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China’s economy has witnessed tremendous growth since opening its doors in 1978. What does the future hold for this economic giant?
China’s real gross domestic product has surged from less than RMB1,775 billion in 1978 to RMB37,026 in 2012. In the process, more than 600 million people have escaped poverty – an impressive success story.
The country’s business landscape has also undergone a transformation with 85 Chinese companies in the Global Fortune 500 list of the world’s largest corporations. Foreign investors have flocked to China’s shores as many of the world’s largest manufacturers have established operations there. However, there is still plenty of room for catch up, with China’s per capita GDP only a fifth of the U.S. level.
China now faces two bottlenecks to its future growth.
First, China’s one-child policy and an aging population has resulted in the labor force shrinking, which will be a drag on growth. The price of labor will increase and the country will lose its labor-cost advantage over others.
Second, the pace of capital investment growth is likely to slow as China seeks to rebalance its economy toward a consumption-driven development model.
This means that in the next decade China must put greater reliance on productivity growth to sustain its economic growth while also driving improvements in business performance and profitability.
Read the full article, “China’s Economy, in 6 Charts” by Mark Purdy, managing director of economic research for the Accenture Institute for High Performance, on the Harvard Business Review blog.
January 27, 2014
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