Former ADB chief bullish on China's growth path

China has considerable room to grow during the 15th Five-Year Plan (2026-30) period, supported by strong technological progress, industrial upgrading and entrepreneurial dynamism, said Takehiko Nakao, the former president of the Asian Development Bank, adding that this was despite the nation currently facing headwinds from the property market and external uncertainties.

During a recent exclusive interview with China Daily on the sidelines of the 2025 Bund Summit in Shanghai, Nakao said he was pleased to see the continued growth of China's economy, which he attributed partly to "strong investment in new areas of technology" under the country's five-year plan framework.

He said that China is becoming the front-runner in technological innovation, including in areas like artificial intelligence, and the focus on developing new quality productive forces marks a key strength in China's growth model.

According to the recently unveiled Recommendations of the Central Committee of the Communist Party of China for Formulating the 15th Five-Year Plan for National Economic and Social Development, the country will enhance the overall performance of innovation systems, raise its innovation capacity across the board, achieve a leading position in scientific and technological development, and keep fostering new quality productive forces.

Nakao said the continued momentum of tech-driven investment demonstrates the resilience of China's economy and potential for future expansion, even though the country faces challenges in the property sector and in local government finances, weakness in consumption and an aging population.

Drawing a comparison with Japan's bubble economy in the 1990s, Nakao said that there are similarities in terms of rapid asset price growth, but China still has far more space to expand.

"China's per capita GDP is still about one-fourth of that of the United States, while Japan's per capita GDP in 1990 was already 30 percent higher than that of the US," he said. "That means China still has a lot of space to grow because its economy on average is not as much as the US, which is a concept of convergence."

Nakao added that China's "entrepreneurship and the sentiment of the people who want to grow and be rich looks stronger than in Japan", and its vast pool of talent provides another structural advantage. "China has so many PhDs in engineering and science as well as lots of workers who are highly educated. And the research and development expenditure is really strong in China," he said.

While acknowledging that China's "high-quality production is very good", he stressed that it should also "pay more attention to the demand side", as strengthening domestic demand will be key to absorbing the nation's growing production capacity and addressing foreign concerns of oversupply.

According to the recommendations of the CPC Central Committee, over the next five years, China should see that the economy keeps growing within an appropriate range, realize steady gains in total factor productivity, and achieve a notable increase in household consumption as a share of GDP.

Wang Yiming, vice-chairman of the China Center for International Economic Exchanges, said official data showed that household consumption accounted for nearly 40 percent of GDP in China in 2024, which is still far behind developed economies such as the US and Japan.

Nakao echoed Wang's views, adding that China still faces the challenge of boosting consumption and improving equality. He said that while investment continues to drive growth, household spending must become a stronger pillar.

"How to promote consumption is a challenge," he said. "There are divides between urban and rural areas. The purchasing power of people in rural areas is not large. Another reason is that people don't feel really safe due to the still low level of social welfare for most people, so they tend to save more."

He stressed the need to ramp up efforts for reasonable wage growth and a stronger social security net. He said that increasing spending on pensions, healthcare and elderly care as well as public education would be essential to narrow social divides and heighten public confidence in consumption.

Nakao underscored that China's economic rise over the past few decades has been powered by reform and opening-up, and continuing that commitment remains vital. It is important to continue to open the economy and promote the private sector, he said.

He acknowledged that globalization is undergoing adjustments worldwide, but China should remain an active participant. "China has gained a lot from globalization and open trade," he said. "What is most important is to have good relations with other countries — friendship and cooperation."

Contact the writers at ouyangshijia@chinadaily.com.cn