John Cheh, the vice chairman of the Esquel Group, a textiles and clothing conglomerate in China, spoke Saturday about China's recent economic progress and the challenges to future expansion.
The Honk Kong Students Association sponsored the event, "China in the 21st Century: Opportunities and Challenges." About 60 people attended Cheh's speech in Barnum Hall.
Cheh - who has worked for the Canadian government and in Beijing, Seoul and Tokyo - began his presentation by showing pictures of rundown Chinese cities from the 1980s, and then those same cities today, highlighting their modernization, progress and technological advancement.
This dramatic change, Cheh said, started in 1989 after the events in Tiananmen Square, when China's economy began to rise faster than any other country.
"Changes have been taking place in China," he said. "China accounts for almost ten percent of the world's growth now."
China's economy has increased so much that "China has become the world's third largest trading country," after the United States and Germany, Cheh said. The sum of China's imports and exports is $1.6 trillion and - behind the United States - China has become the largest attractor of foreign investment.
It is this foreign investment, Cheh said, that helped China in the early 1990s to expand its economy. "China has a huge foreign exchange reserve, and it's measured in hundreds of billions of dollars."
Cheh said that since 2000, increases in foreign trade have leveled off and it is domestic demand, specifically in housing (see article, page 11), that has fueled growth in China rather than foreign investment.
"Growth is driven by domestic consumption and demand," he said. "Quality real estate will continue to do well, whether it's in Beijing or Shanghai. There is real demand."
Cheh said demographics have contributed to China's economic expansion. There has also been an enormous shift in population from the countryside to the cities, and this has occurred relatively seamlessly, unlike in other countries. Cheh said this shift in China is "not like other countries' cities rotting because of urban unemployment."
In the next 25 years, "the trend of urban population growth will continue," Cheh said, referring to forecasts that the percentage of the Chinese population living in urban areas will grow to 65 percent, or roughly 619 million people.
Education is another factor in China's growing economy. From 1995 to 2003, the number of Chinese students studying abroad increased sevenfold. In the same period, Cheh said, the number of post-graduate students in China increased fivefold.
Cheh cautioned that all this growth does not come without creatring problems that may thwart future economic progress.
"The biggest short-term concern for China is the bird flu," he said. "The question is, would it ever mutate into human transmission? If that happens, it would be an epidemic. The honest truth is no one knows."
Cheh said the outbreak of SARS hurt China's economy for several reasons, including the decline of tourism, and if avian flu is transferred to humans, the consequences would be far worse.
In his own factories, Cheh said "we are taking more precautions" to prevent any possibility of disease spreading to humans and that they have "a contingency plan" to combat any problems.
Cheh spoke of the limits within China that hold the nation back from expanding its economy even further. "China has five percent of the world's GDP, but it consumes a disproportionate amount of energy," he said.
The energy issue in China is of great concern because the lack of electricity throughout the country hurts several sectors, including manufacturing growth, which is one of the most important areas that contribute to China's economic development. China produces one-third of the world's textiles.
Another problem for China is its rampant pollution. "Steps have to be taken," he said. "It's very serious. I think China has recognized the importance of [reducing pollution], but it's a long way to get there."
Uneven income distribution presents serious challenges because it pits different areas of the country and socioeconomic classes against each other. "The rich get richer, the poor get poorer," Cheh said. "There are disparities between rural centers and urban areas, and between coastal and inland areas."
"Innovation is certainly needed to overcome a lot of these challenges," he said.
A main reason that China's economy has done well thus far since 1989 is its ability to save. The way in which China treats investment and how it can be used to add to savings has been a major contributor to China's economic success.
"Investment equals savings," he said, "Remember that."
