China has potential to realize 2035 goal
The two sessions starting Thursday will discuss the 14th Five-Year Plan (2021-25) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035, which has drawn widespread attention at home and abroad since it was proposed by the top authorities in late October.
According to the proposal, China is likely to become a medium-level developed country in terms of per capita GDP by 2035.
As President Xi Jinping said in a statement on the proposal: “It is entirely possible for China to meet the current high-income countries’ standards by the end of the 14th Five-Year Plan (2021-25) and to double the economic aggregate or per capita income by 2035.”
Nation on road to achieving target
Economists have little doubt that China will become a high-income country, based on current standards, by the end of the 14th Five-Year Plan. According to World Bank criteria, a country with per capita gross national income of $12,535 is defined as a high-income country. China’s per capita GNI was $10,252 in 2019, meaning it needs a slightly higher than 4 percent annual growth to have per capita GNI of $12,535 by 2025, which, judging by China’s GNI growth rate in recent years, should not be that difficult to achieve.
However, some believe that, given its rapid aging population and an increasingly uncertain external environment, China may find it challenging to double its economic aggregate and become a medium-level developed country in per capita GDP terms by 2035.
Two issues are involved here. One is whether China can double its per capita GNI by 2035 from the 2020 level, and the other is whether China’s per capita GDP can enter the medium-level developed countries’ ranks by 2035.
International institutions have no definite standards for defining a medium-level developed country or economy. It is therefore important to set the criteria for a medium-level developed country or economy, in order to identify the countries in this category.
This can be done in two ways. One is to categorize all middle-ranking developed countries as medium-level developed economies. According to this method, the median per capita GDP of 36 developed countries, as defined by the United Nations based on the 2019 exchange rate, is $40,370, and the arithmetical average is $40,796. And for the 39 developed economies identified by the International Monetary Fund, the median per capita GDP based on the 2019 exchange rate is $43,592 and the arithmetical average is $45,637.
So a country needs to have per capita GDP of more than $40,000 to be considered a medium-level developed economy. But if we use this method, there will be incompatibilities with the prevailing classification.
For example, Italy has long been considered a major developed country, sometimes grouped among the most developed countries. Yet Italy’s per capita GDP reached $40,000 only in 2008, and stayed below $40,000 in the years before and after that－even in 2019 it was $33,228.
Given this fact, the $40,000 per capita GDP criterion is too high to define a medium-level developed country. The IMF has not set any standard to define a medium-level developed country.
But judging by the median of the developed countries’ per capita GDP, even developed countries such as France, the United Kingdom and Japan would be excluded from the list of medium-level developed economies.
How to categorize developed nations
The other method is to divide developed economies into two categories－the most developed economies, which have per capita GDP of more than $40,000, whose number is about 20, and the developed economies which have per capita GDP of more than $12,000 but less than $40,000.
The countries in the middle of this group can be called medium-level developed economies. And based on this methodology, per capita GDP of $20,000 could be used as a criterion to determine a medium-level developed country or economy.
According to China’s long-term development goal, it aims to double its economic aggregate or per capita income by 2035. China’s per capita GDP is 72,447 yuan ($10,504) in 2020 according to the National Bureau of Statistics. And based on 2020 prices and exchange rate, China’s per capita GDP would reach $21,000 by 2035-high enough to be defined as a medium-level developed country.
China’s per capita GDP(nominal) will be about $28,760 in 2035 assuming the GDP price index increases by 1.5 percent a year from now until 2035 and the yuan’s exchange rate appreciates by about 10 percent to 6.27 yuan per US dollar compared with the average level in 2020.
If the yuan’s exchange rate recovers to the early 2014 level of about 6.1 yuan per US dollar, China’s per capita GDP will likely reach $30,000 in 2035.
Therefore, even if international institutions raise the relevant standards in nominal terms, China will still be able to meet the per capita GDP criterion of a medium-level developed economy. But to achieve the goal of becoming a medium-level developed country in per capita GDP terms by 2035, China needs to maintain its steady and healthy development momentum and double its per capita GDP.
If the Chinese economy grows by about 8 percent this year and by about 5 percent a year in the following four years, it will achieve an average growth rate of 5.6 percent a year during the 14th Five-Year Plan period.
And if China’s average annual growth rate is 4.5 percent between 2025 and 2030 and about 4.0 percent between 2030 and 2035, its per capita GDP in 2035 will be double that of 2020 and the country will become a medium-level of developed economy.
Source: China Daily