Romano Prodi:China Today: A New Reform For A New Era

Today, China is witnessing a brand-new revolution and is welcoming in a new era.The global economy is like a sailing boat being thrown up and down in terrifying waves. The year-over-year growth rate is lower. Unlike the boom of the commodity super cycle, commodity transactions are lacking any sort of direction for sustainable development.

Not too long ago, the economic ocean of China was once so isolated that its economic cycle was based on its own economic fundamentals and independent of other nations. Not until a few years ago did it realize its negligible global economic status after analyzing the global economic structure. Nowadays, China's economic growth has accounted for 1/4 to 1/3 of the world's output. China's international trade development (both export and import) has become the major engine for global economic growth. Despite China's slight economic downturn in recent years, the relative percentage growth of its economy is sustainable. Slow economic growth is one of the main contributions to the decline in international oil prices and raw materials. Even though China does not have as large an appetite for these products, this does not cause growth rates to decline due to the fact that China enjoys a diversified economic growth pattern.

We must consider a highly symbolic perspective, i.e. in the year of 2015, China's service industry has contributed to more than half of its GDP, including more than 10 sectors that now drive the economic growth of the entire nation.

This symbolizes a profound reform which is primed to be rapidly carried out in the near future. The transition in the service industry is accompanied with rising wages, given that the labor cost of one generation has grown from 1/40th of that of Europe and the US to the current situation of about 1/4th . With increasing labor costs in China, industries with low added value are gradually outsourced to other low cost nations and regions. China's industrial growth focus is shifting to R&D and innovation-intensive industries. If China wants to continue to improve its product quality, it must make it more globalized. China has made large-scale investments in research and production centers, raising its significance in the international market (beginning in the US and Europe). Traditional export trade is complimented with new elements, including foreign company acquisitions, of course. China's oversea investments amount to nearly USD130 billion, and are still on the rise.

China's recent investments in Italy have promoted functional enterprise innovation.This is also a part of this new strategy. The acquisition of Pirelli is a good example. This acquisition was not only a significant quantifiable transaction, but exemplifies the rapid obtaining of new technologies through acquisitions of innovative and world-class enterprises.

Advanced technological innovations have the necessary potential to meet Chinese enterprises' new demands as incomes rise while simultaneously improving consumption products and the overall standard of living.Not until recently has the neglected pollution problem now become a top priority.The reason is, in my opinion, China pioneered in thoroughly changing the status quo of automobile mass production. Chinese authorities will force the use of electric vehicles in some of China’s major cities.

The reason why such reform is now coming to an end is due to the fact that the financial and banking sector does not have unrestricted measures. A prerequisite of realizing these reforms quickly is to connect to other sectors overseas.

International banks' investments and infrastructure projects along the Silk Road are among the multiple options currently available to China to open its doors to the global financial market. If we carefully look at the current chaotic global financial market status, we can easily understand the Chinese government's reluctance in opening up this sector. However, given some time, such openness will surely become a necessity in China's grand transition. Share!