China’s New Normal & Opportunities for Pakistan

China’s rise to global dominance in a matter of a few decades is unprecedented in recent history. Increasing GDP to 14.72 trillion USD by 2020 on the back of 1.36 billion people, from less than 150 billion USD in 1978, is indeed a remarkable growth that many countries around the world would envy. It is estimated that China will ove

China’s rise to global dominance in a matter of a few decades is unprecedented in recent history. Increasing GDP to 14.72 trillion USD by 2020 on the back of 1.36 billion people, from less than 150 billion USD in 1978, is indeed a remarkable growth that many countries around the world would envy. It is estimated that China will overtake the U.S. in GDP terms by 2028, five years earlier than previously predicted. 

Many today wonder what exactly contributed to China's startling economic development. Fumbling for the right development path to choose during the republican era (1912-1949), followed by the CPC's resolve to transform capitalist industries into socialist settings through planned economy until the reforms and opening up that continued from 1978 through 2012, and the deepening of reforms from there on even to this day is a great but unconventional journey that the Chinese have traversed and has gained respect for.

The deepening of reforms since the year 2012 is referred to as the Chinese New Normal by President Xi Jinping, and it is characterized by a shift from high-speed to medium-to-high-speed growth over the next decade or so, improvements in economic structure, and reliance on innovation rather than economic efficiency, scale, and speed. This shift towards sustainable economic development is supported by a number of policies, including the Made in China 2025 industrial policy and its implementation through the Industrial Guidance Fund (IGF) to the tune of US$1.6 trillion as of 2020.

In China, the New Normal paradigm also emphasizes equitable development. The mantra of the reform and opening-up period, “let some people and regions get rich first,” has resulted in regional disparities in China, particularly in inland China. The development of China's Western and Central regions has lagged behind that of the country's coastal regions in the east. Therefore, the development plans “Western Region Development Plan” and “Rising Central Region Plan” are currently being implemented and have significantly contributed to the development of these regions; however, disparities remain and may continue in the future due to the geographical advantage of the regions along China's shores.

Growing pressure on China for more equitable trade, a rapidly changing geo-economic landscape, and the need for sustainable development both at home and abroad have pushed China to adopt a new model of economic development in the decades ahead to ensure steady but not necessarily fast growth and move slightly towards pro-people than pro-business agendas.

Understanding what China’s New Normal entails is critical for developing countries like Pakistan if they are to reap the full benefits of the Chinese transformation. Industrial relocation in the labor-intensive sectors is widely assumed to occur in the face of China's economic transformation. Professor Justin Yifu Lin, former World Bank Chief Economist attributes this relocation to rising labor wages and other supply-side costs in China. Having said that, large-scale industry relocation from China appears unlikely soon, owing to China's remaining surplus labor in inland China, as well as expanding network effects from supplier agglomeration, logistics efficiencies, and, more importantly, growing automation even in light engineering and labor-intensive sectors.

However, China's rebalancing in the New Normal towards consumption and service-led growth creates opportunities for Pakistan. To capture the potential benefits, Pakistan must rely on the comparative advantage in certain product lines vis a vis China and other regional competitors and develop them as per the Chinese market demand and preferences. The author’s own study identified to this end discretionary goods including leisure products, textiles & apparel, handmade items, and medical & surgical instruments and discretionary staples in agriculture,.

Pakistan's agriculture sector will undoubtedly benefit the most from China's growing middle-income population. However, the food sector in China is heavily regulated, and before entering the Chinese market, one must unravel the complex web of regulations imposed by the Chinese SFDA at both the central and provincial levels. Seamless integration with the Chinese distribution network is also critical in both b2b and b2c scenarios.

Furthermore, Made in China 2025, the Chinese version of Industrie 4.0, do recognizes the importance of quality entrepreneurs and researchers in a wide range of fields, including but not limited to machine learning, cloud computing, data analytics, cyber-security, additive manufacturing, networking, autonomous robots, and so on. Collaboration and openness are thus more important than ever at the national, regional, and global levels, and the Chinese government must support talent at all levels and across borders for MIC 2025 to pay. Access to Industrial Guidance Funds with preferably Chinese SOEs operating in Pakistan as social capital investors may be negotiated so that our researchers and entrepreneurs can suggest solutions and develop applications to Industrie 4.0. era problems and to achieve leapfrog development. 

Another area where Pakistan can benefit from the Chinese transformation is tourism. According to the UN’s World Tourism Organization (WTO), Chinese tourists spent US$254.6 billion abroad in 2019, accounting for one-fifth of global tourism spending. Except for Italy, the top ten Chinese outbound tourism destinations in the pre-pandemic period included regions in the Greater China SAR (i.e. Hong Kong, Macau, Taiwan), followed by countries in South East Asia. According to the China Outbound Tourism Research Institute (COTRI), Chinese prefer to visit nearby regions due to the limited vacation time available to Chinese workers, as well as the ease of access in terms of flight time and visa processing. Tourism is also a key pillar in the Comprehensive Economic Cooperation Framework, which was signed with ASEAN countries. Cooperation in tourism along the same lines with Pakistan under CPEC can be given serious thought.

Lastly, the entertainment industry may benefit from the Chinese transformation. The Chinese market is slowly opening up to foreign films. With Aamir Khan becoming a household name, Indian films have already made inroads into the market. This year, Pakistani films were also shown in Chinese cinemas to commemorate the 70th anniversary of China-Pakistan diplomatic relations. However, Pakistani films/dramas should reach the Chinese market to give them a sense of Pakistani culture and beauty and therefore get a reasonable share of the quota reserved for foreign movies featured in China and should not be a one-time event. 

To conclude, China is transforming at a rate and depth unseen in history. It is time to broader our thinking and look for avenues of cooperation with China, both within and outside of CPEC. Moreover, our strategic relationship with China continues, but the long-term social and economic benefits can only be realized if our approach to cooperation with China is people and business-centric. 

 

rtake the U.S. in GDP terms by 2028, five years earlier than previously predicted. 

Many today wonder what exactly contributed to China's startling economic development. Fumbling for the right development path to choose during the republican era (1912-1949), followed by the CPC's resolve to transform capitalist industries into socialist settings through planned economy until the reforms and opening up that continued from 1978 through 2012, and the deepening of reforms from there on even to this day is a great but unconventional journey that the Chinese have traversed and has gained respect for.

The deepening of reforms since the year 2012 is referred to as the Chinese New Normal by President Xi Jinping, and it is characterized by a shift from high-speed to medium-to-high-speed growth over the next decade or so, improvements in economic structure, and reliance on innovation rather than economic efficiency, scale, and speed. This shift towards sustainable economic development is supported by a number of policies, including the Made in China 2025 industrial policy and its implementation through the Industrial Guidance Fund (IGF) to the tune of US$1.6 trillion as of 2020.

In China, the New Normal paradigm also emphasizes equitable development. The mantra of the reform and opening-up period, “let some people and regions get rich first,” has resulted in regional disparities in China, particularly in inland China. The development of China's Western and Central regions has lagged behind that of the country's coastal regions in the east. Therefore, the development plans “Western Region Development Plan” and “Rising Central Region Plan” are currently being implemented and have significantly contributed to the development of these regions; however, disparities remain and may continue in the future due to the geographical advantage of the regions along China's shores.

Growing pressure on China for more equitable trade, a rapidly changing geo-economic landscape, and the need for sustainable development both at home and abroad have pushed China to adopt a new model of economic development in the decades ahead to ensure steady but not necessarily fast growth and move slightly towards pro-people than pro-business agendas.

Understanding what China’s New Normal entails is critical for developing countries like Pakistan if they are to reap the full benefits of the Chinese transformation. Industrial relocation in the labor-intensive sectors is widely assumed to occur in the face of China's economic transformation. Professor Justin Yifu Lin, former World Bank Chief Economist attributes this relocation to rising labor wages and other supply-side costs in China. Having said that, large-scale industry relocation from China appears unlikely soon, owing to China's remaining surplus labor in inland China, as well as expanding network effects from supplier agglomeration, logistics efficiencies, and, more importantly, growing automation even in light engineering and labor-intensive sectors.

However, China's rebalancing in the New Normal towards consumption and service-led growth creates opportunities for Pakistan. To capture the potential benefits, Pakistan must rely on the comparative advantage in certain product lines vis a vis China and other regional competitors and develop them as per the Chinese market demand and preferences. The author’s own study identified to this end discretionary goods including leisure products, textiles & apparel, handmade items, and medical & surgical instruments and discretionary staples in agriculture,.

Pakistan's agriculture sector will undoubtedly benefit the most from China's growing middle-income population. However, the food sector in China is heavily regulated, and before entering the Chinese market, one must unravel the complex web of regulations imposed by the Chinese SFDA at both the central and provincial levels. Seamless integration with the Chinese distribution network is also critical in both b2b and b2c scenarios.

Furthermore, Made in China 2025, the Chinese version of Industrie 4.0, do recognizes the importance of quality entrepreneurs and researchers in a wide range of fields, including but not limited to machine learning, cloud computing, data analytics, cyber-security, additive manufacturing, networking, autonomous robots, and so on. Collaboration and openness are thus more important than ever at the national, regional, and global levels, and the Chinese government must support talent at all levels and across borders for MIC 2025 to pay. Access to Industrial Guidance Funds with preferably Chinese SOEs operating in Pakistan as social capital investors may be negotiated so that our researchers and entrepreneurs can suggest solutions and develop applications to Industrie 4.0. era problems and to achieve leapfrog development. 

Another area where Pakistan can benefit from the Chinese transformation is tourism. According to the UN’s World Tourism Organization (WTO), Chinese tourists spent US$254.6 billion abroad in 2019, accounting for one-fifth of global tourism spending. Except for Italy, the top ten Chinese outbound tourism destinations in the pre-pandemic period included regions in the Greater China SAR (i.e. Hong Kong, Macau, Taiwan), followed by countries in South East Asia. According to the China Outbound Tourism Research Institute (COTRI), Chinese prefer to visit nearby regions due to the limited vacation time available to Chinese workers, as well as the ease of access in terms of flight time and visa processing. Tourism is also a key pillar in the Comprehensive Economic Cooperation Framework, which was signed with ASEAN countries. Cooperation in tourism along the same lines with Pakistan under CPEC can be given serious thought.

Lastly, the entertainment industry may benefit from the Chinese transformation. The Chinese market is slowly opening up to foreign films. With Aamir Khan becoming a household name, Indian films have already made inroads into the market. This year, Pakistani films were also shown in Chinese cinemas to commemorate the 70th anniversary of China-Pakistan diplomatic relations. However, Pakistani films/dramas should reach the Chinese market to give them a sense of Pakistani culture and beauty and therefore get a reasonable share of the quota reserved for foreign movies featured in China and should not be a one-time event. 

To conclude, China is transforming at a rate and depth unseen in history. It is time to broader our thinking and look for avenues of cooperation with China, both within and outside of CPEC. Moreover, our strategic relationship with China continues, but the long-term social and economic benefits can only be realized if our approach to cooperation with China is people and business-centric.