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Experts call for new growth model for China and Japan

By Zhu Qiwen (China Daily)
Updated: 2009-11-03 09:30

China and Japan must strengthen economic cooperation in order to meet the challenge of a new post-crisis global economic order, echoed experts at the Fifth Beijing-Tokyo Forum in Dalian on Tuesday.

"The combination of Japanese technology and the rapid growth of the Chinese economy can contribute a lot to the world economy," said Xiang Bin, the dean of Cheung Kong Graduate School of Business.

As the world's second and third largest economies, Japan and China are key trade partners.

However, the global financial and economic crisis, the worst in several decades, has forced both sides to rethink their dependence on export for growth.

The future of China's high-end manufacturing may depend on Chinese enterprises' cooperation with their Japanese counterparts, while Japan's small and medium-sized enterprises may tap into the Chinese market to survive the domestic problem of an aging and shrinking population, said Xiang.

"That resources on Earth are unlimited and can be exploited forever has proved wrong," said Shinji Fukukawa, chairman of Machine Industry Memorial Foundation. "If we don't accept the fact soon, our existence will be threatened.

"To deal with the current financial crisis, China and Japan should pursue a new growth model that emphasizes both economy and environment."

As a result of the rise of the Chinese economy, the weight of Asia in the global economy will increase from 25 percent at present to about 40 percent by 2030.

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But as the unemployment rate remains high and consumption sluggish in the United States and European countries, both Chinese and Japanese experts recognized they can no longer continue to rely on export for economic growth.

"In response to the dramatic change of external conditions and domestic factors underpinning its sustainable growth, China has gradually shifted focus of macroeconomic control on restructuring and change in growth pattern," said Chi Fulin, president of the China (Hainan) Reform and Development Research Institute.

According to Chi, the Chinese economy has witnessed some new trends in the post-crisis period.

First, China is transforming from a large producer to a large consumer country, which is expected to raise the ratio of consumption in gross domestic product (GDP) by 10 percentage points in about five years.

"The ongoing upgrade of consumption among urban residents and pro-consumer reforms, with income distribution, social security, public finance and investment policies will guarantee strong growth," Chi said.

Second, urbanization will be accelerated to help the Chinese economy. Studies found that the increase of urbanization ratio by one percentage point will boost investment and consumption by at least 1.2 trillion yuan ($176 billion). A 10-percentage-point increase in urbanization ratio can sustain China's economic growth for one or two decades.

Besides, supply of public goods will be substantially increased to boost domestic consumption.

More importantly, development of low-carbon economy will become a binding requirement for the change of China's growth model.

"The coming 12th Five-Year Plan period (2011-15) will see a strategic breakthrough in China's restructuring and reform," said Chi. "And this will bring about new opportunities for China-Japan economic cooperation."

Participants at the forum also expressed their support for strengthened cooperation on finance and currency issues.

With a foreign exchange reserve of more than $2 trillion for China and more than $1 trillion for Japan, the two countries have a lot to gain from regional cooperation to make better use of their financial assets worth trillions of dollars, said Li Mingxing, deputy director of China Enterprise Confederation.