Making Sense of Chinese Growth

June 14th, 2013

According to Mr Xi in his first address to the nation, "We must make persistent efforts, press ahead with indomitable will, continue to push forward the great cause of socialism with Chinese characteristics, and strive to achieve the Chinese dream of great rejuvenation of the Chinese nation." ; Similar to speeches by western politicians, however, this initial address and many since have been short on specifics.

Justin Lin, or Lin Yifu, is one of the leaders' key economic advisors, a man who recently delivered the David Finch lecture at Melbourne University and gave some insight into China's aspirations. ; According to Lin, China is in a similar income and technological situation to "Japan's in 1951, Singapore's in 1967, South Korea's in 1977, and Taiwan's in 1975. Each of those four then grew by about 8 per cent for 20 years."

To achieve this, he says, "China needs market-oriented reform to complete its transition from a dual-track economy", made up of an embryonic private sector and a large subsidised state sector. ; While there is a lot of optimism surrounding China at the moment, there is also fear that growth is unsustainable due to massive income disparity, government control and corruption, and an imbalance between savings and consumption. ; Reform of the banking sector should also be a priority according to Lin, with the nation's four state-owned pillar banks often inaccessible to rural families and small business operators

In an interview with the ABC, Think Global Consulting CEO David Thomas said things are not always as they seem with China, which is one reason why Australian analysts have such a bad record trying to anticipate growth. ; "China is modernising, it's not Westernising, so we can't assume that the things we've done in the West for a long time is going to work in China... From time to time, you see investment deals done that don't always make sense."

According to Lin, Australia must expand its "mineral-led model", and target any areas where China might perceive it has an advantage over other nations. ; While Lin mentioned tourism, quality food, engineering, and green-based business as examples, the $11 billion of Chinese money that entered the Australian economy last year also spread into the agriculture and real estate sectors. ;