Advancing a Free Society

Dissecting Chinese Growth: How Long Will It Continue?

Wednesday, May 4, 2011

Academic specialists know a great deal, but they are not good at sharing their results with general readers. What we know about Chinese growth is a case in point.

There is practically no question more important than the future of Chinese growth. If it continues unabated for another decade, its GDP would be fifty percent larger than the U.S., and its per capita GDP would be a third. If growth continued two decades, its GDP would be two and a half times ours, and its per capita GDP would be half. China would be a dominant super power, its people affluent, and an economic powerhouse. As some have argued, affluence may bring with it democracy.

Other countries – Japan, the USSR, Germany – had long episodes of fast growth that came to an end. They were all high savers, but not to the extremes of China today. We all know that China’s growth spurt must eventually end, but it is vitally important to know when.

We can apply growth accounting to explain Chinese growth.

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(photo credit: Alexander Torrenegra)