E. N. SAMBUROVA

Candidate of Geographical Sciences, Lomonosov Moscow State University

China Keywords:, competitive advantages, economic growth, domestic demand, external factors

The main factor of China's economic growth, starting from the late 1970s-1980s, was the policy of reforms, thanks to which many state institutions were modernized, archaic elements of the economic structure were eliminated, mechanisms for stimulating and controlling state-owned enterprises were transformed, and non-state forms of ownership began to play an increasing role. Over the years of reforms, changes have affected almost all areas of the economy, including taxation, the financial system, property law, etc. And this contributed to the creation of favorable conditions for the growth of competitiveness of the Chinese economy as a whole. The competitiveness of Chinese products in foreign markets was also ensured by the undervalued exchange rate of the yuan, although in recent years there has been a gradual revaluation of the Chinese currency.

With the current slowdown in China's economic growth, the question has emerged: has the Chinese "economic miracle"come to an end? Or is China still claiming global economic leadership? Whether China will maintain high rates of economic growth, whether its economy will be able to overcome negative trends-this largely depends on the development of the global economy as a whole, as China's contribution to global economic growth is becoming more and more significant.

The ability of the Chinese economy to develop at a high rate is primarily determined by whether the sources of its competitive advantages are exhausted. There is no clear answer to this question.

Some economists believe that the current slowdown in the Chinese economy is a long-term trend, that the Chinese model has exhausted itself, while others, on the contrary, say that there is only a slight correction of this model, and the growth rate, although declining, remains high. The latter draw attention to the fact that the implementation of economic reforms in China is not complete, and although some competitive advantages are gradually exhausting their potential, others are beginning to play an increasingly significant role.

GROWTH RATES ARE STILL HIGH

In recent decades, China has rightfully been considered the engine of the global economy: consistently high rates of economic development provide it with an increasingly significant place in various spheres of economic activity. So, in 2006-2010, according to the World Bank (WB),

nominal (income in dollars) GDP per capita in China grew at an average annual rate of 10.6%!. In 2012, according to the IMF, this indicator grew by 12%, which is higher than in other BRICS countries (respectively, in Russia per capita income increased by 7%, while in India, Brazil and South Africa it decreased by 2%, 5% and 6%, respectively) ².

In terms of overall GDP growth, China is also significantly ahead of most other countries in the world: in 2011 and 2012, China's indicators - 9.1% and 7.8%, respectively-were the best among the Group of 20 countries, and even during the global financial and economic crisis, the Chinese economy continued to grow at a fairly high pace. For comparison, the GDP growth rates of other BRICS countries are noticeably lower than those of China - in 2012, India-4.0%, Russia-3.4%, South Africa-2.5%, Brazil-0.9%³.

In terms of scale, the Chinese economy is second only to the US: in 2012, its nominal (at the exchange rate) GDP reached $8.25 trillion versus $ 15.68 trillion in the United States4.

China is an economic giant that unites administrative units of different levels and types of economic development, the size of which can be compared with entire countries. So, for example, in 2012, the first-ranked country in China in terms of nominal (in dollars) gross regional product prov. Guangdong ($913.8 billion) surpassed Indonesia ($878.2 billion), followed by Jiangsu ($865.8 billion) and Shandong ($800.2 billion) - Turkey ($794.5 billion), followed by Zhejiang ($553.7 billion) - Iran ($548.9 billion)^..

Although ratings that reflect countries 'ranking on various indicators are not always objective, are highly dependent on the set of indicators and respondents' choice, and are very vulnerable, they still provide some insight into the comparative characteristics of countries ' economies and their image in the global community.

China ranks 29th out of 144 countries (Russia is only 67th) in one of the most authoritative rankings - the Global Competitiveness Index (GCI), based on the annual report of the World Economic Forum (The Global Competitiveness Report 2012-2013), compiled according to 110 indicators.⁶ These indicators are divided into 12 groups: quality of institutions, infrastructure, macroeconomic stability, health and primary education, higher education and vocational training, efficiency of the goods and services market, labor market efficiency, financial market development, technological level, size of the domestic market, competitiveness of companies and innovation potential.

Another popular global competitiveness rating is calculated using the methodology of the leading European Management Institute based in Lausanne (Switzerland). It is based on the analysis of 331 indicators in 4 areas: state of the economy, government efficiency, business environment and infrastructure. China ranked 23rd out of 59 countries in this ranking in 2012, while other BRICS countries have much weaker positions: India is ranked 35th, Brazil is ranked 46th, Russia is ranked 48th, and South Africa is ranked 50th.⁷

The slowdown in economic growth and the deterioration of a number of macroeconomic indicators of the PRC in 2012 led to pessimistic assessments of many experts who believe that the potential of its economic growth is exhausted. However, although China's economic growth in 2012 (as noted above, 7.8%) was the lowest since 1999, on average it was significantly higher than the world's - 3.2%. The projected GDP growth rates of China for 2013 - 7.8% (worldwide-3.1%) and for 2014-7.7% (worldwide-3.8%) do not indicate the "collapse" of the Chinese model ⁸.

At a meeting with entrepreneurs at the annual meeting of the Boao Asian (Economic) Forum 2013 in April 2013, Chinese President Xi Jinping expressed confidence that China's development will continue to experience a period of recovery for quite a long time to come. "Industrialization, informatization, urbanization and modernization of agriculture create a huge scope for the development of the domestic market," the Chinese head of state stressed. At the same time, the emphasis will be placed on improving the quality and efficiency of economic development, and more efforts will be made to achieve "green" (ecological) development, development based on renewable energy sources and low-carbon development.⁹

THROUGH CHEAP LABOR

One of the main sources of growth in the national economy of the PRC is cheap labor of Chinese workers.

China is particularly important in the global industry. In recent years, China has become a "global factory" that provides a wide variety of products to the population of many countries, giving up its leadership in the service sector to other countries. The range of these products is very wide-

Table 1

China's share of imports of some US, EU and Japanese products in 2011, %

Источник: International Trade Statistics - http://www.wto.org/english/ res_e/statis_e/its2012_e/its2012_e.pdf

rock: from clothing and shoes, souvenirs and toys to computers and office equipment, televisions and cameras. As of 2011, China accounts for 32% of global exports of textiles, 37% of clothing, 30% of office and telecommunications equipment, and 14% of integrated circuits and electronic components.¹⁰ China accounts for a significant part of the supply of certain types of products to the leading centers of the world economy (see Table 1).

But there is one thing that unites most of these goods - a high share of labor costs in the total cost of their production. The low cost of labor and good availability of labor resources have created an important comparative advantage for China in the production of labor-intensive products. The salary of a Chinese worker is significantly lower than that of workers from developed countries - the United States, the EU, and Japan. According to forecasts of Chinese experts, in 2015 the hourly wage in the manufacturing sector in China will increase to $4.41, in the United States-to $26.06, thus, the cost of labor resources in China in the future will be only a small part of the US indicators ¹¹. The gap is also large with the indicators of new industrial countries, including Hong Kong, although officially its current status is a Special Administrative Region of the People's Republic of China. At the same time, the average wage in China is growing, and the wage gap is narrowing.

On the other hand, a number of countries, such as South and South-East Asia, have significantly lower rates. For example, India is a clear competitor to China in terms of providing cheap labor resources, where the population is growing at a faster pace, and in the near future it may outstrip China in this indicator. But an important feature of Chinese workers is their ability to learn, their readiness for monotonous, monotonous work. The mentality of the Chinese, formed under the influence of Confucianism, in the conditions of a "rice" agricultural civilization with an excess of labor and a shortage of land resources, is distinguished by hard work, readiness to fulfill the decisions of the "ruler". In China, those stages of production processes are concentrated that are focused on using the appropriate qualities of the labor force. India also specializes in information and communication technologies, services, etc., using, in particular, the knowledge of English by almost all educated Indians.

The labor resources of Southeast Asia are more similar in their characteristics to the labor force of China, and wages in countries such as Vietnam, Cambodia, Laos, are lower than in China. These countries are becoming increasingly attractive for foreign capital, and a number of TNCs are moving their production facilities here from the PRC. So, Nike factories are located in Vietnam, the production facilities of the clothing and knitwear industry are moving to Cambodia. However, even taking into account the higher population growth rates in these countries than in China, the number of labor resources in them is not comparable with the PRC.

Although wages in China are growing rapidly, their growth is characterized by unevenness in the territorial context. Compared to rural areas in Western and Central China, wages are rising faster in urban areas, especially in coastal provinces. Despite the fact that the level of urbanisation in China is increasing and reached 52.57% at the end of 2012, compared to less than 20% at the beginning of the reform period12, ^the reserves of labor in the Chinese countryside are still very large. Village-city migrations have reached enormous proportions. The number of migrants in China at the end of 2012 was estimated at approximately 262.61 million, including 163.36 million people (62.2%) working outside their home province.¹³

The majority of migrants are residents of rural areas in the interior of China, rushing to seaside cities in search of work. They are not always able to enjoy all the rights of citizens by accepting lower-paid jobs, which reduces the average cost of labor. Visitors from rural areas

Table 2

China's foreign trade in 1978-2011

Calculated by the author from: Zhongguo tongji nianjian 2011 (China Statistical Yearbook, 2011), Beijing, 2012; Zhongguo zhaiyao 2012 (China Statistical Abstract, 2012), Beijing, 2012.

in cities, the supply of labor exceeds the demand and, consequently, its cost is low.

China's "Go West" policy, which includes the construction of enterprises and infrastructure development in the interior of the country, on the one hand, reduces the opportunities for using cheap labor resources in coastal areas, providing them with jobs directly in the provinces of West and Central China, and on the other, promotes the attraction of foreign direct investment in these provinces. contributes to maintaining China's competitive advantages in the production of labor-intensive goods.

Thus, although the level of wages is gradually increasing, China will retain its advantages in this area in the near future. Creating conditions for increasing labor productivity and increasing the skills of the labor force while expanding the production of products with higher added value can become a long-term prospect for the formation of" developed " factors of production.

EXPORTS AND LARGE INVESTMENTS ARE THE MAIN DRIVERS OF GROWTH

Throughout the reform period, China's economy has largely grown due to factors such as its focus on external development factors and large-scale investment. The construction of new enterprises in various sectors of the economy, the formation of an infrastructure network could not go without investment injections, and a special role here belonged to state capital investments. Large investment resources of the PRC are formed due to such a feature of the Chinese population as a high propensity to save, associated with the traditions of Confucian ethics, the lack of a formed pension system, and poverty, in which a significant part of the population was in the past. In addition, the PRC lacks financial instruments that are attractive to the population.

The formation of China's competitive advantages is also associated with the use of foreign direct investment, which provided channels for the receipt of new technologies, and China's integration into the technological production chains of the world's leading TNCs.

China is a leader among emerging market countries in attracting foreign direct investment (FDI), creating a favorable investment climate for this purpose. Even at the first stages of economic transformation in 1979, the Chinese leadership proclaimed "open economy" as one of the main principles of development. "Special economic zones" were created, and then other types of territories of intensive foreign economic activity with a whole system of preferences were created, which contributed to the influx of investment from abroad. The PRC used opportunities to attract investment from Huaqiao and its compatriots from Hong Kong and Macau - Chinese by origin, who actively supported the transformation in the PRC. It is their inve-

Immigration accounted for the bulk of China's capital inflows in the early stages of the reform. As Zhang Gaoli, First Vice Premier of the State Council of the People's Republic of China, said at the Fortune 2013 global forum in June 2013, in 2012, FDI in China exceeded $1.2 trillion, and the PRC itself plans to invest $500 billion abroad. in the next 5 years ¹⁴.

But the opportunities for extensive growth, based primarily on investment, are not unlimited. To maintain our competitive advantages, we need a transition to sustainable economic growth focused on high technologies, rational use of natural resources, and environmental control and monitoring.

In the meantime, the Chinese economy is characterized by a huge expenditure of natural resources, the country has become one of the world's largest importers of raw materials and fuel, despite the fact that it is a leader in the extraction of many minerals. Such large expenditures of investment and natural resources per unit of GDP reduce the quality of economic growth and negate China's competitive advantages.

An important factor that ensured high rates of economic growth in China was the close connection of the economy with the world economy, intensive foreign economic relations. Large export volumes and very high export quotas (see Table). 2), on the one hand, reflect the high competitiveness of the Chinese economy, and on the other, they are a stimulus for the growth of its competitiveness. A significant part of export products is produced in joint ventures with the participation of American, European and Japanese TNCs: they produce more than half of China's exports, but they also represent the" materialized " export of Chinese labor and capital.

The growth rate of China's foreign trade turnover was affected by the global financial and economic crisis, which affected the decline in the purchasing power of the population of China's leading trading partners, where the bulk of exports go: the United States, the EU, and Japan. This indicator is noticeably decreasing: if in 2010 it grew by almost 35%, in 2011-by 20%, and in 2012-by only 6.2%, amounting to $3.87 trillion (exports - $2.049 trillion, imports - $1.818 trillion). The foreign trade balance in some months of 2012 was even negative, although, in general, in 2012 it still reached $231.1 billion.¹⁵

The scale of China's export production became a source of competitive advantages, as the "economy of scale" was provided by a sales market covering the population of many countries around the world. This allowed China to create highly specialized clusters of enterprises that provide, in fact, global demand for certain types of products. For example, clusters of toy manufacturing enterprises in Guangdong Province, clusters for the production of ties and lighters. However, this also makes the Chinese economy more vulnerable, dependent on the economic situation in other countries of the world, and reduces the importance of the corresponding competitive advantages.

In order to maintain the competitive advantages of its economy, China will have to expand the range of exported products and increase the share of products with higher added value, without abandoning large-scale exports.

TARGETING DOMESTIC DEMAND

The instability of the global economy has become one of the reasons for the desire of the Chinese leadership to move to a new development paradigm - economic growth focused on domestic demand.

The vast domestic market of China, determined primarily by the total number of solvent population, is one of the main sources of its competitive advantages. It was this factor that made China attractive for foreign investment, since the products produced at the branches of TNCs found sales even with the general decline in demand in the world. And the potential of this market is growing: increasing incomes of the Chinese population contributes to the expansion of demand for many types of products and services. Not all of China's population, especially rural ones, is provided with durable goods.

The Chinese Government is making significant efforts to increase the consumption of the population, which is especially important in times of economic crises. To increase effective demand, it is necessary to increase wages, reduce taxes and interest rates on loans and deposits of the People's Bank of China. The task is not just to increase the population's income, but also to force them to spend. For this purpose, a reliable social security system, including a pension system, must be created.

In order to stimulate customer activity, programs are implemented that encourage the purchase of new products. In particular, funds are allocated to subsidize buyers who purchase small consumer electronics and appliances: vacuum cleaners, kitchen goods, etc., and import duties on consumer goods and luxury goods are reduced. ¹⁶

Domestic demand is growing not only as a result of the expansion of population demand, but also due to the implementation of major infrastructure projects in railway construction, energy, telecommunications, education, medicine, etc., while encouraging the participation of public (private) investment. These projects are particularly active in Central and Western China.

However, despite a noticeable increase in the standard of living of the population, serious imbalances in the country's economy as a whole have not been overcome, but even deepened. In the last decade, the share of investment in GDP has increased to 72.1% in 2012 from 33.2% in 2000. " The share of household consumption in China's GDP remains one of the lowest not only in comparison with developed countries, but also among developing countries. In 2010, it was only 33.8%, compared to 53.7% in Thailand and 61.9%in India. ¹⁸*

The 18th Congress of the Communist Party of China (CPC) reaffirmed its policy of fully building a "middle - class society", setting the goal of doubling the average per capita income of the population by 2020, compared to 2010, and by the centenary of the New China (2049) - "building a rich, powerful, democratic, civilized socialist state". At a meeting of the Politburo of the CPC Central Committee held shortly after the congress, chaired by Xi Jinping, the new General Secretary of the CPC, who was elected President of the People's Republic of China in March 2013, the main guidelines for economic work for 2013 were adopted, including the need to further expand domestic demand**.

The decisions of the Central Workshop on Economic Issues held in December 2012 were aimed at increasing demand, where it was stated that it is no longer possible to rely on the international division of labor, expanding exports and increasing investment. New opportunities for growth, according to the Chinese authorities, need to be drawn from expanding domestic demand, increasing innovation potential and moving from an extensive to an intensive economic growth model.

According to the meeting participants, one of the main areas where there is potential for expanding demand is urbanization19. Urban population accounts for the majority of consumer spending. With the easing of restrictions related to the hukou (registration) system, these costs will continue to grow rapidly.

All this shows that China is aware of all the difficulties of maintaining a highly competitive economy and is looking for new ways to ensure economic growth. Much attention is paid to education, the development of science and technology, the introduction of innovations, the formation of own Chinese brands, the production of products with high added value and high quality.

Maintaining the competitive advantages of the Chinese economy depends on how successfully the planned measures to improve its efficiency are implemented, what changes will occur in the economic structure, and how the incomes of the Chinese population will grow.

¹ World Bank statistics - http://data.worldbank.org/indicator / NY. GDP.MKTP.KD. ZG?order=wbapi_data_ value_2011%20wbapidata_value%20wbapi_d ata_value-last&sort=asc

² World Economic Outlook Database. IMF, April 2013 - http://www.imf.org/ external/pubs/ft/weo/2013/01/weodata/weo rept.aspx?pr.x=43&pr.y-8&sy-2011&ey-201 2&scsm-1 &ssd-1 &sort=country &ds-.&br=1 &c=512%2C666%2C9

³ World Economic Outlook: Hopes, Realities, Risks. IMF, April 2013, p. 153 -http://www.imf.org/external/pubs/ft/weo/20 13/01/pdf/tables.pdf

⁴ World Economic Outlook Database, IMF, April 2013...

⁵ Top 10 Largest Provincial Economies in China 2012 - http://www.china.org.cn/ top10/ 2013 - 02/2l/content_28016802_ 11.htm; NBS China Statistical DataBase -http://219.235. 129.58

⁶ The Global Competitiveness Report 2012 - 2013, World Economic Forum -http://reports.weforum.org/global-competiti-veness-report-2012 - 2013/

⁷ Institute of Management Development, IMD - http://www.imd.org/reseach/publica-tions/wcy/upload/scoreboard.pdf

⁸ IMF. World Economic Outlook. Update Growing Pains. 9.07.2013 - www.imf/external/ pubs/ft/weo/2013/update/02/

⁹ Xi Jinping: it is quite possible to continue maintaining a fairly high growth rate of the Chinese economy. russian@xinhuanet.com, 8.04.2013 http://russian.news.cn/dossiers/2013 - 04/ 08/c_132292928.htm

¹⁰ China Daily, 7.03.2012.

^{Chen Yu-Fu, Funke Michael.} 11 China's New Labour Contract Law: No Harm to Employment? // BOFIT Discussion Papers 29, Helsinki: Bank of Finland, 2008.

¹² According to experts, "made in China" still has its "comparative advantages" - http://russian. china.org.cn/exclusive/txt/2012 - 09/05/ content_26434964.htm

¹³ People's Daily online, 19.01.2013-http:/ / russian.people. com. en/31516 / 8098673. html

¹⁴ 2012 nian kuomin jingji he shehui fazhan tongji baogao. 22.02.2013 (Statistical Communique on National Economic and Social Development in 2011)- http://www.stats.gov.cn/tjgb/ndtjgb/qgndtjg b/t20130221_402874525.htm

¹⁵ Full text of Chinese Vice Premier Zhang Gaoli's address at opening dinner of 2013 Fortune Global Forum. 7.06.2013 -http://news.xinhuanet.com/english/china/20 13 - 06/07/c_l 24824012.htm

¹⁶ National Bureau of Statistics of China. Statistical Communique of the People's Republic of China on the 2012 National Economic and Social Development. 22.02.2012 http://www.stats.gov.cn/english/ newsand co-mingevents/t20130222_402874607.htm

¹⁷ russian.china.org.cn. 31.05.2012.

¹⁸ Zhongguo tongji nianjian 2012 (Chinese Statistical Compendium), Tables 1-4, 2-1. Report of the State Statistical Office of the People's Republic of China, 22.02.2013.

^У 19 China and World Economy. Vol. 20, 2012, N l, p. 66.

* For more information, see: Novoselova L. V. Sovremennaya ekonomicheskaya strategiya PRC: investitsionnyi faktor [Modern Economic Strategy of the PRC: Investment Factor]. 2013, No. 7 (editor's note).

** For more information, see: Smirnov D. A. XVIII Congress of the CPC: confirmation of the strategy of "scientific development" / / Asia and Africa Today. 2013, No. 4 (Editor's note).

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