As the new leadership of China takes shape and moves into place, an acknowledged authority on the country predicts a shift in the country’s economy and demands from the newly affluent middle class for better legal protection.
Professor Peter Williamson, Honorary Professor of International Management at Cambridge Judge Business School, thinks that that China’s long-term development has probably 20 years still to run, but in that time internal consumption and service sector growth will become increasingly important.
In an interview for Cambridge Judge Business School’s website, Professor Williamson says longer-term aims have already been announced. These include a shift in the structure of the economy from being export driven to domestic demand, and eventually consumption spending replacing industry as the driver of domestic growth.
“It is radical but it is necessary because you can’t go on building new roads, bridges, factories and machinery forever eventually it has to slow down and turn to consumption in the domestic economy.”
He compares the pattern of China’s infrastructure investment, relative to GDP, against Japan and Korea in their growth years and with post-WWII Germany.
“While China’s has been slightly higher it’s not way out of line with what those economies were doing during the period, when they were really building their infrastructure, their manufacturing capacity and the capacity of the economy during that growth phase.
“It needs to be seen in the context of China’s long-term development, and I think that’s probably got another 20 years to run, but gradually within that period you’ll see infrastructure and the equipping of factories becoming less important to GDP and consumption becoming more important, and also services growing relative to manufacturing and agriculture.”
Professor Williamson is sure the biggest single change is in the emergence of a middle class in good business positions and owning assets – properties, cars and even private companies.
“They are pressing very hard for a rule of law and for a judicial system, legal system, that protects their property rights and can’t just have some party administrator come and make some administrative decision which devalues their assets and removes all the value of the hard work they’ve put in.
“The next stage I think you’re going to see is a lot of pressure from this middle class for a better more independent legal system.”
Professor Williamson has 30 years’ experience of working in China since assisting numerous multinationals and joint ventures, and more recently, Chinese companies venturing abroad.