[Cambridge, April 14 2024] CKGSB’s Founding Dean and Dean’s Distinguished Chair Professor of China Business and Globalization, Xiang Bing, delivered the first closing keynote speech on China’s economic outlook at the Harvard College China Forum.
During his speech, Dean Xiang emphasized that despite encountering significant challenges, there are compelling reasons to remain optimistic about China’s economic prospects. Professor Xiang Bing highlighted several pivotal factors: Firstly, China as the Primary Global Economic Driver: China continues to stand as the foremost driver of global economic growth, contributing 38.6% to the global economic increment between 2013 and 2021. This surpasses the 18.6% contribution from the U.S. and the 25.7% from the combined G7 nations during the same period. Secondly, China as the Leading Trading Nation: Since 2009, China has held the position of the largest exporting nation (overtaking Germany) and has been the top trading nation since 2013, displacing the U.S., with the exception of 2016.Thirdly, China as the Largest Manufacturing Hub since 2010: In 2022, China’s value-added manufacturing output reached $4.98 trillion, representing 30.7% of the global total. This figure surpasses the combined output of the next five countries (the U.S., Japan, Germany, India, and South Korea) which totaled $4.95 trillion.
Next, Dean Xiang underscored the untapped potential within China’s underdeveloped service sector and urbanization. Despite its economic prowess, China’s service sector only contributed 52.8% to its GDP in 2022, notably lower than more advanced economies such as the U.S. (77.6%), UK (71%), Japan (71.4%), EU (64.6%), and the global average of 61.7%. Regarding urbanization, although China reached a rate of 66.2% in 2023, it still trails behind most major economies worldwide and also countries with similar GDP per capita, such as Brazil (87.6%) and Russia (75%). These statistics highlight significant room for improvement in China’s service sector and urbanization levels.
Additionally, China has historically underinvested in government expenditure on social welfare. Significant potential exists for catch-up investment in essential sectors such as social protection, education, and healthcare. If China were to align its expenditures with the world average, these sectors could see an annual increase of $1.42 trillion. Furthermore, if China were to match the expenditure levels of the U.S., the annual increment in these sectors would rise to $4.86 trillion.
Turning to the widely-discussed topic of demographic trends, Dean Xiang provided clarification on recent misconceptions regarding China’s population and labor force. Despite sharing a similar median age with the United States (39.0 vs. 38.1), China’s population exceeds that of the United States by more than four times and has a lower percentage of senior citizens (13.7% vs. 17.1%). Furthermore, while India surpassed China in population size in 2022, China still maintains the world’s largest labor force (China ranks No.1 with 781.83 million, followed by India at No.2 with 523.84 million). Additionally, China’s labor force demonstrates a higher skill level compared to India’s.
Continuing the discussion, Dean Xiang drew attention to China’s deregulation efforts and the potential impact on economic growth and investment opportunities. At least 30 industries or sectors in China need to be further deregulated, including seven key industries monopolized by central SOEs, nine pillar industries relatively controlled by local or municipal SOEs, and more sectors in both public and private sectors. China can grow its economy further with new rounds of deregulations.
Dean Xiang also highlighted that China may have been the most disruptive economy in the past two decades (since 2001) with the evidence of generating the most Chinese Fortune Global 500 Companies, more newly-emerged billionaires than any other countries on Forbes Billionaires List, and the position as the world’s second-largest base for unicorns. China’s disruptive-driven model is distinctly unique compared to the innovation-driven model of the United States.
Finally, Dean Xiang emphasized that China has made foundational contributions to the development of renewable energy sectors (including solar power, wind power, hydropower and bioenergy). After years of investment, China is now the leading exporter of solar products, EVs and lithium-ion batteries (with total export of these three sectors reached 1.06 trillion yuan in 2023). More platform and e-commerce companies from China have evolved from imitation to innovation and achieved remarkable success in the U.S. and global markets. Examples include Tiktok, Temu of Pinduoduo, and Shein.
The Harvard College China Forum also featured speakers such as Zeng Ming, former CKGSB professor and former inaugural Chief Strategy Officer of Alibaba; Liu Wenjing, Chairwoman of Bluesail Medical and CKGSB alumna; Zhou Hongyi, Founder and Chairman of 360 Security Technology and CKGSB alumnus; and Cynthia Su, Director and CEO for International Business of Xiwang Group and CKGSB alumna.
This is the fifth time that Dean Xiang has spoken at the Harvard College China Forum, including as the opening ceremony’s first keynote speaker for both 2018 and 2023. The Harvard College China Forum, established in 1997, is North America’s leading and longest-running student-run conference that aims to engage leaders in business, academia, and politics in constructive discussions on China’s challenges and trends.
