Daily Skiff

While China's economy was once booming, it has now hit a great wall.

About 50 students and members of the community gathered in Palko Hall to listen to the lecture, "China Succeeding: Who Does the Chinese Development Model Challenge?"

Barry Naughton, a graduate school professor of Chinese and international affairs at the University of California at San Diego, said China's successful economy has led developing countries to look more to the country as a model, even though the country's growth has decreased over the last several months.

"China's growth in the last few years has taken China's ordinary success to something qualitatively different," the Green Chair in economics said.

He said China's economy has grown faster for a longer period of time than any other country's.

Emy Kapiamba, a sophomore international economics major, said she found China's history of economic growth interesting.

"For years, the idea has been that growth must be accompanied with democracy, but China has proven otherwise," Kapiamba said.

Naughton said elements associated with China's rapid growth include increased foreign trade and increased investment in infrastructure and factories.

China's growth also increased because the country had moved away from its planned, government-run economic system and the Chinese people had become more urbanized in the last decade, Naughton said.

He said China's human capital had improved because of the increased Chinese intake of students into colleges, with more of an emphasis on education. He said the number of students had quadrupled in the past five years.

Naughton said even though the initial development was impressive, China has been hit by the current world economic crisis over the last six months in a number of ways.

He said from mid-2008 and onward, China hit a brick wall and that the slowdown was more dramatic than anticipated. He said he expects the situation to be temporary but is unsure how long it could last.

The Chinese government response has been vigorous and a stimulus package as large as the one created in the U.S. has been created, Naughton said.

Naughton said China's domestic demand for investment, industrial goods and housing is down. He said trade has also slowed dramatically for the Chinese.

The U.S. market and the Chinese market are interdependent because China depends on the U.S. for their market and investments and the U.S. depends on China for their goods and investment, Naughton said.

Another major problem with the Chinese economy is the lack of consumption spending by its citizens, Naughton said. He said China's percentage of household consumption is only 30 percent compared with the U.S. at 70 percent.

In the early part of the decade, there was a globally synchronized economic boom and now there is a globally synchronized economic downturn, Naughton said.

He said in order for China to gain the dynamic growth they had back, they must increase their consumption and move to a more balanced economic model.

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