China’s Economic Transformation: The Past, Present and Future Professor Xiang Bing talks about China’s Economy at Johnson
Xiang Bing, founding dean at Cheung Kong Graduate School of Business (CKGSB) and professor of China Business and Globalization, spoke to students about “China’s Economic Transformation: The Past, Present and Future” on Feb. 15, 2013 at Johnson’s Sage Hall.
The event was co-hosted by the Asia Business Association, Greater China Business Club, and the Emerging Markets Institute. CKGSB, a leading business school with headquarters in Beijing and satellite campuses in Shanghai and Shenzhen, is China’s first privately funded and faculty-governed business school.
“China has been totally globalized since Deng Xiao Ping’s tour to the south in 1992,” said Xiang, adding that the extent of China’s globalization is underestimated by the West and by the Chinese themselves. One feature of China’s economy is trade dependence. But “while China is the largest export nation, the majority of exports are not done by Chinese companies,” said Xiang. Foreign investing companies contributed more than 55 percent of exports from China. “You have nothing like this in the U.S., U.K., Japan, or Germany. …That’s one [piece of] evidence of China’s economy being more open than many others’.” China’s enormous amount of foreign reserves, extensive trading with many other countries, and number two ranking in foreign direct investment inflow constitute further evidence of China’s openness, according to Xiang.
Xiang is very positive about China’s future economic growth. The service sector in China only contributes 43 percent of GDP now, which indicates “great potential for improvement,” he said. China also has a large domestic market. “The wealth creation in China is unbelievable,” says Xiang, noting that China Life and China Mobile, two of the biggest companies in their respective industries in terms of capitalization, operate only domestically. In addition, the urbanization trend in China will drive demand in the country for at least 10 years.
In terms of crediting China’s rapid economic growth, Xiang highlighted the great contribution the private sector has made to China’s economy. Even excluding foreign companies, that contribution amounts to 71 percent of China’s GDP. The private sector is responsible for 80 percent of China’s jobs and creates 90 percent of new jobs.
Despite the overall positive outlook, Xiang points out that the inequality of wealth distribution in China could be a serious problem. Another potential limitation is Chinese companies’ low value capture. For example, Chinese companies only capture 1.3 percent of the retail value for the iPhone 4S. At the same time, China is paying an enormous price in terms of pollution and human sacrifice. “China has been subsidizing the global living standard for many years,” Xiang said. “The products made in China are underpriced. The environmental costs are not fully captured. The model is not sustainable.” And yet, he noted so much of the international perception is focused on the “China threat.”
“China is not doing a proper job of explaining itself,” he concluded. “Peace is essential for progress. China does not want conflict with anyone.”
— Yuezhou Huo ’15 is an intern in Marketing and Communications at Johnson.