Transcript Yukon Huang Presentation

Interpreting China’s Performance
With a Russian Perspective
Yukon Huang
Carnegie Endowment
Similarities
Russia
Transition from
planned economy
YES
China
YES
Size
Largest land mass
Largest population
Large Trade Surplus
$ 200 billion (2011)
$180 billion (2012 E)
Exports as % of GDP 35%
(recent averages)
35%
Labor productivity
$7000
(VA per worker 2005)
$7000
Massive Internal
Migration
East to West
West to East
Inequality (Gini
coefficient)
Rose from 25 to 45
Rose from 25 to 45
2
Differences
Russia
China
Agrarian labor share
of total
10%
40%
Source of growth
Capacity utilization
and energy prices
Investment and
industrial expansion
Resource based
share of exports
80%
3%
Manufactures share
of exports
15%
90%
Investment as % of
GDP (2011)
22%
47%
GDP Growth (%)
Past Decade: 5%
Future: 3-4%
Past Decade: 10%
Future: 7-8%
3
Three Key Policy Differences
• Agglomeration and manufactures trade
• Innovation and productivity increases
• Vested interests and state capture
4
(1) Economic activity is concentrated in
Asia
5
Massive migration of labor to the coast spurs
concentration
6
China – location of globalized industries
7
China – location of domestic oriented
industries
8
High investment rates coupled with spatial agglomeration
effects increased labor productivity
Labor Productivity Growth (%), 1980-2005
10
China
8
6
4
2
0
10
15
20
25
30
35
40
-2
-4
-6
Investment to Output Ratio (%)
-8
9
China and Russia – Comparison of World Bank’s
Business Environment Rankings
CHINA
RUSSIA
Ease of doing business
91
120
Starting a business
151
111
Construction permits
179
178
Registering property
40
45
Getting credit
67
98
Protecting investors
97
111
Paying taxes
122
105
Trading across borders
60
160
Enforcing contracts
16
13
Resolving insolvency
75
60
Investment climate: administrative and
transactions costs as a percent of sales
Russia
China
Bribes
1.5
2.0
Infrastructure
problems
6.5
2.5
Security, theft
protection
3.5
1.5
Supply delays
1.0
1.5
Total
12.5
7.5
11
Regional Trade – specialized components,
strong logistics and scale economies
12
Processing trade drives China’s trade surplus
Trade balance (RMB bn)
40
30
20
10
0
-10
-20
Processing trade
-30
Normal trade
-40
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
13
Russia and China – relations with global
community
• Differing productive structures limits growth prospects for
Russia but provides flexibility for China.
• China will continue to shape global market for
manufactures – more in terms of variety than in just
lower costs.
• Russia will continue to be largely an energy/mineral
supplier and vulnerable to price fluctuations.
• This has political implications for how they will relate to
the international community.
• China needs good relationships given its dependency on
the broader global market for its goods. Russia sees
itself as an energy exporter to captive markets and thus
less dependent on favorable relationships.
14
(2) Innovation must drive China’s future growth
• Future growth should come more from innovation.
• But innovation needs to be private sector driven in
comparison with the past state led investment approach.
• By 2030, China will have 200 million college graduates, more
than the entire workforce in US but skills are deficient.
• R&D spending is rising rapidly but reliance on government
support is a concern. Patents are soaring but value unclear.
• Some firms are getting closer to the technological frontier but
overall production mix is still not technologically advanced.
• Big question can China leapfrog beyond its “natural” position
and develop more indigenous technology?
15
China and East Asian economies are innovating no
more than comparators at similar income levels
(ranking)
10
SGP
TWN USA
JPN HKG
KOR
9
Knowledge Index
8
7
MYS
6
THA
CHN
5
4
PHL
IDN
MNG
VNM
KHM
LAO
3
2
1
0
6
7
8
9
Log GDP per capita
10
11
12
16
But China really stands out in terms of
adoption of technology
17
Global R&D Landscape
18
(3) Vested Interests and State Capture
• Russia – state capture by financial-industrial
groups and a dominant leader. Influenced by
“dutch disease” and resource rich governance
vulnerabilities.
• China – shifting from a broad coalition of growth
advocates to state capture by the Party/State
Banks/SOEs. State led rapid growth has
generated abundant rent-seeking opportunities.
19