Nobel laureate Spencer: China's well-off society promotes value chain upgrade

Lead: China is entering a "well-off" phase after 30 years of rapid growth, said Michael Spencer, chairman of the 2001 Nobel Prize in Economics, and president of the U.S. Growth and Development Commission.　　Over time, labour-intensive parts of the value-growth chain will disappear from China's high-income regions, moving to less developed regions, and China's position in the value chain will escalate. But "running well-off" is sometimes regarded as a trap. In fact, most of the middle-income countries will experience a slowdown in economic growth. At this stage, emerging economies tend to come to the crossroads.　　Of the 13 cases of sustained high growth in the post-war period, there are only 5 cases: Japan, South Korea, Taiwan, Hong Kong and Singapore have been able to maintain high growth throughout the well-off process, successfully surpassing the standard of developed countries with a per capita income of $20,000. However, as emerging market economies rise to higher value-added parts of the global supply chain, physical, human and institutional capital will be deepened, pushing their economic structures closer to the developed world.　　This has left the former only in the developed world "the most cutting-edge high-value products and services," and the competition will become more intense. For the U.S. economy, while the U.S. economy has recovered, unemployment has not fallen, and the lack of domestic demand in the aftermath of the crisis is causing a high unemployment rate in the United States.　　From the economic principle, foreign demand, especially the demand of high growth emerging markets, can partly make up for the shortage of domestic demand in the United States.　　At the same time, reshaping competitiveness requires the US to be multi-pronged: strengthening investment in human capital, the technological underpinnings of the economy, and infrastructure. The article reads as follows: Since the end of the Second World War, the level of global trade and financial openness has been greatly improved. This is thanks to international agencies such as the IMF and trade liberalisation negotiations that began in 1947. At the same time, the colonial system was completely shattered and the world was newly born in many developed countries. These countries will undergo a century of modernization and are now just halfway through. But what is the outcome of the process of modernization in developing countries? Where will it take us?　　More importantly, how can we influence this process? Following the lowering of formal barriers to trade and capital flows, several major trends have combined to increase the pace of economic growth and structural change in post-colonial and other developing economies.　　These trends include technological advances (particularly in transport and communications), as well as management innovation and supply chain integration of TNCs. Thus, soon after the end of the Second World War, developing countries that had traditionally exported natural resources and agricultural products began to expand to labor-intensive manufacturing. First is the textile and clothing industry, then luggage, tableware, toys and other industries.　　The supply chain has also seen a geographical dispersion, with low-value-added parts beginning to shift to low-income countries. In the consumer electronics industry, for example, low-income countries have become the only alternative to labor-intensive assemblies. But semiconductor components, circuit boards and other components are still in middle-income countries such as KoreaComplete the design and production process. While the evolution of the global economic structure is best described by the "one time only" process, growth patterns in developing countries show repeatability.　　Powerful economic forces have contributed to structural change and economic diversification, consolidating economic growth and creating a common transformation. For example, after 30 years of rapid growth, China is entering a "well-off" phase. Over time, labour-intensive parts of the value-growth chain will disappear from China's high-income regions. Driven by massive public investment in infrastructure and logistics, some will move to lower-income mainland China.　　Eventually, however, labour-intensive industries will move to less developed areas, and China's position in the value chain will escalate, whether in the export sector or in the domestic consumer product segment (the domestic part of the upgrade must take place under conditions of income growth). But running off is sometimes seen as a trap. In fact, most of the middle-income countries will experience a slowdown in economic growth.　　In the post-war 13 cases of sustained high growth (which will soon include India and Vietnam, to 15), only 5: Japan, South Korea, China, Taiwan, Hong Kong and Singapore have been able to maintain high growth throughout the well-off process, successfully surpassing the standard of developed countries with a per capita income of 20,000 dollars. Structural change is part of a changing global economic outlook. The overall trend in the global economic outlook is also highly unpredictable, in part because of the different timing of countries ' participation in the global economy and the pace of expansion. The first high-growth economies, Japan, South Korea and Taiwan, started with export labour-intensive products, then upgraded to capital-intensive products such as automobiles and then upgraded to human-intensive production activities such as design and technology development.　　As wages grew, labour-intensive production activities that had been carried out in Japan were transferred to the successor of the global economy. China began to enter a period of rapid growth from the late 1970s to early 80, mainly due to low labor costs and economic policy reform.　　But no one expected that China would overnight from a closed planning economy to an open market-oriented economy, the economic freedom of individuals and enterprises has greatly increased. As emerging market economies rise to higher value-added parts of the global supply chain, physical, human and institutional capital will be deepened, prompting economic structures to move closer to the developed world.　　This has left the former only in the developed world "the most cutting-edge high-value products and services," and the competition will become more intense. At this stage, emerging economies tend to come to the crossroads.　　The overall size of developing countries (especially the major emerging economies), their rising incomes, and their rising value chains are causing an increasing impact on developed economies, particularly the tradable sector. How big is the impact on the big developed countries? In the United States, for example, since 1990, the United States has a net increase of 27.3 million jobs, 98% of which belong to the non-tradable sector, mainly government departments and health, retail, hospitality and real estate industry.　　After the financial crisis, the U.S. fiscal and household spending will be long-term constraints, asset prices are also under pressure, the ability to maintain the original job creation speed is very problematic. In fact, the lack of domestic demand in the aftermath of the crisis is causing a high unemployment rate in the United States, although the US economy has recovered, but unemployment has not fallen. From the economic principle, foreign demand, especially the demand of high growth emerging markets, can make up the problem of insufficient domestic demand to some extent. But in fact this is not happening, at least not yet. America's trade deficit did fall from $702 billion trillion in 2007 to $375 billion trillion in 2009, but that was all due to a sharp drop in imports, from 2.35 trillion to $1.95 trillion.　　In fact, exports have also fallen slightly, from 1.65 trillion to 1.57 trillion dollars. Export growth can be obtained from the more competitive parts of the value chain, such as finance, insurance, computer system design, etc.　　However, to create enough jobs and reduce external deficits, the scope of the export sector itself must be expanded. This requires reshaping competitiveness in more tradable high-value-added sectors. It would be nice to have an easy and competitive approach, but it doesn't exist, and trade protection is clearly not the right choice. Reshaping competitiveness is a complex challenge for any country and needs to be multi-pronged: strengthening investment in human capital, the technological underpinnings of the economy and infrastructure. (Duan Jiao Yu, San Francisco, USA)