China Will Remain a Developing Country for a Very Long Time

From: English Edition of Qiushi Journal Updated: 2011-09-20 10:50
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  China has made gains in economic and social development since institution of the reform and opening up policy that have caught the world’s attention. China’s national economy has entered the front ranks of the world. China has become the third largest shareholder in the World Bank, one of the three countries in the world that have sent men into space, the world’s largest exporter, the world’s largest automobile producer and the country with the largest foreign exchange reserve in the world. This has led some Western media that a short time ago were saying that “China is on the brink of collapse” and asking “who will support China?” to suddenly talk about “China’s responsibilities,” claiming that China “is no longer a developing country” and demanding that China “bear more international responsibilities.” In particular, a new round of such talk from the international media erupted after China’s GDP surpassed Japan’s for the first time in the second quarter of 2010.

 A number of criteria used by authoritative international organizations actually indicate that China still should be classified as a developing country according to the current level of development. The United Nations divides the countries of the world roughly into three categories: the least developed countries, developing regions and developed regions. China is considered a part of “developing regions.” The United Nations Development Program (UNDP), which calculates a “human development index” for each country based on three indices, average life expectancy, education and living standards, ranked China in 2009 at 92 as a developing country with “a medium level of development” and a development index of 0.772. The 31 member countries of the Organization for Economic Cooperation and Development (OECD) have been traditionally regarded as developed countries, but China is not currently one of them, nor is China among the countries being considered for participation. The OECD holds the opinion that China, Brazil, India and South Africa only have “the potential to become members in the future.”

 In classifying countries, the World Bank considers their per capita GDP and a comprehensive range of factors including economic and social development, science and technology, culture and education, health, consumer spending and competitiveness. This method is more scientific and believable than that of the UNDP. From the World Bank comparison of the latest data for China’s economic and social development with that of other countries it is not difficult to reach the following conclusions:

 I. China will have a large economy with low per capita GDP for a long time.

 According to data provided by the World Development Report 2010 of the World Bank, China’s GDP for 2008 was US$3.8993 trillion, 3rd highest in the world, with average per capita GNI of only US$2,940, ranking 130th in the world. Accordingly, China was listed by the World Bank as belonging in the “lower middle income group” with a considerable gap from the average for those in the upper middle group. Data published by the International Monetary Fund (IMF) in 2009 indicated that China according to average per capita GDP ranked 104th in 2008, also placing the country in the lower middle level.

 II. China’s industrial and employment structures and rate of urbanization were typical for lower middle income countries.

 The World Bank report indicates that the proportions of China’s three industrial sectors in the GDP were 11%, 49% and 40% in 2008. This situation is different from developed countries in the following areas:

 One is excessively high dependence on primary industry. Primary industry in developed countries normally accounts for no more than 5% of GDP, as opposed to 11% of GDP for China in 2008.

  Chen Shihua (center), an elderly woman in Qingshanya Village, Xiping Town, Zhanyi County, Qujing City, Yunnan Province, carries water to her home April 9, 2010. The able-bodied members of the family are working away from home, leaving the farm work to the elderly members of the family. Urbanization has promoted a “rush to the big cities,” especially evident in the megacities of Beijing, Shanghai and Guangzhou but also seen in small and medium-sized cities. This has resulted in numerous problems for city residents including over crowding, traffic jams and shortage of resources. Historical changes have taken place in the traditional pastoral life that has existed for thousands of years in the countryside as cities have expanded and rural towns and townships have developed. / Photo by Xinhua reporter Lv Jianrong

 Two is a serious dependence on manufacturing. Secondary industry in developed countries, mainly consisting of high-end manufacturing, generally accounts for no more than 30% of GDP, while China’s manufacturing sector accounted for 49% of GDP in 2008 and to a large degree consists of the lower end of the industrial value chain.

 Three is China’s relatively backward service industry. Tertiary industry in developed countries accounts for an average of 65% of GDP. Tertiary industry in the United States, mostly consisting of modern service industries, accounted for 76.9% of GDP in 2009. The average proportion of GDP contributed by the service industry in the European Union is also around 70%, but China’s service industry accounts for just 40% and is only roughly equivalent to the level of the United States around 1820-1870. Moreover, the proportion contributed by the knowledge-intensive sector of the service industry is very low.

 Similarly, China’s employment structure is far inferior to those in developed countries. The 2008 World Bank report indicates that the proportion of the labor force engaged in agricultural production in China from 2002 to 2004 was 44.1% of total employment, but the same index for the United States in the same period was just 0.58%-2%. The proportion of people employed in secondary industry in China corresponds to the level of the United States from 1870 to 1910. The proportion of the labor force of developed countries in tertiary industry is normally 60% to 80%. The corresponding figure for China is only 33.2%, about the level of the US during the initial stage of industrialization.

 There is a clear gap between the level of urbanization in China and that in developed countries. According to the 2009 World Bank report, China’s urbanization rate reached 40.4% in 2005, lower than the world average level of 47%. Projections based on the current progress in urbanization indicate that by 2015 China’s urbanization rate may reach 49.2%, but this is still far lower than the 75% of developed countries.

 III. There is a large gap in the level of social development between China and developed countries.

 One is China’s poor ability to make innovations in science and technology. China’s spending on R&D is far lower than that of the major developed countries. China’s spending on R&D in 2008 totaled 461.6 billion yuan, accounting for 1.45% of its GDP, but the average spending for member countries of the OECD in 2005 accounted for 2.25% of GDP. R&D intensity in the United States has been at the 2.27% level for a long time and the level in Japan is over 3%. Studies indicate that when R&D intensity of a country does not exceed 1%, technology R&D only produces applicable technologies. When R&D intensity reaches 1% to 2%, R&D work tends to improve technologies, and when R&D intensity exceeds 2% technology R&D produces innovations in technology. Based on this understanding, China’s R&D investment is still at the stage of improving technologies. In the 12 indices examined in the Global Competitiveness Report 2009-2010 issued by the World Economic Forum, China ranked 79th in the world in the maturity of its science and technology. Chinese enterprises have few R&D facilities and insufficient R&D capability. The great majority of the patents for inventions in the area of high technology in China come from overseas. In the fields of radio transmission, mobile communications, semi-conductors, Western medicine and computers, for instance foreign-funded enterprises account for 93%, 91%, 85%, 69% and 60% respectively. On the other hand, 80% of scientific research in developed countries is carried out by large domestic companies.

 Two is insufficient government spending on education. China spends much less on education than developed countries, has insufficient medium and high-level personnel and has a much lower overall level of human resources than developed countries and emerging industrial countries. The low proportion of China’s population with a high school education has become a bottleneck in efforts to improve the quality of China’s human resources. The average world level of spending on education is 4.9% of GDP and the level of most countries is generally not lower than 4%. China has long regarded 4% as the target for educational spending, but according to the statistics of Green Book of Population and Labor published in 2009 by the Chinese Academy of Social Sciences, actual investment in public education in China only accounts for 2.4% of its GDP. In developed countries the proportion of the population with higher education or high school education is high, 35% in the United States and 23% in South Korea. But according to the 2003 Report on China’s Education and Human Resources, the first of its kind issued by China’s Ministry of Education, the average schooling for Chinese people aged 15 years and over was only 7.85 years and 7.42 years for the population aged 25 years and over. The average of these two figures is below the level of the second year of junior high school, similar to the level of the United States 100 years ago and nearly four years lower than that of South Korea. 

 Three is the seriously underdeveloped state of China’s medical and health facilities. According to a report issued by the economics department of the Asian Development Bank PRC Resident Mission in April of 2009, China’s total public expenditures on education and health accounted for less than 4.5% of GDP, far lower than the international level. Government expenditures of the countries of the OECD on the other hand, averaged about 13%.

 IV. There are still many problems in distribution of income and the structure of consumer spending in China.

 The rapid development of China’s economy in recent years has greatly increased the size of China’s economy but is also enlarging the gap between the rich and the poor. According to the Human Development Report 2009 of the United Nations, China’s Gini Coefficient was 0.415, higher than those of developed countries such as France (0.327), Switzerland (0.337) and the United States (0.408), as well as higher than developing countries such as Romania (0.315), Malaysia (0.379) and India (0.368). This is a reflection of the fact that the income gap in Chinese society has become too wide. China has made great achievements in poverty alleviation in recent years, but there is still a great deal that needs to be done to help the poor.

 There is a big gap between the level of consumer spending in China and that in developed countries. Per capita consumer spending in China was only equivalent to 8.8% of that of American consumers in 2003. Although there has been significant increase in consumer spending in recent years, it was only equivalent to 15.4% of the spending of American consumers in 2008. The structure of consumer spending in China is still concentrated in low-end spending. Food is still the major item in the spending of Chinese consumers, with spending on services accounting for much less. In 2008, spending on food accounted for 33.1% of total consumer spending in China, but in the same year the proportion of spending on food in the United States was only 6%. In 2008, spending on services in China accounted for 40.1%, but the figure for US residents was 66.4%. The ratio of consumer spending to GDP in China was not only lower than that of the developed countries but also lower than that of a number of developing countries. That ratio was 35.3% for China and 70.1% for the United States and 54.7% for India in the same year.

 V. China has made considerable progress in strengthening overall competitiveness, but progress in modernization is still significantly lagging behind. 

 China ranked 20th in the 2009 ranking of international competitiveness published in the World Competitiveness Yearbook by the International Institute for Management Development (IMD), Lausanne, Switzerland. The World Competitiveness Yearbook said that China performed well in development of the domestic economy, international trade, employment, public finance, the labor market and scientific infrastructure, but was not as competitive as it could be in terms of international investment, business legislation, management practice, health and environment. In the Global Competitiveness Report 2009-2010 published by World Economic Forum, China’s overall ranking was 29th, one place above that of the previous year, and there is still plenty of room for improving efficiency and infrastructure.

 China’s modernization index in 2006 was 38 and China ranked 59th in the China Modernization Report 2009 issued by the Chinese Academy of Sciences, in contrast to the average world index of 53. The Chinese Academy of Sciences recently issued the China Modernization Report 2010—World Modernization Review, which introduced a new concept, the human development index. This index is an average of the progress of a country or region in five fields, i.e. health and life expectancy, average educational level, sharing of information, environmental quality and average standard of living. According to this index, China ranked 63rd.

 During the 30-plus years of reform and opening up, tremendous changes have come to China and the country has moved up to the front ranks of the world in terms of overall strength and competitiveness in some fields. This is a great achievement of the CPC in leading the Chinese people on the road of socialism with Chinese characteristics. Most of the indices, such as those for economic and social development, education, health, science and technology, indicate that China is still a developing country and that China’s road to modernization still has a long way and heavy tasks ahead. From a dialectical point of view, however, a gap also indicates potential, and China has vast potential for continued development.

 Everyone knows that China never shuns its international duties. Mao Zedong once openly announced that China “ought to make a greater contribution to humanity.” In spite of the fact that the country was suffering from extremely difficult economic conditions in the 1950s and 60s, China did all it could to support and aid Asian and Latin American countries striving for national independence and developing their national economies. China bore a great deal of pressure in helping the world economy recover from the Asian financial crisis of 1997 and the international financial crisis of 2008. In international disasters such as the Indian Ocean tsunami, Haiti earthquake and Pakistani flood, the rapid aid supply of materials and personnel from China left a deep impression on the international community. China’s huge debt reduction and development aid to African countries have received high praise from their recipients.

 Certain Western media have ignored the basic facts of the above situations and imply that China is no longer a developing country, attempting to force the country to accept international duties beyond the country’s capacity and demanding that China bear some international responsibilities that even the developed countries have not been able to fulfill. China has every reason to watch out for this situation. China has actively promoted making the world more harmonious and will fulfill its international obligations, but we can not accept so-called “responsibilities” that would threaten economic and social development and would be out of line with the country’s level of development.

(From Qiushi, Chinese edition, No.18, 2010)

Note: Author: Director of the China Institute of International Studies

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