Bert Hofman: China is underway to emerge as a technological superpower

Bert Hofman: China is underway to emerge as a technological superpower

hello and welcome to global thinkers i’m wang guan in beijing today it is our pleasure to have with us professor byrd hoffman he’s the director of east asian institute at national university of singapore he’s also the former world bank country director for china korea and mongolia professor hoffman it is our pleasure to have you with us professor hoffman china’s economy grew by 12.7 in the first half of 2021 what is your reading of this figure and what does this tell you about the potential trajectory of chinese economy well china of course did did very well in containing the impact of of covet 19 and already last year it was one of the few economies that showed positive growth at 2.3 first quarter was an enormous jump uh 18 growth but that was of course because the first quarter in 2020 was was was quite this small the second quarter is more normal and and that is 7.9 percent growth that’s more or less what is expected quite a bit of dam dynamism if you look at the quarter on quarter numbers they’re quite positive so it seems that china is well on track to to have a very decent growth life about eight eight and a half percent growth this year well more than uh uh premier league chunks minimum six percent and that’s a that’s a very good sign there’s some there’s some issues if you want with the growth that still relies quite a bit on external demand uh exports have been doing really well but that’s important because the rest of the world hasn’t yet fully recovered and so that that dynamism will dissipate over time as the rest of the world start producing again and exporting again and second consumption still has still been lagging it’s been doing okay in the second quarter but overall consumption growth is still not the real driver of the economy that the authorities would like to see yeah why do you think that’s the case well there’s a couple of things one is because household incomes have not fully recovered yet there’s been a number of sectors especially in the services sector that have not yet fully recovered they have not yet all rehired all the all the people that were employed and so there’s a bit of lagging there second um because of china’s social safety net is still in is still still not complete some people feel felt and feel that they should save more they should save more to be prepared for any other eventuality in the future and that means that they consume less as a share of their income third even though overall uh the the household sector has recovered quite well as in other countries the it has been quite uneven and and those that are highly educated work in the high tech sector they do really well and they’ve been doing i’ve gotten a boost frankly from covert 19 because there’s so much more demand of their services whereas others don’t do so well so income distribution has taken a bit of a hit and that’s not that good for consumption either so there’s a number of factors that that drive that drive this issue of consumption lagging the overall recovery some of it will resolve over time but others are of a more structural concern and again in the 14 5 year plan it’s well recognized but there’s a whole range of reforms that need to happen to get consumption up as a share of gdp right now it’s below 40 which is really quite low compared to the rest of the world a household consumption that is really quite low compared to the rest of the world most of most countries it’s 55 60 or even higher and it’s an important factor in demand so that switch that china is is only at the start of uh will take time and effort and it will take reforms in the social safety net in the pension system in the huco system all those all those factors that would in in the end result in a higher share of consumption in gdp um how do you think china can tap into its indigenous uh growth and indigenous uh innovation front when it comes to boosting productivity through technology given america’s intention on you know containing china well it’s look it’s it’s a very central question for today and i think china is is well underway to emerge as a technology called superpower in some areas it’s already leading if you look at photovoltaics or or solar panels if you look at high-speed rail if you look at electric vehicles china is ahead in some areas it is competit compatible with the united states and with europe saying artificial intelligence and others but then in a whole range of other areas it’s still learning it’s still behind china is now investing almost as much as europe not as much yet as the united states but almost as much as europe at 2.3 percent of gdp so it’s catching up at the same time uh technology and and research and development is also a long game it’s you don’t learn it overnight so if you look at in a longer term perspective what what china has invested say over the past 25 years that is still much less than say the united states or europe so china is still catching up in a whole range of areas and that means that that openness and international exchange is still very very important for china if that’s not there if that’s not possible it will have to rely more on domestic innovation and of course china being china they have recognized that and the 14-5 year plan has this focus on technology on spending more on spending more on the foundational technologies the basic technologies that and research that that drives whole new areas of of of technology such as integrated circuits and also the organization of china’s rnd industry if you want is part of the five-year plan so so as they say necessity is the mother of invention and i think china now finds it necessary to rely more on its domestic technology and it will do so of course it’s still a loss china is still behind in say integrated circuits the the more sophisticated chips china cannot yet produce because it still doesn’t have the technology to do so i’m from the netherlands there’s a dutch company that makes lithography asmr it is called it’s a very sophisticated technology 35 years of experience in building that technology and of course china is still a little bit behind but it will get there
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Bert Hofman: China is underway to emerge as a technological superpower

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