Light amidst global gloom

In the long run, the global financial crisis will not change the trajectory of global growth, although it has had a far-reaching impact on global economy. On average, the global economy is expected to maintain an annual growth rate of 2.9 percent over the next two decades, which is lower than the past two decades.

In developed countries, economic deceleration is likely to become more obvious over the next couple of decades, and the possibility of the United States, Japan, and European countries regaining the growth rate of the previous decades appears to be slim.

Developing countries, however, are expected to become an even greater driving force of global economic development over the next two decades because of their increased inputs into scientific and technological research and development. And most of the developing countries will continue enjoying their demographic dividends, including an endless supply of labor to boost their economic development, for some time to come.

The ever-deepening globalization and the application and popularization of IT will also help developing countries to bridge the technological gap with their developed counterparts. Besides, developing countries' higher savings ratio will offer them a forceful capital booster for development. Developing countries will attract more international capital, which will bolster their long-term growth, because of their improved infrastructure and institutional environment and developed countries' gloomy growth prospect. In fact, developing countries are likely to maintain on average 5 percent growth over the next 10 to 20 years.

Since China's fast-growing economy has slowed down owing to low global economic growth, it should increase its inputs in new technologies' R&D to gain an advantage in the next technological revolution. It should also allocate more funds for the training of talents to improve the quality of its workforce. In particular, the Chinese authorities should take more practical measures to improve the education system in its vast rural areas to offset the negative impacts of the changed demography.

China has long depended on external demand for its economic growth, but the global economic slowdown has made it review its economic development model. At the same time, the rise of other emerging economies has resulted in fiercer global competition for the country. These developments call for the Chinese mainland to expedite the transformation of its development model and reduce its dependence on exports. Moreover, it should also accelerate the implementation of its "go global" strategy and strengthen cooperation with other emerging countries to widen its market.

The authors are with the State Council Development Research Center. A report by a team of researchers led by the authors originally appeared in China Development Observation.

(China Daily 01/05/2013 page5)