Wednesday, May 23, 2007

Will China be the leading nation in the 21st century?

In this 2005 blog post, which is still as relevant today as it was then, Gary Becker, 1992 Nobel Prize winner, suggests a cautious "probably not."

Rapid growth over the short term from a low starting point does not necessarily translate into continued rapid growth in the longer term. In essence, it's easier to generate rapid growth when you're poor. China will struggle to maintain this as it gets wealthier.

Becker also points out that there have been many other cases of countries growing rapidly that have led to misplaced views on their eventual economic domination (Germany, Japan, Russia).

Read more here.

1 comment:

Cindy~~ said...

I think I'm a little more optimistic about China's future economic growth.
As the post says, China is now benefiting from the catch-up advantages and as it is still far behind the standard of most developed countries, I believe its potential is still huge. I admit there're many problems in China, namely bad banking and financial systems, state-owned enterprises, huge rural populations, poor copyright rules... But aren't those exactly where the potential come from? with all these problems, China is now growing at a speed of around 8% a year, so what if the problems been solved? I believe China will benefit a lot from solving those drawbacks or at least improving them.
China has a large number of rural population and it is indeed a serious problem which greatly affect economic growth. However, as more and more people move into urban areas, which is exactly what is happening now, they will drive up domestic demands. A few years ago (maybe 2002), China suffered from a period of deflation, which most believe is a result of lack of domestic demand. AD failed to catch up with the movement of AS causing price level to drop. If more rural population moves to the cities and gets wealthier, this problem can be alleviated. Given that many contries have raised alert of China's expanding exports and chinese exporters are facing more and more barriers, domestic demand is critical for China's economy.
To sum up, I think most of the problems that China is currently facing will be improved, although at cost and takes time, and in the process of these improvements taken place, China will continue to grow at a handsome rate for quite a period of time. And hopefully, no people with weird ideas will come into power~~