By Moritz Schnorpfeil and Rolf Bachmann, St. Gallen Symposium
Beijing stands still these days -- symbolically speaking. After declaring the "red alert" for the first time in history, schools suspended classes, industrial plants limited production and half of the cars have been banned from the streets. This is falling together with an economic slowdown, a rising demographic tension and very recently, a heavy tumbling of stock markets.
It seems that there is a need to reconsider the economic path China has taken so far, a need for change. Acknowledgment, of course, is a first step. The government, companies and all seem to have become aware that the situation escalated.
The private sector certainly has to play a key role in driving a new Chinese economic growth. In order to handle the consequences of more and more people living a "modern" life, new technologies will be key to enable the transformation to happen at a compatible pace.
Furthermore, entrepreneurs striving for a change of businesses, processes and habits, a growing service sector and sustainable and the respective financial capital allocation will be crucial. But will this be enough to compensate for the manufacturing sector and to handle the bad and ugly side of China's growth? Another question that arises is whether society and culture can change quickly enough to adjust to the rapid development of new technologies? Or does technology have to be even faster, easier and fulfilling more of the people's needs?
Then there is the role of the government -- in China certainly the most powerful actor to drive fast change. This includes to establish institutions such as the New Development Bank BRICS which addresses hands-on, real-practice and sustainable solutions as part of their DNA. This further creates incentives for the private sector to act "greener" or in a more social way and finally having the courage to take tough decisions that will, in the first place, affect positively China's citizen's life.
This also influences China's role in the world. Obviously, many global institutions still have not yet fully embraces the rise of China's economy and -- vice versa -- China probably hasn't realized to have the potential to redefine global rules. For instance, China would have all it takes to be the world's biggest catalyst for the green economy. Why, for instance, is the entire traffic not changing entirely to an electric solution? For sure, this will require a stronger integration in worldwide institutions and policy making, meaning that either China has to better play according to the established set of rules or it has to make the wold more adapt to its own rules.
China is being offered a huge momentum to imply these changes listed above, but it needs do it using new practices and in a lean and smart ways. The country's economy has accumulated immense resources, it has gained financial influence, and it has established effective decision making within the country as well as an increasingly more influencing role outside the country. Moreover, the current economic slowdown additionally offer the possibility to pause for a moment, reflect past developments and make corrections.
As stated above: Although Beijing seems to be hamstrung at the moment -- now it is the time to act, and probably there is no other country than China that could possibly become a global pioneer in a new understanding of economic growth -- "over night".
China's economy in transformation was discussed at the 7th St. Gallen Symposium Beijing Reception on 9 December 2015 in Beijing, and in the light of the 46th St. Gallen Symposium, held on the topic "Growth - the good, the bad, and the ugly" from 11-13 May 2016 in Switzerland.