{ "title": "The Future of China – IMF F&D", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao", "canonical": "https://www.imf.org/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao", "overlayPath": "/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/index.md", "summary": "China’s long-term success will depend primarily on addressing its internal challenges, writes David Dollar, Yiping Huang, and Yang Yao.", "sections": [ { "heading": "Overview and central thesis", "content": "- China set a long-term goal in 2012: build China into a fully developed and prosperous country by 2049, 100 years after the founding of the People’s Republic.\n- Given past success since 1978, the transformation is possible but “difficult and not guaranteed.”\n- The article emphasizes that China’s long-term success will depend primarily on addressing internal challenges: an aging population, a rural-urban divide, an underdeveloped financial system, insufficient innovation, and reliance on carbon-based energy sources.\n- External economic relations have become contentious, with growing trade and investment barriers in both directions.\n- The authors’ book, China 2049, examines policies to help achieve the 2049 goal." }, { "heading": "Demographics: an older population", "content": "- Total fertility has dropped to 1.7 births per woman, below the replacement rate of 2.1.\n- Relaxation of the one-child policy did not produce more babies.\n- China’s working-age population has already started to decline; the elderly population is expected to increase dramatically in the next few decades.\n- The over-65 cohort will more than double to 400 million people by 2049.\n- The “old-old,” 85 and over, will more than triple to about 150 million people, surpassing their peers in the United States and Europe combined.\n- The only working-age bracket that will increase is the 55- to 64-year-olds.\n- Policy implications and needs:\n - Increased resources for health care, long-term care, and assisted living.\n - Socialization of costs previously privately borne as smaller families may leave elders with no one to rely on.\n - Strengthening the health care system, especially in rural areas.\n - Labor force policies: raising retirement age gradually (current examples: male civil servants can retire at 60, female civil servants at 55).\n - Family-friendly policies to sustain and enhance female labor force participation.\n - Recognition that even some increase in fertility would not affect the labor force for 20 years." }, { "heading": "Urban-rural divide", "content": "- Urbanization trends: urban population increased from 20 percent at the beginning of reform to 60 percent today, rising by about 1 percentage point a year.\n- More than 200 million urban migrant workers remain registered as rural residents under the hukou household registration system.\n- By 2007, urban workers were making 3.14 times as much as those in rural areas; more recently the ratio is 2.71 times.\n- China has about one-fifth of the world’s population but only 7 percent of its arable land, constraining rural living standards for 500 million people.\n- Urbanization is low relative to per capita income and population density compared with fast-growing Asian economies (example: South Korea had urbanization closer to 80 percent at a similar stage).\n- Social consequences of hukou restrictions:\n - Migrant workers face constraints in bringing children or parents to cities due to limited access to education, health care, and pensions.\n - Resulting family structures: parents in cities working while grandparents maintain family farms and raise children left behind.\n- Policy recommendations:\n - Fully scrapping internal migration restrictions to improve social access (education, health care, pensions) for migrants.\n - Facilitating migration would help meet needs of the growing elderly population and maintain the urban workforce." }, { "heading": "Financial system, productivity, and innovation (\"More bits, fewer bricks\")", "content": "- China is characterized by significant financial repression based on factors such as ownership of banks, regulation of interest rates, intervention in credit allocation, and control of cross-border capital flows.\n- China ranks as one of the most financially repressed among major economies, similar to India; moderately more repressed than Russia and South Africa; considerably less liberalized than advanced economies.\n- Financial liberalization progressed until about 2000 but stalled thereafter.\n- Initial liberalization effectively channeled high savings into export-oriented manufacturing and housing, aided by lending practices relying on physical collateral.\n- The golden age of growth was between WTO accession in 2001 and the global financial crisis in 2008.\n- After 2008, to maintain demand, China invested massively in infrastructure via lending to local governments and upstream sectors (such as steel) and channeled more resources into state enterprises.\n- The surge in lending to local governments and state enterprises caused overall indebtedness to grow at an alarming rate, indicating poor capital allocation.\n- Total factor productivity (TFP) trends:\n - Early 2000s: TFP grew 2.6 percent a year.\n - Later part of the past decade: TFP accelerated to 3.9 percent.\n - Between 2015 and 2019: TFP grew only 0.2 percent a year.\n- Innovation inputs and weaknesses:\n - China spends 2.4 percent of GDP on research and development.\n - China has millions of scientists, engineers, and software developers graduating every year and gradually improving intellectual property protection.\n - Innovation output is inconsistent: strong in fintech and artificial intelligence, weak in aggregate productivity.\n - The state still channels many resources to state enterprises, whereas most patents are generated by private firms.\n- Policy implications:\n - Need for a diversified, competitive financial system that funds dynamic start-ups based on intellectual property rather than favoring state enterprises and traditional assets.\n - As China fine-tunes its next five-year plan, focus on strengthening the innovation ecosystem, including financing mechanisms rather than supporting particular industries and technologies.\n - Innovation is key to meeting environmental goals, particularly the target of zero net carbon emissions by 2060." }, { "heading": "Trade and investment: global integration vs. fragmentation", "content": "- Continued integration into global trade and investment is important for catching up in GDP per capita.\n- China became the world’s largest trading nation and, in the previous year, the largest recipient of foreign direct investment.\n- Current international environment: China’s push for leadership in specific technologies worries partners, leading to trade and investment restrictions on Chinese tech firms and a risk of technological decoupling.\n- The “dual circulation” program emphasizes domestic demand and national innovation and could encourage inward orientation.\n- Countervailing integration steps:\n - Membership in Regional Comprehensive Economic Partnership with Asia-Pacific countries.\n - Membership in the Comprehensive Agreement on Investment with the European Union.\n - Dialogue with Trans-Pacific Partnership members about potential future membership, which would require reforms (limits on state enterprises and subsidies, opening up sectors to foreign investment).\n - Overtures to the Biden administration about reducing trade and investment barriers.\n- Policy recommendation:\n - Continue opening the economy and negotiating trade and investment agreements in all directions to avoid inward-looking decoupling that would harm both China and global productivity growth." }, { "heading": "Conclusions and policy priorities", "content": "- China is at an inflection point in external economic relations; success depends primarily on addressing domestic challenges.\n- Interlinkages highlighted:\n - Aging population and rural-urban divide: greater integration can help address elderly needs and support the urban labor force.\n - Financial reform and innovation policy: move away from targeted industrial policy toward general support for innovation, enabled by a diversified financial system that does not favor state enterprises.\n- Innovation is essential for eliminating carbon emissions without compromising productivity or living standards." }, { "heading": "Authors", "content": "- DAVID DOLLAR — senior fellow in the John L. Thornton China Center at the Brookings Institution.\n- YIPING HUANG — Jinguang Chair Professor of Economics and Finance at the National School of Development and director of the Institute of Digital Finance at Peking University.\n- YANG YAO — Cheung-Kong Scholar and Liberal Arts Chair professor at the China Center for Economic Research and the National School of Development, Peking University.\n\nThe Future of China — IMF F&D, June 2021.\n\n---\n\n Content in this bundle\n\n- سطوة عالمية وهشاشة محلية\n - سطوة عالمية وهشاشة محلية (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - سطوة عالمية وهشاشة محلية (PDF){rel=\"external\" type=\"application/pdf\"}\n- 全球影响力、国内脆弱性 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷\n - 全球影响力、国内脆弱性 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 全球影响力、国内脆弱性 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Influencia mundial, fragilidad interna ● Finanzas y Desarrollo ● Junio de 2021\n - Influencia mundial, fragilidad interna ● Finanzas y Desarrollo ● Junio de 2021 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Influencia mundial, fragilidad interna ● Finanzas y Desarrollo ● Junio de 2021 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Puissance mondiale, fragilité intérieure\n - Puissance mondiale, fragilité intérieure (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Puissance mondiale, fragilité intérieure (PDF){rel=\"external\" type=\"application/pdf\"}\n- 「世界で影響力　　足元に脆さ」　デビッド・ダラー　黄益平　姚洋　著、　ファイナンス＆ディベロップメント　2021年6月号\n - 「世界で影響力　　足元に脆さ」　デビッド・ダラー　黄益平　姚洋　著、　ファイナンス＆ディベロップメント　2021年6月号 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 「世界で影響力　　足元に脆さ」　デビッド・ダラー　黄益平　姚洋　著、　ファイナンス＆ディベロップメント　2021年6月号 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Успех Китая в долгосрочной перспективе будет зависеть в первую очередь от решения внутренних проблем\n - Успех Китая в долгосрочной перспективе будет зависеть в первую очередь от решения внутренних проблем (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Успех Китая в долгосрочной перспективе будет зависеть в первую очередь от решения внутренних проблем (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Future of China – IMF F&D\n - The Future of China – IMF F&D (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - The Future of China – IMF F&D (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/bundle-manifest.json)", "Authors: DAVID DOLLAR, YIPING HUANG, YANG YAO", "Published: June 1, 2021", "China set a long-term goal in 2012: build China into a fully developed and prosperous country by 2049, 100 years after the founding of the People’s Republic.", "Given past success since 1978, the transformation is possible but “difficult and not guaranteed.”", "The article emphasizes that China’s long-term success will depend primarily on addressing internal challenges: an aging population, a rural-urban divide, an underdeveloped financial system, insufficient innovation, and reliance on carbon-based energy sources.", "External economic relations have become contentious, with growing trade and investment barriers in both directions.", "The authors’ book, China 2049, examines policies to help achieve the 2049 goal.", "Total fertility has dropped to 1.7 births per woman, below the replacement rate of 2.1.", "Relaxation of the one-child policy did not produce more babies.", "China’s working-age population has already started to decline; the elderly population is expected to increase dramatically in the next few decades.", "The over-65 cohort will more than double to 400 million people by 2049.", "The “old-old,” 85 and over, will more than triple to about 150 million people, surpassing their peers in the United States and Europe combined.", "The only working-age bracket that will increase is the 55- to 64-year-olds.", "Policy implications and needs:", "Urbanization trends: urban population increased from 20 percent at the beginning of reform to 60 percent today, rising by about 1 percentage point a year.", "More than 200 million urban migrant workers remain registered as rural residents under the hukou household registration system.", "By 2007, urban workers were making 3.14 times as much as those in rural areas; more recently the ratio is 2.71 times.", "China has about one-fifth of the world’s population but only 7 percent of its arable land, constraining rural living standards for 500 million people.", "Urbanization is low relative to per capita income and population density compared with fast-growing Asian economies (example: South Korea had urbanization closer to 80 percent at a similar stage).", "Social consequences of hukou restrictions:", "Policy recommendations:", "China is characterized by significant financial repression based on factors such as ownership of banks, regulation of interest rates, intervention in credit allocation, and control of cross-border capital flows.", "China ranks as one of the most financially repressed among major economies, similar to India; moderately more repressed than Russia and South Africa; considerably less liberalized than advanced economies.", "Financial liberalization progressed until about 2000 but stalled thereafter.", "Initial liberalization effectively channeled high savings into export-oriented manufacturing and housing, aided by lending practices relying on physical collateral.", "The golden age of growth was between WTO accession in 2001 and the global financial crisis in 2008.", "After 2008, to maintain demand, China invested massively in infrastructure via lending to local governments and upstream sectors (such as steel) and channeled more resources into state enterprises.", "The surge in lending to local governments and state enterprises caused overall indebtedness to grow at an alarming rate, indicating poor capital allocation.", "Total factor productivity (TFP) trends:", "Innovation inputs and weaknesses:", "Policy implications:", "Continued integration into global trade and investment is important for catching up in GDP per capita.", "China became the world’s largest trading nation and, in the previous year, the largest recipient of foreign direct investment.", "Current international environment: China’s push for leadership in specific technologies worries partners, leading to trade and investment restrictions on Chinese tech firms and a risk of technological decoupling.", "The “dual circulation” program emphasizes domestic demand and national innovation and could encourage inward orientation.", "Countervailing integration steps:", "Policy recommendation:", "China is at an inflection point in external economic relations; success depends primarily on addressing domestic challenges.", "Interlinkages highlighted:", "Innovation is essential for eliminating carbon emissions without compromising productivity or living standards.", "DAVID DOLLAR — senior fellow in the John L. Thornton China Center at the Brookings Institution.", "YIPING HUANG — Jinguang Chair Professor of Economics and Finance at the National School of Development and director of the Institute of Digital Finance at Peking University.", "YANG YAO — Cheung-Kong Scholar and Liberal Arts Chair professor at the China Center for Economic Research and the National School of Development, Peking University.", "**سطوة عالمية وهشاشة محلية**", "**全球影响力、国内脆弱性 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷**", "**Influencia mundial, fragilidad interna ● Finanzas y Desarrollo ● Junio de 2021**", "**Puissance mondiale, fragilité intérieure**", "**「世界で影響力　　足元に脆さ」　デビッド・ダラー　黄益平　姚洋　著、　ファイナンス＆ディベロップメント　2021年6月号**", "**Успех Китая в долгосрочной перспективе будет зависеть в первую очередь от решения внутренних проблем**", "**The Future of China – IMF F&D**" ], "related": [ { "title": "سطوة عالمية وهشاشة محلية", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/ar/dollar-ar.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/ar/dollar-ar.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/ar/dollar-ar.pdf", "mime": "application/pdf" } }, { "title": "全球影响力、国内脆弱性 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/chn/dollar-chn.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/chn/dollar-chn.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/chn/dollar-chn.pdf", "mime": "application/pdf" } }, { "title": "Influencia mundial, fragilidad interna ● Finanzas y Desarrollo ● Junio de 2021", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/es/the-future-of-china-dollar-huang-yao-global-clout-es.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/es/the-future-of-china-dollar-huang-yao-global-clout-es.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/es/the-future-of-china-dollar-huang-yao-global-clout-es.pdf", "mime": "application/pdf" } }, { "title": "Puissance mondiale, fragilité intérieure", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/fr/the-future-of-china-dollar-huang-yao-global-clout-fr.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/fr/the-future-of-china-dollar-huang-yao-global-clout-fr.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/fr/the-future-of-china-dollar-huang-yao-global-clout-fr.pdf", "mime": "application/pdf" } }, { "title": "「世界で影響力　　足元に脆さ」　デビッド・ダラー　黄益平　姚洋　著、　ファイナンス＆ディベロップメント　2021年6月号", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/jp/dollar.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/jp/dollar.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/jp/dollar.pdf", "mime": "application/pdf" } }, { "title": "Успех Китая в долгосрочной перспективе будет зависеть в первую очередь от решения внутренних проблем", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/ru/dollar-ru.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/ru/dollar-ru.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/ru/dollar-ru.pdf", "mime": "application/pdf" } }, { "title": "The Future of China – IMF F&D", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2021/june/the-future-of-china-dollar-huang-yao.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2021/june/the-future-of-china-dollar-huang-yao.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2021/june/the-future-of-china-dollar-huang-yao.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/index.md", "json": "/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/index.json", "bundleManifest": "/en/publications/fandd/issues/2021/06/the-future-of-china-dollar-huang-yao/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T07:22:33.530Z" }