China's shift from a nation of producer to a nation of consumer was made possible through the development of a service-based model economy, according to an expert. (Photo : www.scmp.com)
China, the second largest economy in the world, has transformed itself from a nation of producers to a nation of consumers, Stephen Roach, senior fellow at Yale University's Jackson Institute of Global Affairs, said during a discussion held on Thursday, Nov. 19, at China Institute.
"The key understanding of China is not the number of GDP, but the mix of economy," Roach said during the discussion.
According to Roach, China has two models of economy: the fixed investment created by the old economy and exports, and the new one boosted by private consumption.
Roach said that the old model drove China's economic growth in the past three decades, which is now slowing down, while the new model is still emerging, in its development stage.
A recent article written by Roach said that the gap is continuing to widen as services grew 8.4 percent year on year in the first half of 2015, outperforming the 6.1-percent growth in manufacturing and construction.
The article cited that the service sector contributed 48.2 percent to China's GDP in 2014, surpassing the combined 42.6 percent share of manufacturing and construction.
Roach further said that the shift to a service-based model has taken the pressures off the old manufacturing-based model.
During the meeting, Roach expressed his belief that in the next 20 years the service sector could account for 65-70 percent of China's economy.
"This is the key piece of transformation story of China," he said.
The Yale expert stressed that the infrastructure of a consumer society is services, which could also generate more jobs. In China, services require more jobs per unit of output or about 30 percent greater than manufacturing and construction.
Jobs in China have been shifted to labor-intensive, services-led growth, Roach pointed out, adding that the urban job creation target has reached 10 million per year since 2013.
