Joe Ngai
China is firmly entrenched in a "medium growth" phase as its economy transitions into a more mature state, and its GDP will likely grow around 5 percent this year and beyond, said Joe Ngai, chairman of management consultancy McKinsey China.
Despite facing challenges both at home and abroad, including geopolitical tensions and a downturn in the housing sector, Ngai remains optimistic about China's long-term economic prospects, emphasizing its continuing role as a key driver of global growth.
"I think that China is solidly in a medium growth phase as we are transitioning into a more mature economy," Ngai said in a recent exclusive interview with China Daily.
Ngai added that China's growth remains robust relative to the rest of the world, accounting for approximately one-third of global GDP growth.
Despite the difficulties and challenges ahead, Ngai pointed to key factors that continue to work in China's favor. He highlighted the ongoing process of urbanization, with China still in the "mid-stage" of this transformation.
"There's another 15 percent of urbanization expected in the next 10 to 20 years. This trend will continue and will contribute to China's growth."
Ngai also expressed optimism about the country's emerging technological leadership in fields like electric vehicles, solar energy and artificial intelligence.
"In many technologies right now, China is very competitive globally. We are growing in areas like electric vehicles, solar panels, AI and robotics, and these are areas where we see a lot of upsides."
A new report released by McKinsey Global Institute has identified 18 potential fast-growing sectors of the future ranging from AI software and services to robotics that could reshape the global economy, generating $29 trillion to $48 trillion in revenue by 2040.
"The good news is China is very active in those 18 sectors. China actually has quite a number of very good company investments and progress in these areas," Ngai said.
In addition to technological advancements, Ngai emphasized that China's economic future will be shaped by its ability to boost domestic consumption, which he described as "underdeveloped" but possessing significant potential. "Consumption demand is actually in the bank," Ngai said, explaining that Chinese households have saved up in recent years, creating a reservoir of demand waiting to be unleashed.
Looking ahead, he believes China's next phase of growth will be characterized by a shift from industrial output to stronger consumer demand. "We have always relied on industrial output for GDP growth, but as we continue to boost local consumption, there's a lot of room for growth," he said.
He also pointed out that as other economies, particularly Southeast Asia and Mexico, become more competitive in low-cost labor, China must pivot to higher-value industries. "We need to focus on high-value-added industries. That's where I think the new quality productive forces come into play."
When it comes to multinational companies operating in China, Ngai sees both challenges and opportunities, adding that multinationals still have a crucial role to play in driving innovation and economic prosperity.
"It's very important for the Chinese local business environment to be powerful and for multinationals to have a level playing field," he said. "These companies bring innovation, expertise and investment that continue to be valuable to China's growth."
He also highlighted China's increasing role in exporting intellectual property, technology and innovation. "We used to export goods, but we'll be exporting IP, know-how and our ability to create wealth. That is a much broader and much wider opportunity for China going forward."
Over the long run, Ngai believes that China will remain a critical player in the global economy.
"The next China is still China. There is no substitute for the Chinese market, whether as an end market or a source of innovation."
Simon Lacey, head of Digital Trade and Geopolitics at the World Economic Forum, said he believes China's emphasis on shifting to new quality productive forces will inject strong tailwinds into the economy and create rising growth opportunities for foreign investors.
