Many opinion makers among experts keep forgetting though that even the absorptive capacity of this territorial enclave has its limits. The Chinese economy has played a prime role in the economic growth of Asia for some time. It is not only because of its 1,3 billion hard working citizens satisfying their long repressed consumer needs, but mainly because it is only a natural consequence of launching the grand reform that was being prepared since 1994.
The entire production segment in the prime sector was restructured within a decade, support infrastructure expanded and the system of administration was reorganized from scratch. The ability to experience a steady GDP growth for two decades up to 10% a year is unprecedented. The economic position of Eurozone came as a result of the entire process in terms of GDP (purchasing power parity).
US lost its advantage over Asia in total goods and services exports in 2013. Asian dominance over the inflow of foreign investments or their exports is undoubtable. Both EU and US have however understated the strength of the historical ties of the so called Greater China (Hong Kong, Singapore and Taiwan).
Detailed analyses confirmed that with their support, China is able to successfully adapt to various scenarios influencing international developments. For some time it seemed that mass production, low-value exports and the growth of domestic consumption will gradually diminish China’s impact on world’s economic growth, therefore putting China under the world hegemony of financial centers. More in depth analyses proved the self-titled experts wrong and confirmed that China’s development strategy is capable of flexible adjustments to various scenarios in advance and it is therefore still affecting global economic growth.
China has been aware of its interdependence on the science and research potential of metropolises since the turn of the millennium and has therefore kept domestic consumption and incomes on a low level. No other transition economy has managed to direct half of its GDP into fix investments, as well as no other economy increased state expenditures on science and research up to 15-20% each year, reaching precisely 133,2 billion USD in 2011, overtaking EU-27.
The Chinese investment plan intends to spend approximately 3% of GDP on research and education, which is currently comparable with Nordic economies only. Domestic universities have more than 6 million students enrolled, out of which 1,6 million are in their postgraduate studies and thousands on a study program abroad. Half of all foreign students in the US are coming from Greater China.
The outcomes of the above described investment strategy are already tangible. In 2011 China received 526,000 patent applications out of which 77% were domestic and 3 million patents were issued. In 2013, China applied for 21,500 patents thus overtaking Germany and ranking after USA and Japan.
Only four transnational corporations worldwide submitted more than 2,000 patent applications, among them two Chinese transnationals (ZTE and Huawei) and only one German (Bosch).
In 2011 China ranks 29th in the Global Innovation Index and 14th in Innovation Efficiency Index and it is highly likely it will enter the top 20 as soon as 2014. This is also where the greatest economic risks for EU lurks.
Prof. Ing. Peter Baláž, PhD.