Knowledge
Economy: A New Driving Force
In
pursuing its economic development, China now has to deal
with quite a new world, that of the emerging knowledge
economy. This world is very different from that in which
the West achieved advanced economy status, or even that
in which the Asian Tigers shot to prominence. The driving
forces of new technologies, global competition and market
pressures are being felt in every corner of China.
-
Center for Strategic Economic Studies, Victoria University
The
global economy is witnessing rapid economic and social
changes at regular intervals. In the process, many new
concepts are emerging and attempts are being made to describe
and analyze the process of change. Interestingly, new
activities, arrangements and structures are taking place
on a global basis. One of the key characteristics of the
changes is the growing importance of knowledge in all
sectors of economic activities. Most advanced economies
have developed from an agricultural economy in which land
was the key resource, followed by an industrial economy,
in which natural resource and labor were the main resources.
Now, it is the Knowledge-Based Economy (KBE), where knowledge
is the prime resource. Accordingly, the global economy
is characterized by rising knowledge intensity and increasing
globalization processes for the creation, production and
distribution of goods and services.
After
opening the economy to the outside world in 1979, China's
economic performance and its achievements in increasing
the welfare and reducing the poverty of the country were
quite impressive. During the period, growth has been driven
by workers and resources transferred from low productivity
agriculture to industries. Besides that, China is attracting
far more FDI than any other country in the world. And
a massive inward investment, an undervalued currency and
derision for intellectual property rights are seen. However,
sustaining the above said economic growth will be difficult
for China, if it goes by the inefficient state-owned enterprises
and an ailing banking sector with bundles of non-performing
loans. Moreover, according to some rankings, China's international
competitiveness is declining. For instance, the average
worker productivity in China is a mere 0.8% in agriculture,
whereas it is 3.6% in manufacturing in the US. If China
boosts its productivity levels, it will need less labor
and that will further aggravate the unemployment scenario.
To
thrive and compete in the global knowledge economy, China
ultimately needs to have more freedom on all kind of activities.
On this front, China is aggressively deregulating businesses.
In order to grow, it has to bring knowledge and technology
into the western provinces, but that's again a double-edged
sword. As per the experts, technology allows free sharing
of information, which leads to greater education. Education
brings knowledge and free thinking, which challenges the
status quo. As the Chinese economy moves towards
KBE, America may lose skilled workers to China because
of better economic opportunities in the days to come.
In future, these developments will have some interesting
global economic implications.
Policymakers
are very optimistic about the knowledge economy in China.
They expect that it will bring new opportunities to China's
modernization and economic development in the 21st
century. Further, the usage of knowledge-based technology
like IT will greatly reduce the prices of traditional
products and services, and thereby, it will be able to
bridge the gap between China and the other advanced nations
in the area of high-tech applications. China's comparative
advantages in textile and capital-intensive industrial
sectors will further get a boost with the help of knowledge-based
technologies.
- N Janardhan Rao
Consulting
Editor
