10/19/2016 ProbingQuestion:IsChina'seconomicgrowthsustainable?

|PennStateUniversity

For over three decades, China has had the world's fastest growing
major economy. But some believe that the speed and size of its
recent expansion mean the country is steering headlong into a
crisis.

Image: iStockphoto/BanksPhotos

Probing Question: Is China's

economic growth
sustainable?
By Melissa Beattie-Moss
March 16, 2015

China is sometimes called "The Red Dragon," but another, less

common nickname for the world's third largest country is "The
Kingdom of Bicycles." For some economists, the bicycle -- a
vehicle that must keep moving to remain stable and maintain
forward momentum -- is an apt metaphorfor China's economy.
For over three decades, China has had the world's fastest growing
major economy. But some believe that the speed and size of its
recent expansion mean the country is steering headlong into a
crisis.

Is China's economic growth sustainable?

"Yes, unless the political system becomes unstable there," says

Min Ding,professor of marketing and innovation in Penn State's
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10/19/2016 ProbingQuestion:IsChina'seconomicgrowthsustainable?|PennStateUniversity

Smeal College of Business.

China is in the midst of urbanization on an unparalleled scale,

says Ding. With more than 1.3 billion citizens, China is the world's
most populous country. Until the late 20th century, most of its
citizens lived in villages or rural areas. Then, within a 50-year
span, the percentage of city-dwellers rose from 13 to 52, and is
predicted to grow past 60 percent by 2030.

Ding says economists are closely studying the potential eects of

the country's massive urbanization on the economy, the
environment, and the political system.

"The vast inland regions in China have yet to be fully developed,"

he explains. "Compared to the coast, the labor cost and the land
are much cheaper there."

After decades of encouraging inland residents to seek work in

coastal factories, he says, "the central government now feels it is
obligated to develop these regions to ensure social harmony,
even at other costs. They will heavily invest in urban
infrastructure to a scale that is unprecedented in history and
unimaginable to outsiders. Every medium-size city in China is now
putting a subway system in."

Some believe that the autocratic one-party system will eventually

be at odds with China's long-term economic growth and stability.
Can the country create higher standards of living for its people
within the communist system, or will it shift to a more democratic
system?

"I cannot forecast whether China will develop a Western-style

democracy," says Ding, "but I am quite condent that, over time,
China will gradually develop into a system that is more
transparent, cleaner, more law-based, and less ideological." The
Singapore model may be a possibility, he adds, "or it is also
possible that the Chinese Communist Party will allow dierent
factions as an experiment in intra-party democracy, among other
possibilities."

Democratization is not necessary to keep the Chinese economy

humming, he says. "I think many Westerners let political views
and emotions get in the way of understanding how the Chinese
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system works. When it comes to economic matters, the Chinese

are, in some ways, more capitalistic than Americans. China is run
like a big corporation. Everyone has to report to someone above
him or her, who has the power to re and hire. Such a system has
its advantages in terms of eciency and optimization."

Ding, author of several books including The Chinese Way, believes

that Chinese people today are more aptly described as socialists
rather than communists, "at least in policies and practice. They
are not only hardworking, they are obsessed with accumulating
wealth for themselves and for their children."

Some point to stories of China's millionaires moving abroador

transferring their wealth out of the country as a trend that
undermines China's economic growth. "This isn't a threat to the
country's success," counters Ding. "Substantial wealth has already
been transferred to outside China, but many of these emigrants
are still very wedded to Chinese society, and are always looking
for opportunities to invest in their homeland."

There are some cross-cultural misunderstandings between

Chinese and Americans that make global business more dicult
than necessary, says Ding. "Counter to conventional wisdom,
Chinese people can be quite emotional. If they like you, they will
do business with you even though you may not be their best
option. There's a Chinese expression that translates 'I want to
share success and money with friends.'"

What's more, he says, despite the media focus on China being a

collectivist culture, Chinese are also quite individualistic. "They
are collectivists within their tribe, meaning their circle of family
and friends, but individualists outside their tribe."

Chinese tend to think Americans are too rigid, adds Ding.

"Americans are thought of as following rules and regulations 100
percent, and being somewhat inexible. In China, there is a
saying that rules are meant to be broken, and you are not smart
enough if you can't gure out how to circumvent a rule or a
roadblock."

The world is certainly watching as the Bicycle Kingdom navigates

the complex highways and byways of its rapidly changing
landscape.
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10/19/2016 ProbingQuestion:IsChina'seconomicgrowthsustainable?|PennStateUniversity

Min Ding is Smeal Professor of Marketing and Innovation in Penn

State's Smeal College of Business. He can be reached at
minding@psu.edu.

CONTACTS:

Melissa Beattie-Moss, mzb123@psu.edu

WorkPhone:8148652614
http://www.rps.psu.edu

Last Updated August 25, 2016

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