computer_1050

China's New Digital Dividend

Author(s): Andrew Sheng, Geng Xiao

Date: Jul 28, 2017

Theme(s): China

Publications: Opinions & Speeches

Distinguished Fellow Andrew Sheng and HKU Professor Geng Xiao examines the pros and cons of China's rapid leap into the digital age.

Over the past four decades, China has gone from being a low-wage supplier to one of the three most important links in the global value chain, alongside the United States and Germany. Despite growing concerns about China’s corporate debt – which is now close to 170% of GDP – and its ability to escape the middle-income trap, rapid digitization will allow the Chinese economy to continue moving up the value chain.

Following its strategic “opening up” almost 40 years ago, China provided an abundant source of cheap land and labor, which enabled it to achieve economies of scale in consumer manufacturing. Then, as China moved toward middle-income status, it became a major consumer market in itself.

In 2012, China’s current leaders recognized that the country’s “demographic dividend” had run its course: the Chinese economy was reaching its “Lewis turning point,” the stage at which its surplus labor supply would be exhausted, and wages would start to rise. And, at the same time, the “opening-up dividend” was also reaching maturity, and encountering protectionist barriers around the world.

 

This article first appeared in Project Syndicate on July 27, 2017The views expressed in the reports featured are the author’s own and do not necessarily reflect Asia Global Institute’s editorial policy.