China Daily

Poverty eliminatio­n contribute­s to global developmen­t

- The views don’t necessaril­y represent those of China Daily.

China eradicated extreme poverty in 2020, a giant achievemen­t given that the annual economic growth of the country last year was only 2.3 percent. This fact is important not only for China but for the whole world, because for the past decade and a half, China has been the prime driver of global economic growth.

This year, China’s economy is expected to grow by more than 6 percent. What does that mean for Latin America?

China is the second main export market for Latin American countries and a growing one at that. It is already the main market for big countries in South America, such as Brazil, Argentina, Chile and Peru. And the COVID-19 pandemic is expected to increase the importance of the Chinese market for the region, not least because it is expected to grow at one of the fastest rates in the world.

Also, Chinese investment in Latin America, which has been growing, is expected to further increase. Latin America needs investment in many sectors, especially in the infrastruc­ture sector. No wonder 19 countries in the region have already joined the Belt and Road Initiative, the last one being Peru in April 2019. And China’s growing investment in Peru has made it one of the main investors in the country — about $30 billion at the end of 2020 (about onefourth of the total foreign investment in Peru).

Besides, China, with per capita income of more than $10,000, is aiming to basically realize “socialist modernizat­ion” by 2035. For that, however, China has to avoid the middle-income trap.

How can China achieve the 2035 goal after realizing its 2020 goal of eradicatin­g extreme poverty?

First, China needs to improve the well-being of rural residents, for which it must boost agricultur­al productivi­ty in order to increase farmers’ incomes. But that is a very challengin­g task, because as productivi­ty increases, fewer workers will be needed for agricultur­al jobs. Therefore, the central authoritie­s should allow the free mobility of rural residents, albeit with certain restrictio­ns, by adjusting the hukou (household registrati­on) system so they can get better-paying jobs in cities.

Second, the government should take steps to improve rural residents’ education level and provide them with training to help them get betterpayi­ng jobs. As China’s economic structure shifts from the primary sector (for example, agricultur­e and mining) to the manufactur­ing sector, especially high-end manufactur­ing and service sectors, people need to acquire new, advanced skills to enter such fields, including advanced technology.

In fact, the service sector already accounts for more than 50 percent of China’s GDP. But there are many disparitie­s in service sector jobs — highand low-playing jobs for example. Banking, IT and education sectors, for instance, offer relatively high-paying jobs.

Third, in the manufactur­ing and service sectors, China must move from producing low-valueadded goods and services to higher value-added goods and services, so as to enable workers to earn higher wages. China is developing advanced technologi­es at a fast pace, among other things, by allocating more funds for research and developmen­t. It has come a long way in this field and has already become a leader in sectors such as 5G technology, high-speed rail, and electric cars. Its “Made in China 2025” plan is playing an important role in this context.

And fourth, China should further open up its economy to the outside world so that its manufactur­ing and service sectors become more competitiv­e in high value-added industries. As China’s middle-income group grows and acquires more purchasing power, it will be able to afford and demand more foreign goods and services with higher added value. Actually, China has become the world’s largest consumer market and is therefore contributi­ng more to the global economy.

In summary, to avoid the middle-income trap, China needs to produce more and more higher value-added goods and services. It will also need to implement policies to improve social safety nets, give people equal access to good education and health services, build more affordable housing, and guarantee retirees decent pension.

What lessons can China offer other countries, and how can China and other countries help each other to boost mutual developmen­t? Probably, the main lessons are developing the agricultur­e sector, helping farmers raise their incomes by improving productivi­ty, and strengthen­ing the manufactur­ing sector so it can employ more and more people, provide good education which a country needs to move from producing low valueadded goods to higher value-added ones.

Moreover, China can help other developing countries modernize their agricultur­e and industrial sectors, as well as infrastruc­ture facilities, and expand its market to buy more products from those countries.

 ??  ?? The author is a professor of economics at the National University of San Marcos in Lima, Peru.
The author is a professor of economics at the National University of San Marcos in Lima, Peru.

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