“Some questions never change.”
Dr. Tao Wang came to this conclusion after decades of covering China’s economy and her past 15 years of working at UBS Investment Research. Questions about China’s sustainability for economic growth, state and market relationships, and structural issues are what inspired her to write her new book Making Sense of China’s Economy, which was published earlier this year.
Dr. Wang spoke about her book at The Foreign Correspondents’ Club (FCC) alongside Andrew Chan, a member of the FCC’s Professional Committee who has worked in risk management.
Her first point: there is no simple narrative regarding China’s economy. The “doom predictions” that Dr. Wang would often hear hadn’t materialized yet, reinforcing her advice to not extrapolate when monitoring the mainland’s economic development.
Dr. Wang also used her talk to address some of the common misconceptions, one of which is that the Chinese government is a monolithic entity, as well as the concerns about the rising role of the state versus the market. Through graphs and charts, she showed the drop in state ownership in the economy across various sectors between the 1980s until mid 2000s, which has stopped over the past one and half decade. While the state increased its role in social areas (though China still lags OECD countries in social spending) and regulations in recent years, she believes that the lack of progress in SOE reforms contributed to the perception of an ever-larger role of the state.
“I’m not as pessimistic,” she said when addressing the decline of China’s working population and long-term potential growth.
Acknowledging the challenges of decline in the working-age population, she pointed out that there is still surplus labor to be transferred out of farming, and that China’s actual retirement age of 54 is very young when compared to China’s average life expectancy (78 years). A gradual and modest extension of retirement age can help increase labor supply this decade.
Along with the declining work population, Dr. Wang mentioned other challenges to China’s economy: social inequality between urban and rural citizens, rising debt, access to technology, and geoeconomic issues. She believes that while problems in accessing advanced technology will be negative for China, the country still has plenty of room to catch up and move up the technology ladder by applying existing mature technologies.
Dr. Wang noted that economic reforms and “opening up” to the rest of the world were key behind China’s economic success. One thing the government did right was being pragmatic and adaptive to different challenges, she highlighted.
But will China continue to be pragmatic and adaptive? Dr. Wang said that is perhaps the biggest question. The answer is not clear, however she is “cautiously optimistic.”
Making Sense of China’s Economy is now available on Amazon.
Watch the full discussion on our YouTube channel: