China's plan to refocus its economy and transition three quarters of its workforce into technology and innovation does come with some risk, but it is a must for it to move on to a new ladder, an Australian economic expert has said.[Special Coverage]
A bigger risk "would be not to do it!" Hans Hendrischke, Professor of Chinese Business and Management of the University of Sydney Business School, told Xinhua in an interview Monday.
"There is a risk if you get millions of people into entrepreneurship and start-ups. You have market risks, you have risks they did not have before, when they had stable employment in state-owned enterprises," he said.
"But the bigger risk is to have people stay in manufacturing, which is less and less necessary, as the whole manufacturing sector becomes more digitised and moves closer to a services sector."
The move is expected to see the number of middle-class households in China double by the year 2020.
"It's largely a transition from primary and secondary industries into the tertiary sector, so it's about moving people out of agriculture and manufacturing and into the services sector. It's about taking people out of poverty and securing their living standards," Hendrischke said.
With roughly 64 percent of GDP already coming from the services sector, China is rapidly moving into advanced information technology, and "cutting edge" innovation like cloud computing.
"That's where much of Chinese investment is going and it's leading China to a new competitive environment where it hasn't been before," he said.
Challenges for the world's biggest manufacturing economy still remain however.
The problem of oversupply and overcapacity in commodities like steel and coal are issues that Chinese policy-makers have singled out and are looking to resolve.
"The overcapacity problem is also environmental problem because both of these industries (coal and steel) are heavily polluting, especially the old-fashion ones that are technically not at the latest level," he said.
"So these have to be closed down and the problem with that is social issues, that you have a workforce that has to be re-trained, re-employed or put on social security."
These are the two things China is attempting to solve together with the move toward an innovation-based, service economy focused on developing and investing in new technologies, the expert said.
