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Justifying and discussing optimism and pessmism about China
As often arises whenever Nextbigfuture has an article about China, there are various points brought out:
1. Too many articles about China
2. Too much optimism about China's prospects – some were too optimistic about Japan
3. The expectation that China will stumble badly or collapse
I am perfectly willing to consider evidence or strong theories about China or any major aspect about the future.
China is not Japan of the 1970s or 1980s
China's economy is now probably at least triple Japan on a GDP Purchasing power parity basis. China's economy is about double Japan on a currency exchange basis.
China has a population of 1.36 billion versus 127 million for Japan and 317 million for the USA.
Some have said that China may not overtake America this century after all. This is some kind of wishful thinking that China will be weak and the US will get stronger. I hope that the US gets economically stronger, but I think it will take pro-growth oriented policies.
China's Development Research Council (DRC) expects growth to drop to 6pc by 2020. It could be much lower. The US Conference Board says it will average 3.7pc from 2019-2025 as the ageing crisis hits. Michael Pettis from Beijing University thinks it is likely to slow to 3pc to 4pc over the next decade, deeming this entirely desirable if it comes from taming the runaway state enterprises.
If so, China's growth may not be much higher than the new consensus estimate of 3pc for a reborn America, powered by its energy boom and the revival of the chemical, steel, glass, and paper industries.
China's output is 75pc of US levels on a purchasing power parity (PPP) basis but even on this measure the Chinese `sorpasso' is looking less certain. Clyde Prestowitz, an arch US `declinist' who has just thrown in the towel, says China may “never” catch the US on any relevant measure. That is a stretch, but not impossible on a forecastable horizon.
“Keep in mind the next time you are in China and find yourself choking on the foul air that the things making the air foul are counted as positives for GDP. If you adjust Chinese GDP for environmental degradation and for over-investment in things that will never be used, it falls in size by 30-50 per cent.
Congressional Budget Office projection of US growth
Source: http://nextbigfuture.com/2014/02/justifying-and-discussing-optimism-and.html
