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Monday, August 30, 2010

Fwd: [bangla-vision] China’s Audacity in Paying Attention to the Toffler’s Three Waves



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From: Mohammad <mohammad_b_haq@yahoo.co.uk>
Date: Mon, Aug 30, 2010 at 7:55 PM
Subject: [bangla-vision] China's Audacity in Paying Attention to the Toffler's Three Waves
To: bangla-vision@yahoogroups.com


 

SolidarityEconomy.net
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China's Audacity in Paying Attention to the Toffler's Three Waves

Posted: 29 Aug 2010 07:18 AM PDT

China 2020: Double and Quadruple Happiness

by Frank Feather

SolidarityEconomy.net via Toffler Associates

Introduction

Frank Feather is a business futurist, with a remarkably accurate 30-year forecasting track record that often defies conventional wisdom. He is ranked as one of the "Top 100 Futurists of All Time" by Macmillan's Encyclopedia of the Future. A best-selling author and dynamic keynote speaker, Feather was born in the UK but is now based in Toronto, Ontario, Canada. He has consulted to companies including Ericsson, IBM, Ford, Nokia, and Shell. Continuously since 1984 he has been special adviser to China on economic modernization and market reforms, and he has seen many of his ideas implemented there. He previously worked for Barclays Bank, Toronto-Dominion Bank and CIBC.

Alvin Toffler

China's Growth

China has a remarkable and unmatched 30-year track record of doubling and quadrupling its gross domestic product. In 1978, the country's GDP was US$147 billion and falling, per capita income was only US$190 a year, and more than 250 million people were living in abject poverty. Adjusted for inflation, the country's per capita output in 1977 was no higher than it had been in 1957.

Undaunted, China set itself some audacious goals. It aimed to quadruple its GDP between 1980 and 2000, something it had achieved by 1996. It then determined to double its output between 2000 and 2010. Again, the goal was achieved ahead of schedule. The country's next goal is to quadruple GDP between 2000 and 2020 and to achieve "moderate prosperity." China's long-term 70-year goal, laid down in 1978, is to boost its per-capita GDP to that of medium-income countries by 2050, a goal which it will almost certainly surpass before the self-imposed deadline.

Wave-Like Economic Development

China's overall economic strategy is simple. It is based on the "third wave" concept developed by the futurist Alvin Toffler in his book by the same title, published coincident with reforms in 1980. The book was translated into Chinese and read by every mainland Chinese politician and academic and "third wave" became part of the vocabulary.

Toffler's three waves are agriculture, industry, and services. China set about modernizing each of these sectors, shifting workers from the first to the second, and then on to the third wave. Since 1979, the mix of workers engaged in each type of activity has been transformed: the percentage of the workforce in farming has fallen from 47% to 11%; the percentage in manufacturing has fallen marginally from 39% to 49%; while the percentage engaged in services has soared from 14% to 40%. By comparison, the number of service workers in the US economy surpassed those in manufacturing in 1950, and the third wave service sector now employs 82% of the US workforce.

On my first lecture tour to China in 1984, I was asked: "What comes after the Third Wave?" In response, I developed a six-wave model, which China now uses. While client privilege prevents me from divulging how China applies this, I broke the burgeoning third wave sector into two waves (services and high-tech) and added two new waves (leisure/tourism and outer space). These six waves are described in my book Future Consumer.com, which was also published in China.

China's strategy is to develop these six waves, in order to build a post-industrial society. It also aims to become energy self-sufficient and to clean up its environment. Today's emphasis is to further modernize industry, to grow the high-tech, service, and tourism sectors, and to continue with the push into aerospace.

Focus on Innovation and Consumers

To reduce its dependence on exports, China is also putting greater emphasis on original research and development (R&D), rather than simple manufacturing and assembly. We are going to see some impressive innovations emerge from China in various high-tech sectors in coming years. For example, the country has just test flown its first regional jet and has launched an initiative to compete in full-size passenger airplanes by 2020. China is also going to become a major global player in automobiles.

There is also a big push to grow the consumer economy. China has one of the highest savings rates in the world. While this major strength creates a massive pool of investment funds, Chinese consumers have a natural reluctance to spend, contributing only 35% to GDP (versus more than 70% in the United States). This is changing, with new-found affluence and the marketization of the housing and other sectors, encouraging consumers to make a bigger contribution to economic output.

Retail sales are growing at an impressive pace—more than 20% a year—and this is taking up some of the slack caused by the drop in exports to recession-hit global economies. It is estimated that in the next four years, almost half a billion units of refrigerators, washing machines, color television and cell phones will be sold in rural areas alone.

Economic Forecasts to 2020

There are several recent, if diverse, forecasts of China's long-term growth prospects. According to the accountancy firm PricewaterhouseCoopers, China could match US GDP in absolute terms by 2025 and surpass it by 30% by 2050. The Carnegie Endowment forecasts that China's economy will overtake the United States by 2035, and it will be twice its size by 2050.

Of course, these studies were completed before the current global recession. So how has the recession affected China's prospects?

During the past 30 years, China has had economic slowdowns. It also has a nine-year cycle, similar to that of Western economies. However, the slowdowns in China seem to precede those of the West, by at least a year, and China also weathers these slowdowns comparatively well, largely thanks to Beijing's excellent macro-economic control.

China's GDP growth rate slowed in 1980–1981 (versus 1981–1982 in the West), in 1988–1990 (versus 1991–1992), and in 1997–1999 (versus 2000–2001). The first of these downturns was triggered by the initial farm price reforms and a budget deficit. Despite the recent "opening up" of its economy, China at the time remained largely detached from the wider global economy. The second downturn was again caused by overheating and inflation, which then fed into the Tiananmen Square incident of 1989. Yet, this did not cause a full-blown recession. The third downturn was caused somewhat by the 1997 Asian financial crisis, which China helped tobail out, and also by urban price and housing reforms.

In each case, however, China was back in recovery mode as the West slowed down. I believe that we will see a similar scenario in 2009–2010. China has deliberately cooled its torrid growth rate (its economy has grown by more than 10% in each of the last five years), and it was retooling its manufacturing and consumer sectors before it got slammed with a sharp downturn in exports in 2008.

As mentioned, consumers are taking up the slack, buying more durables, and I believe China will still record 9% economic growth in 2009. That will lift GDP to about US$3.7 trillion on an exchange rate basis, and to US$7.7 trillion on apurchasing power parity (PPP) basis. That is more than half the size of the US economy.

In addition, the Chinese government is rolling out a massive four trillion Yuan (US$600 billion) stimulus package, aimed at infrastructure and other major initiatives. As this kicks in, I forecast that GDP will grow by 10% in 2009 and 2010, before settling back to a more manageable 8–9% annual rate. I expect that to be sustained until around 2017, when another slowdown cycle will cause growth to fall to 7–8%, a slowdown which I predict will again precede the next slowdown in the West, which I forecast for around 2019. By then, China will be in recovery mode again, ending the decade with an average GDP growth rate of 9%.

Based on these figures and their underlying assumptions, China's GDP will be about US$11 trillion (exchange rate basis) and could be at least US$25 trillion (on a PPP basis) by 2020.

This will ensure that China remains the second largest economy, with the United States retaining top dog position. But it will have at least quadrupled and will be positioned to overtake that of the United States in the 2020–2040 timeframe. Per capita income will still be relatively low, at around US$12,000 on a purchasing comparative basis, with millions of people well below that level. But China will be a relatively modern, well-off society, and it will be a major player in the commercial aircraft, automobile and computer hardware and software sectors, as well as the world's leading tourist destination.

Basically Recession-Proof

China has shown itself to be basically recession proof. Even in the 1989–1990 downturn, it still managed to grow industrial output by around 4%. It took the 1997 Asian crisis in its stride, and appears likely to weather the current global recession. This can be put down to several strengths.

The main strength comes from foreign investment, which was initially attracted by the strategy of the special economic zones (SEZs) that China set up in 1980. Since then, more than four-fifths of the Fortune 500 companies have invested in China, with some 800 R&D centers set up by those and other foreign firms.

Overall, more than 500,000 foreign companies have established operations of various sizes in China. Total foreign direct investment (FDI) at the end of 2007 was US$759 billion and this could exceed US$1 trillion by the end of 2010. This investment is not going to go away. Indeed, despite the recession, FDI continues to flood in, with new projects announced daily.

Second, China is extremely cash rich. It has a 40% savings rate (that of the United States is basically zero) and has amassed US$2 trillion in foreign exchange reserves. The country has a huge balance of trade surplus, even in the downturn, and a healthy balance of payments position.

Thirdly China is rich in terms of its people. Its vast workforce gives it a tremendouscompetitive advantage, despite stories that it is being priced out of the global market. What these stories overlook is that China still has a vast and undeveloped interior. This allows it to shift factories inland, allowing the services, high-tech, and tourism sectors to grow in the coastal regions.

Fourth, as noted, China also is a vast consumer market that could single-handedly drive reasonable economic growth for at least the next couple of generations. China is also developing significant intellectual capital that will drive innovation, making it more efficient at creating real value added. Even the country's ageing population is not a significant handicap, just as it has not been to Europe. Rather, the ageing population will fuel rapid growth in the health care, housing and tourism sectors.

So, while there's no denying that China faces significant challenges in resource availability and the environment, as well as in creating millions of jobs every year, there appears little to stop it from achieving its ambitious ongoing objective of further quadrupling its GDP.

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--
Palash Biswas
Pl Read:
http://nandigramunited-banga.blogspot.com/

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