will allow the country to develop as a big power in global trade.
First, robust growth in investment, especially in fixed assets, has been taking place for several years, indicating continued growth in the country's manufacturing capacity. However, domestic demand, mainly propelled by individual consumption, remains stagnant.
Meanwhile, exports have contributed almost 60 per cent to China's gross domestic product (GDP) in recent years.
Yet, being labour-intensive, processing trade supplies a large number of positions that are less demanding of the educational level or technological experience of employees, helping ease the country's unemployment pressure.
Of course, when the central government adopted a prudent fiscal policy, its control over expenditure strengthened, making it impossible to provoke domestic demand through proactive government spending, which was the practice after the Asian financial crisis of 1997.
When these factors emerge in the country's economy simultaneously, it will have a structure that facilitates its trade surplus. An inevitable result of the current development mode is that China would become an important player in global trade.
Admittedly, the position is also won through economic globalization.
While China becomes a world base for manufacturing, thanks to its advantages in land and labour, it is also enjoying the benefits brought by advanced technology and management skills as well as a different lifestyle.
Major industrial countries gain access to high-quality commodities at low
prices when they choose China as their base for processing and manufacturing.
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