Wu Jinglian, a well-known economist with the Development Research Center under China’s State Council, warned that lopsided government-promoted development in heavy industries such as iron and steel, nonferrous metals, building materials, and chemicals driven by real-estate, automobile and construction demands is harmful to the healthy sustained growth of the Chinese economy.

Shi Qi, a scholar in Nanchang University’s Institute of Economic Management, said, “After the communist victory [over the KMT government in 1949], the government has always invested heavily in a few industries to boost production. The disadvantages of this mode of development have become more and more visible, especially after the economic reforms in 1980s. On the other hand, economic development driven by increased efficiency is more appropriate for China.”

The Chinese government, in its 9th Five-Year Plan, called for a transition from economic growth by heavy government spending to that by increased efficiency. Wu said that the old mode of economic growth was a product of the planned economy and such energy-hungry government projects were responsible for the severe shortages in coal, electricity, petroleum, and transportation that started about a year ago.

Yet Zhang Dechun, an economics professor in Huzhou Normal College, disagreed.

Zhang said, “Unlike the G-8 nations that are already in the information age, China has not yet completed its industrialization, rather, it has just started to industrialize. It is inevitable that China has to invest heavily in heavy industry.”

Professor Zhang acknowledged that China uses too much energy and raw materials per unit of production. Even though he thinks developing heavy industries is necessary, Zhang agreed with Wu that the Chinese government meddles too much in the economy on both a local and national level, causing it overheat.

Zhang said, “The industrial structure throughout China is converging, and automobile manufacturing has become the key industry everywhere, along with petrochemical and steel industries. This trend certainly has a lot to do with local governments’ desire to keep up with neighbors and showcase their achievements. Local leaders believe that they would be left behind if they should fail to catch up.”

He added that China should strengthen macroeconomic regulations and constantly improve its market economy, thereby relying on market forces instead of administrative decrees to regulate economic development and to solve the contradiction between heavy industrialization and the quality of economic development.

However, Wu said that the key to changing the mode of economic growth is to reform the economic system itself.