School of international and Public Affairs Columbia University Manuel Pinho
SPHERE WITH CORE What matters to China matters to the world Do not give lessons to China: Europe and the US The challenges: Growth model Rebalancing Sustainability The sustainability (energy, resources, CO2 emissions) challenge Energy demand and intensity 12th 5 Years Plan External dependence CO2emissions and pollution
China will become the largest economy in the world before the end of the decade 35 30 25 20 15 10 China, People's Republic of United States European Union 5 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 After 30 years of sustained growth, China is about to become the largest economy in the world. China s economic performance is impressive in terms of growth of income per capita and poverty reduction, although it is not unprecedented. What is unique is that this achievement is taking place in a country with a very large population of more than 1 billion.
China is the engine of world GDP growth Contribution to world GDP growth 1996-2005 2006-2012 2013 37 40 19 17 17 10 6 6 3 US Europe China Source: Conference Board, World Bank We live in a 3 speed world Healthy GDP growth rates in China and other developing countries Anaemic growth in the US Stagnation in Europe China accounted for 40% of world GDP growth in 2013 What matters to China matters to the world
What ma9ers to China ma9ers to the world GDP growth rate Income per capita 20 15 10 5 0-5 - 10 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 China, People's Republic of United States Euro area 100000 10000 1000 100 10 1 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 China, People's Republic of United States Long term: potential growth rate of China in the medium term China s GDP per capita remains far from that in the US and the Eurozone. The country still has considerable room to grow, given its distance from the technological frontier. The challenge: from extensive growth to total factor productivity growth. 2007-13: In 2013, US GDP is 5.6% higher than in 2007 Euro area GDP is 1.5% lower In China it is 58.5 % higher 2013-2018 The IMF projects GDP growth of 7% p. year on average until 2020.
Do not lecture China (1): Public finances General government gross public debt, % GDP US Eurozone China Cyclically adjusted fiscal deficit, % GDP US Eurozone China 73 54 86 17 18 95 99 103 106 62 66 68 72 75 34 29 26 23 2008 2009 2010 2011 2012 2013 IMF WEO database 8 8 7 6 5 5 5 4 4 3 3 3 0.5 1 1 1 0 2008 2009 2010 2011 2012 2013 The US and the Eurozone entered the crisis in a relatively weak position The crisis deteriorated further the public finances as a result of cyclical factors (initial increase in public expenditure), revenue loss, need to support the financial sector, etc.
Do not lecture China (1): US public debts 140 120 100 80 60 40 20 0 1880 1884 1888 1892 1896 1900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
Do not lecture China (2): Current account Current account U$ Current account U$ 4.5E+11 4E+11 3.5E+11 3E+11 2.5E+11 2E+11 1.5E+11 1E+11 5E+10 0 2005 2006 2007 2008 2009 2010 2011 2012 12 10 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 China, People's Republic of Germany China, People's Republic of Germany IMF WEO database IMF WEO database
Is investment excessive? Slower GDP growth Diminishing returns Slower trade growth Intensive growth Rebalancing Services, urbanization Technology, innovation Reforms
Just do it, Deng Xiao Ping 12th 5 Years Plan Develop 7 priority industries TECHNOLOGY, INOVATION Develop the Western provinces HARMONY Protect the environment and improve energy efficiency SUSTAINABILITY Transitioning to a consumption driven economy, instead of export driven REBALANNCING
ObjecMves of the 12 th 5- year Plan Investment dynamics Sustainable model Growth Social harmony + InnovaTon Environmental protecton INDUSTRIAL POLICY New strategic industries ITC, biotechnology, new energy sources Domes6c consump6on engines Tourism, shipping, airlines pharmaceutcals Re- inventors AutomoTve, industrial equipment, steel Restructurers Real estate, Commercial banking Social u6li6es Power, rail, networks
China s 3 energy priorimes Energy for growth and the improvement of living standards Avoidance of excesssively high external dependence Example text Go ahead and replace it with your own text. This is an example text. Sustainability/ Polution -17% carbon intensity by 2015-16% energy intensity 15% target for non fossil fuels 35,000 Km high speed train 12 m ha new forest
China energy system in 3+1 figures Energy consumption per capita, koe 7794 Share of industry in total final consumption 47 80 Carbon intensity of energy supply (Metric t. of CO2 per billion Btu) 70 4518 4040 2482 27 18 22 26 60 50 40 30 1138 1062 20 World US EU Japan China 10 0 Energy consumption per capita is 1/7 of that in the US Industry accounts for almost 50% of energy consumption 80% of power generation is coal based
China s external dependence is rising very fast
Technology v. insmtumons Top 10 countries with technically recoverable shale oil resources Rank Country Shale oil (billion barrels) 1 Russia 75 2 U.S. 1 58 (48) 3 China 32 4 ArgenTna 27 5 Libya 26 6 Australia 18 7 Venezuela 13 8 Mexico 13 9 Pakistan 9 10 Canada 9 World Total 345 (335) 1 EIA estmates used for ranking order. ARI estmates in parentheses. Top 10 countries with technically recoverable shale gas resources Rank Country Shale gas (trillion cubic feet) 1 China 1,115 2 ArgenTna 802 3 Algeria 707 4 U.S.1 665 (1,161) 5 Canada 573 6 Mexico 545 7 Australia 437 8 South Africa 390 9 Russia 285 10 Brazil 245 World Total 7,299 (7,795)
Just do it, Deng Xiao Ping Would you tell me please, which way I ought to go from here? That depends a good deal on where you want to go, said the cat Manuel Pinho