Indian Council of World Affairs

Distinguished Experts, 

Welcome to ICWA Panel Discussion on ‘An Assessment of the Chinese Economy’

We are all aware of the Chinese economic rise. China is an economy which has achieved growth at unprecedented rates. Yet, China is not a country that any other country wishes to ‘emulate’ – least of all India – either politically or economically. An economic growth achieved at high social costs can neither be sustainable in the long run nor is it desirable or worthy of emulation.

China needs to rethink its economic-social balance; and it can do so given the political clout it enjoys regionally and globally. That the West has consistently voiced concerns about the human rights aspects of China’s growth, primarily premised on their ideological and strategic competition, does not discount the importance of the social costs of China’s economic growth.

That said, the ‘overheated’ nature of the Chinese economy when it was experiencing high growth is now ‘slowing’ down. The magnetic attraction of China as a hub of manufacturing is eroding as efforts are on the rise globally to reconfigure supply chains. Over-production has gone down though dumping abroad hasn’t and it needs to too. Countries like US, India and also the EU continue to impose anti-dumping duties on Chinese goods to protect local industries and unfair competition owing to excessive Chinese government subsidies and an excessively export oriented outlook.

China’s economic growth is occurring at the expense of the economies of other countries which are fast losing their production capabilities and are being reduced to consumption economies dependent on mass-produced Chinese imports. For instance, Vietnam, Laos, Myanmar.

Any economic system needs to have a production and consumption balance. This is getting severely impacted the world over due to few economies which are doing the bulk of production. The applicability of the theory of comparative advantage or competitive advantage has its limits; it cannot be permitted to allow over-production somewhere at the expense of economic ruin elsewhere. Moreover, glorifying cheap labour and labour intensive models at the cost of ‘quality of life’ does not make for good sense either in theory or in practice.

Also, I am not sure if we want to be in a situation where all the goods available all over the world are ‘uniform’ with no local innovation, no local design, no local touch which, for instance, would be the case if Chinese goods were allowed to flood all the world’s markets. A world economy based on ‘uniformity’ is contrary to the very fundamentals of being human – of his urge to express himself through his own creations and seek acceptance and appreciation.

So, what is the data that supports what I have just said? The Chinese economy grew at nearly 10% in the 1980s, 1990s, & 2000s; in 2010s it grew at around 7.7% and, now in 2020s, the growth rate is around 5%. So, the ‘overheated’ Chinese economy is slowing down with the growth rates being reduced by half from the 1980s. In fact, the growth rates are now similar to the pre-Deng’s economic reforms period. These are official figures. There are also independent analyses that suggest actual current growth may be lower – in the range of 2.4-2.8% in 2024.

And what are the social costs that I am talking about? The ‘One Child Policy’ which coincided with the period since economic reforms till 2015 continues to shape demographics and family structure in China. ‘One Child Policy’ means growing up with no kin, it also means forced abortions and sterilizations. China’s fertility rate is one of the world’s lowest. Second, China is now transforming into a shrinking and ageing worker population which should give rise to concerns about enhancing social safety nets rather than about eroding competitiveness. Third, the introduction of economic reforms in 1979 coincided with increasing outflows of migrants from China as well as rising ‘study abroad’ trends for students and scholars, and the emigration of super-rich elite. Low fertility rates, ageing population, rising emigration, lagging social safety net make for unstable social indicators; and unstable social indicators make for an unstable polity.

I am sure these are some of the issues that our Panel Discussion today will dwell on. I look forward to a thought-provoking discussion. And I wish the panellists all the best.

*****