China’s goal in the coming years will be to continue moving to a service-based economy, thus trying to avoid a middle-income trap with the Fourth Industrial Revolution (4IR), which promotes technological development. China has been one of the upper-middle-income countries since 2010, according to the World Bank (in 2020, this is conditional on the per capita GDP being between $ 4,046 and $ 12,525). China has achieved this by pursuing an annual GDP growth rate of 10% since the reform and opening-up policy announced in the 1970s, building the country’s manufacturing capacity, supported by low labor costs and rapid growth in the working-age population. Remember in its analysis Fitch Solutions.
On the other hand, the competitiveness of the workforce is melting with income in China growing rapidly and the aging of society.
The surprising massive news came this week that census data indicates that China’s population may have shrunk for the first time in decades, as a result of a decline in natural fertility policy (which Chinese policymakers have partially abandoned since then). Whereas, as a result of the deteriorating competitiveness, more and more companies adopted the “China +1” policy, that is, the transfer of production with low added value from the country to a less developed neighboring country (Vietnam was the main beneficiary) It has become extremely important for China to focus its competitiveness on productivity, innovation and quality services. In its recently adopted Fourteenth Five-Year Plan (2021-2025), it identified the development of technological innovation as a major policy goal. They want to increase the size of the digital economy to 10% by 2025 from 7.8% in 2020.
What is this analysis about?
- China’s competitive advantage is melting very slowly
- Chinese policymakers are doing everything they can to increase productivity
- The concept of industrial transformation is developed and solidified
- However, a skilled workforce is available and advanced infrastructure is unavailable
- China’s global role depends on how successful the technology transition is
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