Recent Structural Change of the Chinese Economy and Japan-China Relations

The rapid growth of the Chinese economy has put many countries, especially those in China’s immediate backyard, on alert. Mr. Kiyoyuki Seguchi analyzed the current structural change of China’s economy and assessed its meaning for the global economy. He ended his discussion by focusing on investment relations between Japan and China. His main argument was that China’s economic development is not as threatening as sometimes perceived, and that continued Japanese investment in China is a necessary catalyst for progress between the two Asian countries.

Seguchi argued that the Chinese economy is more stable and growing more impressively than often portrayed in the media. He first chronicled the history of China’s growth since 2002. According to data from the Census and Economic Information Center (CEIC), after 2002 China experienced five successive years of double-digit GDP growth, accelerating to what Seguchi described as “over-heating,” characterized by inflation and dependence on a real estate bubble. The Chinese Communist Party (CCP) subsequently enacted economic policies designed to combat this overheating.  These measures, combined with the unexpected Lehmann brothers shock resulted in a decrease of China’s GDP growth rate to 6.6% by 2009.

Yet, after 2009, China’s economy experienced a rapid recovery, becoming again an overheating economy. Despite these rapid fluctuations between 2005 and 2012, Seguchi argued that China’s economy is currently extremely stable. He explained that although the media often focuses on the decline in GDP growth rates from double digits to 7.4% in 2012, the latter is a sustainable target for the Chinese state. In fact, the current Chinese economic policy is one of “保七” or “maintain 7” referring to the aim to maintain a 7% GDP growth rate.

Seguchi attributed this healthy growth rate – which he projects will last until 2020 – to an emphasis on urbanization and infrastructure building. He explained that increased urbanization is indicative of an economic transition from a focus on manufacturing to a focus on services. He argued that this would lead to an increase in the quality of life for  the Chinese people and healthier economic development. Additionally, he maintained that infrastructure developments such as highways and bullet trains would, as happened in the case of Japan’s economic growth, further contribute to China’s economic progress. Additionally, he noted that since 2007 inland areas have been experience larger GDP growth than coastal regions. These inland areas are now considered the major driving forces of the Chinese economy. As a result of these growth factors, the Chinese economy is shifting towards an economy fueled by domestic demand, reflected in rising production costs and income levels.  However, Seguchi noted  that the era of rapid growth will not last indefinitely and cited decreasing employment, specifically in the suburbs, as a potential negative factor after 2020.

Looking at China-Japan relations, Seguchi argued that the structural transition of China’s economy is a positive development for bilateral investment and trade relations.  An increase of Japan’s foreign direct investment (FDI) in China will lead to an increase in Chinese employment and a long run improvement in China’s technology.  This will make China more competitive globally and also make China  a more attractive market for Japanese investment.  Seguchi argued that this positive bilateral economic relationship will continue despite other areas of political friction between the two countries.


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