Very much thank you to TEDx and Holt Business School for inviting me to this  event. It's a great pleasure to be here and share some of my thoughts for you.  Looking at China, for those who have either lived in China or done business with China over the years, one of the things that strike you is kind of a information  overload. 

There is today so much information in all channels about China, so it is hard to  deconstruct what is important, what is important for you, what is important for  your business. So on the topic of rethinking China as the event for today, I  thought of highlighting three small stories where I try to pinpoint a few of the key  indicators of the Chinese economy that is often misunderstood. So I will tell you  three short stories, a little bit of a timeline, short, medium, long-term view. 

First, Xi Jinping, he can represent the short term, he's going to be in power for  the next 10 years. Chinese growth was always 8% when Jiabao was the  premier, today is said to be 7%. But what is the right growth for China and what  does it mean for you or your business? A little bit more in the medium term,  when this little guy might grow up, will he be a consumer? Will the consumers of China save the day of the Chinese economy, make it sustainable? That's the  second thing I will look briefly into. 

And in the long term, who is number one? Will China simply take over from the  United States to become the biggest economy in the world and will they then  remain so for eternity? I do not think so. Before I start, a little bit of background.  For those living in China, you might be familiar with this. 

There was a leadership change this winter. The old administration with Hu Jintao and Jabao on top, the new one with Xi Jinping, Li Keqiang at the bottom. For  people not familiar with China, not Chinese, it might be quite hard to spot the  difference. 

As one of my friends said, maybe they've done a little bit of cost cutting. There's  less people and there's less plants in the picture. But I think there's more  substantial changes than that taking place. 

In the Hu Jintao administration, the balance between the fractions in the party  was quite equal. It was four to five. In the new administration, Xi Jinping and his  fraction, his backers, are actually five or some say five and a half out of the  seven. 

So the power base that Xi Jinping has for the coming decade is much stronger  than what Hu Jintao had in his tenure. Also, for those who remember, when Hu 

Jintao became president, he became both the head of the party and head of the  state 10 years ago, but he had to wait two years before he got also the third  important position as head of military. Xi Jinping has all these positions from day one, and I think that is important to see how China tackles the challenges  ahead, that they have a leadership that is more uniform and stronger than the  previous one. 

However, in the years to come, there are many challenges facing China. Europe is one. Europe used to be the biggest export market for China. Asia is now taking over for that. There is homegrown problems. We read a lot  about the property prices. 

People in Shanghai are very familiar with that. Local government investment  vehicles. A lot of headlines pointing towards challenges ahead for China. Another one is overcapacity here, exemplified with the solar industry. And then  the reoccurring theme of is there over investment? Maybe not so easy to see,  but this is the GDP growth for China of the last decade or so. This is quarterly  numbers, a little bit more choppy, but the average, as we all know, has been  close to 10% growth for three decades, and in the last few years, 8% growth. However, if you only go two years back, China grew at about 9%, and everyone  was kind of looking at is this economy overheating? A year later or so, the  growth had slowed down to about 7.9%, and then everyone started talking about a hard landing. So I guess the good growth for China is somewhere between  9% and 7.9%, somewhere between overheating and a hard landing. However, if  you do business either in China or with China, I would argue that the GDP figure is not so relevant for you, because if you look beyond that figure, the deviation  between sectors and regions are quite large. 

If you look at the solar industry, or the new green industries, solar, wind, today  they are in massive, have massive challenges, so with some older industries like shipbuilding. If you look at the service sector, maybe into healthcare, maybe into elderly care, many sectors grow with double digits and a lot more. So what's  important for you and your business is not necessarily how fast China is  growing, but how well is the economy doing within the sector that is most  important to you. 

It's a little bit like looking at Europe and say, should I do business in Europe?  They have maybe zero, maybe 1% growth, but the difference, of course, about  setting up business in Greece, setting up business in Germany, is large. If you  look a little bit longer, medium term, and talk about consumption, many  economists today argue that China has to change their business model. It has to go from the investment-led, export-oriented growth model that they had in the 

last decades, into a more consumer-based economy. 

The prerequisite for this is often said to be political reform, or even economic  liberalization. I think both of those factors could be good, and those factors could contribute to a change toward consumerism, but I would argue that it's not  necessarily needed. If you look at the West, and if you look at the US, the  economy with the highest proportion of consumption to GDP today is America. In America, if you are 8, 10 years old, you probably have an iPhone. If you're a  70-year-old, you probably play golf, you might have a second home, or go  around to Florida for the winter. The point is, of course, not everyone does this,  but the point is that the entire spectrum of the population are, to one extent or  the other, a potential consumer. 

In China, on the other hand, I argue that consumers are mostly found within the  younger generation, between 20 and 40. Making a very simplified argument, but looking at China, looking at the enormous economic growth that's taken place  for the last few decades, and also looking at the 60s and 70s where people did  not have the same education opportunities, people above 40 today do not have  the same purchasing power and opportunity for consuming as the younger  generation. However, making a very simple argument that those aged 35 to 40  today, in 10 years' time or in 20 years' time, they will simply continue to  consume, whereas the new cohorts growing into becoming 18, 20, 22-year-olds, they will become new consumers. 

So, making a simple argument out of demographics, in only 20 years' time, the  cohorts in China that has potential consumers will practically double from about  400 million to 750 million in only 20 years. To make a similar argument, and this  

I borrow from the economists, many economists say that 5,000 US dollars or  approximately 30,000 renminbi is a tipping point of average disposable income  before consumption takes off in a society. If I may ask the audience, which city  was the first one in China to reach this level of disposable income anyway?  Shenzhen. 

That was close. It was Dongguan in 2008. But if you continue to click in the  years to come, we see that because of the high growth in China, very, very  rapidly the map is filled with dots of cities that have reached an average  disposable income of 30,000 renminbi, which is seen as a tipping point for  consumption. 

And everyone here, everyone been to China, we know that even if you have not  heard about some of these cities, you know that it's not a little city with a couple  of hundred thousand people, it's most likely an area with 3, 5, 8 million people. 

So again, also from the economics point of view, if growth overall continue only  for a few more years, most of China will reach an average income level that will  make consumption a much more important part of the economy. My argument is simple. 

Economic liberalization or political reform will probably support more  consumption, but it's not needed at all. Demographics alone and continued  growth for a few more years will make consumption a much, much more  important factor of GDP in China only 10 years from now. If GDP overall is 8%,  5% or even lower in a few years' time, I'm not arguing that. 

I'm just saying that consumption will become an important part and it will be a  driver of growth in China, just as in the West in the near future. To make one  more argument, called in the long run, who's number one? Many have probably  seen this from the economists, maybe someone has been on their website and  put in some figures themselves, but they made a model where you can put in  some growth number for China, some growth number from the US, and you can  predict what year will China overtake the US. If I put in 7.5 for China, 2.5 for the  US, there's a chance that China will overtake the US, and the result is 2020,  based on a few simple assumptions, of course. 

But for those, or anyone reading the internet, reading newspapers, reading  analytical reports, when will China overtake the US has kind of been a headline  for almost 10 years now. And it's been kind of taken as a fact. It's repeated so  many times that when I read it today, it almost feels like when the year comes,  and it will come soon, after that, China will continue to grow and continue to  overtake the US and become the number one dominant leading economy in the  world. 

No one has yet said what happens after they become number one. And I think,  again, to use population or demographic as one simple key of data, it is possible to make certain assumptions. Today, China is about 1.35 million people. 

We all know that the Chinese population is about to peak. And then, according  to a UN estimate, drop sharply over the next 80, 90 years. On the other hand,  the US economy, today about 300 million people, is growing and growing quite  rapidly. 

Today, America is about 23% population-wise of China. If you look 90 years into  the future, America will have a population more than half the size of China. To  me, those simple facts make it pretty clear that it will be very difficult for China to outgrow the US in the decades ahead.

And it might actually be in the reverse. For in the decades that lie ahead of us, if  China soon peaks population and then slowly starts to shrink their population  down towards 1 billion people, China will have a big aging part of their  population that will be increasing. The cheap labor that we've seen in China for  the last decade will no longer be here because it will be more likely to be labor  shortage. 

So China will definitely not be the factory of the world a couple of decades from  now. And these challenges with an older population and also the environment,  as a factor I have not talked about, I think that China will be a strong economy  going forward. But most likely, the United States have a much better potential  with a young population, a growing population, and also a population and an  economy over the decades that have shown very adaptable to change. 

So if I may end with a short prediction, since I'm European, I put EU as the  largest economy today. If you look into IMF figures, etc., it is actually said as the  largest economy today. But if you look at a country basis, it is of course the  United States. 

So somewhere before 2025, China will take over as the world's largest  economy. I think everyone agrees upon that. If it happens in 2018, 2022, 2025,  not so important. 

It will happen very soon, not only within our lifetime, but within the years ahead  of us. But then I will argue that only based on demographics alone, when we get somewhere around 2050, the middle of this century, America and the population  dividend and the demographics of America probably makes it very likely that  America will regain the position as the largest economy in the world, and they  will remain so for the rest of this century. Does that mean anything negative or  bad for China? I don't think so. 

It will be two economies fairly large, fairly much larger than the rest for the rest  of this decade, but it will not be a century of China alone. America has a lot more in it, and they will be the largest economy for most of this century. Thank you  very much. 



آخر تعديل: الجمعة، 2 أكتوبر 2026، 9:33 AM