CHINA 2049:
ECONOMIC CHALLENGES OF A RISING GLOBAL POWER
DAVID DOLLAR, YIPING HUANG, AND YANG YAO
JANUARY 2020
EDITOR’S NOTE
The following is drawn from the executive summary of the forthcoming edited volume “China 2049:
Economic Challenges of a Rising Global Power” (Brookings Institution Press, May 2020). The book is
the outcome of a joint research project between economists at the National School of Development,
Peking University, and the Brookings Institution.
EXECUTIVE SUMMARY
China is on track to be the world’s next economic superpower, but it faces tremendous challenges, such
as fostering innovation, dealing with an aging population, and coping with a global environment skeptical
of a more powerful People’s Republic. This policy brief draws from a forthcoming edited volume —
“China 2049: Economic Challenges of a Rising Global Power” (Brookings Institution Press, May 2020)
— which is the result of a collaborative effort among economists from China’s Peking University and
the Brookings Institution. The book will offer in-depth analyses of these challenges and explore a
number of essential questions: Does China have enough talent and the right policy and institutional
mix to transit from an input-driven to innovation-driven economy? What does an aging population
mean for the country in terms of labor supply, consumption demand, and social welfare expenditures?
Can China contain environmental and climate change risks? How should the financial system be
transformed in order to continuously support economic growth and keep financial risks under control?
The book contributors, listed in the appendix of this policy brief, also consider the roles state-owned
enterprises play in the future Chinese economy, how technological competition between the U.S. and
China will affect each country’s development, China’s future role in the international monetary system,
and whether the U.S. and other established powers will accept a growing role for China and the rest of
the developing world in the governance of global institutions such as the World Trade Organization and
the International Monetary Fund.
“China 2049” will provide unique insights — summarized here — into independent analyses and policy
recommendations by a group of top Chinese and American scholars. Whether China succeeds or fails
in economic reform as it moves toward the 100th anniversary of the Communist revolution will have a
large impact not just on China’s development, but also on stability and prosperity for the whole world.
1
, In 2012, the Chinese government announced world as China continues to ascend in the coming
“Two Centennial Goals.” The first is to double the decades? And, three, what policies should China
2010 gross domestic product (GDP) and per capita adopt to both facilitate rapid growth of the Chinese
income for both urban and rural residents by economy and accommodate it in the global system?
2021, the year when the Chinese Communist Party
(CCP) celebrates its centenary. And the second is KEY DRIVERS OF PAST ECONOMIC
to build China into a fully developed country that
is prosperous, powerful, democratic, culturally
GROWTH
advanced, and harmonious by 2049, the year when After establishment of the PRC in 1949, the
the People’s Republic of China (PRC) celebrates its Chinese government adopted various policy
centenary. It appears that China is well on track: It schemes trying to modernize the economy,
has already achieved the first Centennial Goal, as including the socialist transformation program and
its GDP grew by 7.4% per annum between 2010 and the urban industrialization strategy, starting in the
2018, and it aims to eliminate poverty completely mid-1950s. While paces of economic development
by 2020. were, at times, decent and even remarkable, the
central planning system was largely unsuccessful
There are greater uncertainties, however, in boosting income levels during that time. This
surrounding the path to the second Centennial eventually led to the starting of economic reform
Goal. China ascended successfully from one of the from the end of 1978, which dramatically improved
world’s poorest economies in 1978 (with GDP per economic performance. Real GDP grew by an
capita at less than $200) to a high-middle-income average of more than 9.8% during the period of
economy in 2018 (with GDP per capita close to 1978-2008, which was often referred to as the
$10,000). And according to projections in the “China miracle.”
forthcoming edited volume “China 2049,”1 under
reasonably favorable conditions, China’s GDP
per capita — using purchasing power parity (PPP) China was one of the main beneficiaries of
measures — relative to that of the United States globalization.
may rise from about one-quarter in 2018 to around
two-thirds in 2049. However, the growth trajectory
in reaching the middle-income level and that in So what contributed to this economic success during
achieving the high-income status could differ earlier decades of economic reform? The foremost
significantly, viewed from key growth drivers and driver was the reform policy, or transition from the
internal and external constraints for growth. centrally planned system to a free market economy.
This transformation significantly increased both
The purpose of this report is to take stock of the allocative efficiency, through better allocation of
new economic challenges for China when it sets resources, and technical efficiency, through better
out to achieve the second Centennial Goal over the use of resources in the same production activities.
coming three decades. While the various chapters Adoption of a household farming system in the
in the forthcoming edited volume examine the countryside in the early 1980s, for instance, led to
transformation of different sectors and aspects immediate jumps of grain output, as the new scheme
of the economy, they focus on the central theme helped establish a direct link between efforts and
of China becoming a new global economic power. rewards. Again, migration of rural surplus labor to
Specifically, these analyses seek to address three urban areas both raised average labor productivity
common questions: One, what contributed to and supported expansion of industrial production.
China’s past economic success? Two, what are the According to analysis in the forthcoming “China
most important new challenges for China and the 2049,” improvement in total factor productivity
2
ECONOMIC CHALLENGES OF A RISING GLOBAL POWER
DAVID DOLLAR, YIPING HUANG, AND YANG YAO
JANUARY 2020
EDITOR’S NOTE
The following is drawn from the executive summary of the forthcoming edited volume “China 2049:
Economic Challenges of a Rising Global Power” (Brookings Institution Press, May 2020). The book is
the outcome of a joint research project between economists at the National School of Development,
Peking University, and the Brookings Institution.
EXECUTIVE SUMMARY
China is on track to be the world’s next economic superpower, but it faces tremendous challenges, such
as fostering innovation, dealing with an aging population, and coping with a global environment skeptical
of a more powerful People’s Republic. This policy brief draws from a forthcoming edited volume —
“China 2049: Economic Challenges of a Rising Global Power” (Brookings Institution Press, May 2020)
— which is the result of a collaborative effort among economists from China’s Peking University and
the Brookings Institution. The book will offer in-depth analyses of these challenges and explore a
number of essential questions: Does China have enough talent and the right policy and institutional
mix to transit from an input-driven to innovation-driven economy? What does an aging population
mean for the country in terms of labor supply, consumption demand, and social welfare expenditures?
Can China contain environmental and climate change risks? How should the financial system be
transformed in order to continuously support economic growth and keep financial risks under control?
The book contributors, listed in the appendix of this policy brief, also consider the roles state-owned
enterprises play in the future Chinese economy, how technological competition between the U.S. and
China will affect each country’s development, China’s future role in the international monetary system,
and whether the U.S. and other established powers will accept a growing role for China and the rest of
the developing world in the governance of global institutions such as the World Trade Organization and
the International Monetary Fund.
“China 2049” will provide unique insights — summarized here — into independent analyses and policy
recommendations by a group of top Chinese and American scholars. Whether China succeeds or fails
in economic reform as it moves toward the 100th anniversary of the Communist revolution will have a
large impact not just on China’s development, but also on stability and prosperity for the whole world.
1
, In 2012, the Chinese government announced world as China continues to ascend in the coming
“Two Centennial Goals.” The first is to double the decades? And, three, what policies should China
2010 gross domestic product (GDP) and per capita adopt to both facilitate rapid growth of the Chinese
income for both urban and rural residents by economy and accommodate it in the global system?
2021, the year when the Chinese Communist Party
(CCP) celebrates its centenary. And the second is KEY DRIVERS OF PAST ECONOMIC
to build China into a fully developed country that
is prosperous, powerful, democratic, culturally
GROWTH
advanced, and harmonious by 2049, the year when After establishment of the PRC in 1949, the
the People’s Republic of China (PRC) celebrates its Chinese government adopted various policy
centenary. It appears that China is well on track: It schemes trying to modernize the economy,
has already achieved the first Centennial Goal, as including the socialist transformation program and
its GDP grew by 7.4% per annum between 2010 and the urban industrialization strategy, starting in the
2018, and it aims to eliminate poverty completely mid-1950s. While paces of economic development
by 2020. were, at times, decent and even remarkable, the
central planning system was largely unsuccessful
There are greater uncertainties, however, in boosting income levels during that time. This
surrounding the path to the second Centennial eventually led to the starting of economic reform
Goal. China ascended successfully from one of the from the end of 1978, which dramatically improved
world’s poorest economies in 1978 (with GDP per economic performance. Real GDP grew by an
capita at less than $200) to a high-middle-income average of more than 9.8% during the period of
economy in 2018 (with GDP per capita close to 1978-2008, which was often referred to as the
$10,000). And according to projections in the “China miracle.”
forthcoming edited volume “China 2049,”1 under
reasonably favorable conditions, China’s GDP
per capita — using purchasing power parity (PPP) China was one of the main beneficiaries of
measures — relative to that of the United States globalization.
may rise from about one-quarter in 2018 to around
two-thirds in 2049. However, the growth trajectory
in reaching the middle-income level and that in So what contributed to this economic success during
achieving the high-income status could differ earlier decades of economic reform? The foremost
significantly, viewed from key growth drivers and driver was the reform policy, or transition from the
internal and external constraints for growth. centrally planned system to a free market economy.
This transformation significantly increased both
The purpose of this report is to take stock of the allocative efficiency, through better allocation of
new economic challenges for China when it sets resources, and technical efficiency, through better
out to achieve the second Centennial Goal over the use of resources in the same production activities.
coming three decades. While the various chapters Adoption of a household farming system in the
in the forthcoming edited volume examine the countryside in the early 1980s, for instance, led to
transformation of different sectors and aspects immediate jumps of grain output, as the new scheme
of the economy, they focus on the central theme helped establish a direct link between efforts and
of China becoming a new global economic power. rewards. Again, migration of rural surplus labor to
Specifically, these analyses seek to address three urban areas both raised average labor productivity
common questions: One, what contributed to and supported expansion of industrial production.
China’s past economic success? Two, what are the According to analysis in the forthcoming “China
most important new challenges for China and the 2049,” improvement in total factor productivity
2
