China: Get, Set, Slow, Repair

An economy is frequently assessed in comparison, rather than in an isolated manner. The economies mostly compared with China are South Korea, Japan, and India. The growth pattern and the determinants thereof are constantly estimated. A World Bank study appraised that, from 1980 to 2015, China experienced a growth rate of 8.7 percent. The single digit growth rate is a result of the slow down that the economy is experiencing since 2010. Urbanisation, Industrialisation and growth-oriented policies have been highlights of the past few decades in its history. However, the current slow-down seems to be dragging too much, too far. The trend has been very well-interpreted economically as convergence and divergence.  Japan and South Korea experienced similar economic growth patterns in different time-periods. Even though China attempts to repair the economy, like South Korea and Japan did, with improved technology, further industrialisation and decreased FDI, it faces immediate obstacles like low human capital, and limited institutional capabilities. This may be quite in contrast with the problem faced by India, a closely compared economy.

The more serious problem of the two is low human capital. Labor crunch in China is determined to be the result of two significant factors: an ageing population, and the potential shift towards a consumption-based economy. An ageing population may be only a part of the whole equation; lack of special assistance for the ageing population, lack of social security systems and less than adequate financial planning form some part of the remaining story. Addressing these issues, in order to improve availability of labour in the medium term atleast , must become the order of the day. The younger population is plagued by factors like declining fertility levels, overcrowded neighbourhoods, and lack of sufficient application-oriented skills. This is demonstrated by the ‘job vacancies-to-applicants ratio’, which was 0.7 to 1.1 between 2006 to 2010. This number is likely to increase further as unemployed youth jump the wagon to a doctorate and plan to further increase the skill-job-mismatch.

Increasing the labor force or making the existing force viable, is not a choice that the Chinese government has. Introducing new technology, accessible health care and improving living conditions are some priorities. While urbanisation is a welcome step towards development, a lot of catching up must be done from the socio-economic perspective. Inclining towards becoming a consumption-based economy may not be a single step affair. It is true that such an economy would likely generate several job opportunities; even so, it would generate the need to employ people with specific skills. This would mean introducing more relevant courses in university education and otherwise. While China attempts to progress towards being the giant of consumerism, it is for the world to witness special developments in the rest of the world.

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