As noted in class on occasion and in a previous blog post, The Economist has really ramped up its regular coverage of China. The magazine very much straddles a line on its expectations about China's future, and in a way that I find compelling.
We have had a discussion in class on occasion about the prospects for Chinese growth and economic power into the coming decades. I take a relatively bullish view on China over the medium to long term (though perhaps somewhat less than, say, Morten).
In my role as Devil's Advocate, my own perspective is that there are a number of uncertainties that make projections about Chinese economic superpowerdom risky. In brief, these are: 1) demography and aging; 2) the challenge of shifting to a more consumption-based and domestically-oriented economy; 3) the question of whether very high rates of growth are sustainable beyond about the 30 year time frame that Japan and South Korea experienced; 4) possibilities of a property bubble (which was a major trigger of Japan's economic troubles leading into its lost decade, and the trigger of the American crisis in recent years); 5) related questions about the banking system; and 6) the more political issue of whether the Chinese Communist Party faces instability as the middle class consolidates. (Focusing on GDP growth rather than quality of life here, I am less persuaded that the environmental sustainability question will affect China's economy in the short term, though if we expanded the view a bit, that is certainly a non-trivial issue.)
That may sound like a big list, and a list from someone who is bearish on China. I'm actually not pessimistic. For one thing, the list could be shortened, depending on how one prefers to break things down. The first 3 items on the list are really closely related, and relate to how China's growth and economy will change as it shifts from drawing on "surplus labor" and moves towards higher productivity, higher wages, higher capital investment, more production directed at increasingly wealthy domestic consumers, and growth that is less less export-driven. I am moderately confident China's economic decisionmakers will handle this effectively (and the trillion+ in reserves doesn't hurt as a rainy day fund), though I also think that item 6 (and whether there is a push for greater political opening) is a wild card here. Items 4 and 5 are really interrelated as well, and again there is a good chance that China can successfully manage to deflate any bubbles without a hard landing.
I do not project some collapse or waning of Chinese influence; I would just say there is real variance in possible future outcomes, and I would not share the confidence of any who make bold assertions about the extent of China's development another generation from now. There are sets of lingering questions that make me reticent about such predictions.. For one, I also remember the fading of the Japanese "threat" - from the perspective of American competitiveness, etc. - rather too vividly. I think China's economy likely has more staying power as one that will surpass the US economy in size and significance, but the Japanese experience does still haunt my thinking about this. One way to put it is what David Shambaugh mentioned in his session the other evening: that making straight-line projections about China base on its last 30 years is unwise.
In any event, The Economist hits on this set of issues to a large degree. They raise questions about the future of the Chinese economic model without assuming that it will collapse. They are wary without being alarmist. They have elevated China to the point where it has its own weekly section, yet are constantly inquiring about whether the country is pushing or reaching certain limits, and how it will and must adapt. In short, it is good coverage, and I recommend it.
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