Resource Implications of China’s Emergence: The Weight of GDP Revisited

Abstract

In the advanced economies, services and intellectual content – the so-called “new economy” – have accounted for an increasing share of output, with a resulting decline in material inputs. While this was partly enabled by the transfer of the weightier parts of production to developing countries as a result of globalization, the terms of trade tended to shift markedly against commodities during periods such as the second half of the 1990s when the "ideas economy" of the United States accounted for the lion's share of global growth. By contrast, with the emergence of China as a leading engine of growth during the global recovery of 2003-2004, commodity prices firmed, with Chinese demand identified as a primary cause. The apparent steep rise in the material content of China's GDP during its growth surge and a flattening out of China's heretofore impressive gains in energy efficiency suggests that its economy is comparatively "stuff"-intensive. While these short-term developments remain to be fully confirmed as longer-term trends, they do suggest that the impact of China on the global economy going forward might well be different than in the first quarter century of its reform period: China might not only compete for labour-intensive production, it might also increasingly compete for consumption.

Keywords: China, new economy, resource demand, material content

JEL Classification: 053