Can China Smoothly and
Successfully Shift to a
Sustainable Growth Model
Andong Zhu
Tsinghua University
Outline
 Introduction
 The Growth Models in the past 30 yeas
 Opportunities and Challenges to New
and Sustainable Model
 Conclusion
Introduction: From Old China to New
China
Semi-Feudal
Semi-Colonial
Backward
Market-Oriented
Sustainable
Independent
GDP Growth Fast
(Economic,
Economic & Social
Income Inequality
Social, Environment)
Construction Balanced Social Development
Development
Environment
1949
1978
2002 or 2009?
A Family in the “Old China”
1948: Hyper-inflation in China
The Achievements of New China
before 1978
 Preliminarily Industrialized the Economy
 Established a Independent and
Comprehensive Industrial system
 GDP Growth Rate Averaged at 6.68% per
year during 1953-1978
 Life Expectancy increased from around 35
to about 67 years.
The Growth Models of New China 2.0
 Achievements
 Evolvement of the Growth Models
 Problems
Fast GDP Growth
GDP Growth Rate of China：1979-2008 (%)
16
15.2
14
13.5
12
10.9
10
8
6
4
14.213.9
13.1
9.0
11.611.3
9.2
8.9
13.0
11.6
10.9
10.0
9.3
10.4
10.010.1
9.1
7.8 7.6
7.6 7.8
8.4 8.3
9.0
5.3
4.1 3.8
2
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
Huge Amount of Foreign Reserves
Foreign Reserves of China ($Bn): 1978-2007
2500
1946
2000
1528
1500
1066
1000
819
610
500
1985
1986
1987
1988
1989
1990
2008
1984
2007
1983
2006
1982
2005
1981
2004
1980
2003
1979
2002
6
212
2001
3
2000
3
1999
2
1998
3
1997
8
1996
9
1995
7
1994
3
1993
-1
1992
1
1991
0
155 166
105 140 145
74
11 22 19 21 52
1978
0
403
286
Evolvement of the Growth Models
Relatively
Balanced/Outward
Looking Growth
Balanced/Inward
Looking Growth
Planned Economy
With
Market Mechanism
1978
1992
Marketization;
Privatization
Liberalization
Imbalanced/outward
Looking
New growth model?
Over-dependent
Sustainable
On
(Economic,
International Market
Social, Environment)
And
Development
Investment
2001
2009
The Over-dependency on Investment
中国的投资率(%): 1978-2007
44
43.2
42.742.6
42.6
42
41.0
40.540.3
40
42.1
38.8
38.2
38.1
38
37.5
36.1
36
34.8
37.9
37.0
36.3 36.6
32.5
32
36.5
36.236.2
35.3
34.934.8
34.2
34
36.7
36.6
32.8
31.9
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
30
The Consumption Ratio in China
中国的消费率(%): 1978-2007
70
65 62.1
64.4
65.5
67.1 66.5 66.4
65.8 66.0 64.9
63.6
63.9 64.5
最终消费支出
62.5 62.4 62.4
59.3
60
45
62.3
61.4
59.6
56.8
54.3
55
50
58.2 58.1
59.2 59.0 59.6
61.2
居民消费支出
48.8 49.1
50.8
52.5 51.9 52.0
50.8 51.6 50.5 49.9 51.1 50.9
51.8
48.8
49.9
47.5 47.2
44.4 43.5
44.9
45.8 45.2 45.3 46.1 46.4 45.2
49.0
43.7
41.7
39.8
40
37.7
36.3
35.3
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
35
Widening Income Inequality
Income Gini Coefficient of China: 1978-2006
0. 46
0. 45
0.
44
0.
44
0. 43
0. 39 0. 40 0. 39
0. 38
0. 37
0. 34
0. 30
0. 31 0. 31
0. 29
0. 32 0. 32
0. 30
0. 37 0. 37 0. 38
0. 39
0. 41 0. 40
0. 35
0. 33
0. 28
0. 26
0. 24
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
0.50
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
Sweden 25, India 32.5, United States 40.8,
China 44.7, Brazil 59.1
Household Final Consumption Ratio and the the Ratio of top 20% population's
income against the Bottom 20%, 2003
80
60
Household
Final
Consumption
ratio
(%)
100
40
0
2
4
6
8
10
Q1/Q5
12
14
16
18
20
What are the Major Reasons of
Inequality in China？
 Monopoly?
 Corruption?
 Privatization?
 Income distribution
Ownership  Labor Relation

 Income distribution
Ownership
Share of Chinese Industrial Output by Ownership（%）：1990－2004
100
Foreign
90
80
Domestic Private
70
60
Clollectively Owned
50
40
30
20
State_owned
10
0
1 9 90
1 9 91
1 9 92
1 9 93
1 9 94
1 9 95
1 9 96
1 9 97
1 9 98
1 9 99
2 0 00
2 0 01
2 0 02
2 0 03
2 0 04
The Laid-off/privatization Movement(Mn)
Urban
employment
State-owned
Units
Collectiveowned Units
highest level
27331(2005)
11261(1995)
3628(1991)
lowest level
19040(1995)
6488(2005)
810(2005)
8291
-4773
-2818
change
Informalizing Labor Market
30000
25000
EMP-CITY-SOE
EMP-STF&WRK
EMP-CITY
20000
15000
10000
5000
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
What New Growth model Needed in the
Chinese Economy?
 Balanced/sustainable Economic
development
Less
depend on international Market
Less depend on Investment
Increasing Private Consumption
increasing income of the poor
& improving the Social Security Net
(re-)nationalization of enterprises; more strictly
regulate the market
Opportunities and Challenges to New Model
 Opportunities
The
Drain Up of the Rural Labor Reserves
The Current Crisis (International Market; US
Model; Theory, etc)
 Challenges
Low External Debt Risk
Risk Indicators on External Debts of China (%): 1985-2007
18
120
16
100
14
12
80
10
60
8
6
40
4
20
2
Debt Service Ratio
Liability Ratio
Foreign Debt Ratio (RHS)
0
0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Enough Room for Fiscal and Monetary Policies
China Still Has Room to Loose the Money Market: 2005.01~2008.11
8.0%
19%
Interest rate of one year loans
Required Reserve Ratio (RHS)
Required Reserve Ratio of Small and Middle sized FI (RHS)
At the end of 2007，total public debt was RMB3.4 Tr.，as
13.8% of GDP and 67.0% of government revenue
2008.11
2008.09
2008.07
2008.05
2008.03
2008.01
2007.11
2007.09
2007.07
2007.05
2007.03
2007.01
2006.11
7%
2006.09
5.0%
2006.07
9%
2006.05
5.5%
2006.03
11%
2006.01
6.0%
2005.11
13%
2005.09
6.5%
2005.07
15%
2005.05
7.0%
2005.03
17%
2005.01
7.5%
The Composition of the 4 Tr. RMB
Stimulus Plan
The Composition of the 4 Trillion RMB Stimulus Plan
Re-construction after Dissaster,
1000, 25%
Housing for the Poor, 400, 10%
Rural Construction, 370, 9%
Saving Energy and Decreasing
Emmission, 210, 5%
Industrial Restructuring, 370, 9%
Socail Affairs, 150, 4%
Infrastructure Investment, 1500,
38%
20081124
20080611
20071224
20070711
20070118
20060731
20060213
20050816
20050301
20040831
20040312
20030911
20030320
20020927
20020408
20011010
20010418
20001024
20000509
19991104
19990519
19981118
19980608
19971210
19970625
19961226
19960715
19960119
19950808
19950224
19940906
19940328
19931008
19930429
19921116
19920604
19911219
19910709
19901228
7000
Shanghai Stock Market Comprehensive Index：1990.12.28~2009.3.12
6000
5000
4000
3000
2000
1000
0
Conclusion
 The growth pattern of China has to be
changed even without this current Crisis
 It will not be Easy to transform China to a
really Sustainable Development Model
Smoothly and Successfully
Comments and Questions
Welcome!
Thank You!