438 Revista del Instituto Español de Estudios Estratégicos Núm. 2 / 2013 depend on foreign sales. Experts summarise the foregoing by stating that China’s economic growth is based on exports12, and this is consistent with what Chinese experts and leaders believe. For example, Li Jian from the Chinese Academy of Inter-national Trade and Economic Cooperation, the Commerce Ministry’s think tank, has stated that: “China will remain the most powerful engine of global growth for the next couple of decades, but it will no longer be just processing imported raw materials and components for re-export”13 And at a much more important level, Chinese Premier, Li Keqiang, has said that: “China can only sustain economic growth by transforming its growth model”14 In the same interview, Li Keqiang said that the general plan was to restructure the economy, starting with its weak financial system, so that growth would be driven less by exports and more by private consumption, even though this would mean slower growth rates. Given the confidence that the Chinese authorities have in the diagnosis, we can expect that they will make every effort to achieve their goals. We will now analyse the implications of moving from export-driven economic growth to growth fuelled by private consumption and we will also assess the effects this is likely to have on economic relations between China and the United States and their military spending levels. Currently, two factors determine private consumption in China: firstly, wages, which are quite low and, secondly, the level of savings, which is higher than in many other countries. As a result, private consumption per capita is very low, as is aggregate private consumption as a percentage of GDP. Although production in China has grown significantly, productivity in a good share of industries continues to be quite low. It is precisely for this reason that China has focused on producing goods where the main advantage is low production costs, thus enabling it to sell the products at very low prices. Generally speaking, worker productivity determines wages, which is why salaries are low in China. Therefore, if wages are to increase, productivity will have to be increased, and this will involve improving workers’ skills so that the country can produce goods that compete both on price and quality. If China can achieve the latter, sales prices will be higher and, therefore, so will wages. 12 A good analysis of the past and, most especially, future challenges facing China’s economy can be found in Dorrucci, Pula and Santabárbara (2013) 13 Interview for Reuters (11 September 2013) by Kevin Yao and Alan Wheatley. 14 Statements made in Dalian on 11 September 2013 and picked up by Reuters.
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