Will China average 7% or greater annual GDP growth over the next decade?

Apr 27th 2011, 14:33

Thanks to tNzArycM6Ts comment:

I usually communicate with CCPs one of the fifth generation

leader and I am his fellow (its very easy to guess who he is).

I know you worry about whether Beijings economical policy

is right or not. Maybe you and I are hesitating whether

we should support Peoples Republic of China or

the 1949s extinguished R.X.X about the same thing that

Hu Jing-Tao and Wen Jia-Bao are incredibly easily

satisfyingly getting the second largest economy of the world

and at this moment say the most important thing is "happiness"

which only want to take no resposiblities for the next 10

year Chinas ecoomical slowdown like the past 10 year

Taiwans Chen Shui-Bians tone so that your feelings is paradox.

But CCP is not one-person dictatorship--never and forever--

even in the Mao Ze-Dong or Deng Xiao-Ping period. Dont

feel depressed and believe the above you said--Chinas

economical rapid growth is very close to what CCPs

25-person Politburo decide. Be confident of Beijing

and optimistic about the vision of the CCPs fifth leaders.

Of course every leader wants their country to get more

and more stronger(except Ma Ying-Jeou in the kindergarden).

The number "7" is estimated by observative standard

rather than scrap while sneezing. Beijing is now doing their

best balancing anything and speeding up political reform

toward more democratic direction.

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Will China average 7% or greater annual GDP growth over the next decade?

Apr 27th 2011, 14:35

I know those say "No" think there are many instable factors

which can lead the death of CCP, but their sentences

are too weak to form any premise of any contention. Meanwhile,

many bloggers or commentators support "Chinas political

and economical situation is different from Western country".

We recognize anyone who just say two vocabulary "democracy"

and "science" following the late 1910s May-4th exercise

in Beijing University cannot succeed. Instead, to maintain

the prosperity, give(or be given) welfare and join in

political affairs is the most important in China. Just

clap your hands and say oh-yeah while I talk to six CCPS

fifth leaders about your worry. Dont worry about vote "YES".

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回了一名覺得會硬著陸的網友。的確民主和經濟發展有矛盾並存的問題，有的說是兩回子事，不切實際。的確要有一定的自由度才會有建設和發展，也會有多元生活。一黨專政的動員力量當年仍然強大，國營事業拿原物料的控制權仍然驅動經濟，當時偏擴大內需及解制，開放更多貿易自由項目。技術官僚仍然受省級及中央重視。

附一篇4月14日對金磚四國的比較：

Economics focus BRIC wall

Growth tends to slow when GDP per head reaches a certain threshold. China is getting close  Apr 14th 2011 | from the print edition

THE economic crisis may have been debilitating for the rich world but for emerging markets it has been closer to a triumph. In 2010 China overtook a limping Japan as the world’s second-largest economy. It looks sets to catch America within a decade or two. India and Brazil are growing rapidly. The past few years have reinforced the suspicion of many that the story of the century will be the inexorable rise of emerging economies. If projections of future growth look rosy for emerging markets, however, history counsels caution. The post-war period is rich in examples of blistering catch-up growth. But at some point growth starts to disappoint. Gaining ground on the leaders is far easier than overtaking them.

Rapid growth is initially easy because the leader has already trodden a clear path. Developing countries can borrow existing technologies from countries that have already become rich. Advanced economies may be stuck with obsolete infrastructure; laggards can skip right to the shiniest and best. Labour productivity soars as poor economies shift workers from agriculture to a growing manufacturing sector. And rapid income growth among young workers boosts savings and fuels investment.

But the more an emerging economy resembles the leaders, the harder it is to sustain the pace. As the stock of borrowable ideas runs low, the developing economy must begin innovating for itself. The supply of cheap agricultural labour dries up and a rising number of workers take jobs in the service sector, where productivity improvements are more difficult to achieve. The moment of convergence with the leaders, which once seemed within easy reach, retreats into the future. Growth rates may slow, as they did in the case of western Europe and the Asian tigers, or they may falter, as in Latin America in the 1990s.

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The world’s reliance on emerging markets as engines of growth lends urgency to the question of just when this “middle-income trap” is sprung. In a new paper* Barry Eichengreen of the University of California, Berkeley, Donghyun Park of the Asian Development Bank and Kwanho Shin of Korea University examine the economic record since 1957 in an attempt to identify potential warning-signs. The authors focus on countries whose GDP per head on a purchasing-power-parity (PPP) basis grew by more than 3.5% a year for seven years, and then suffered a sharp slowdown in which growth dipped by two percentage points or more. They ignore slowdowns that occur when GDP per head is still below $10,000 on a PPP basis, limiting the sample to countries enjoying sustained catch-up growth. What emerges is an estimate of a critical threshold: on average, growth slowdowns occur when per-head GDP reaches around $16,740 at PPP. The average growth rate then drops from 5.6% a year to 2.1%.

This estimate passes the smell test of history (see chart). In the 1970s growth rates in western Europe and Japan cooled off at approximately the $16,740 threshold. Singapore’s early-1980s slowdown matches the model, as does the experience of South Korea and Taiwan in the late 1990s. As these examples indicate, a deceleration need not precipitate disaster. Growth often continues and may accelerate again; the authors identify a number of cases in which a slowdown proceeds in steps. Japan’s initial boom lost steam in the early 1970s, but its economy continued to grow faster than other rich nations until its 1990s blow-up.

In the right circumstances the good times may be prolonged, allowing an economy to reach a higher income level before the inevitable slowdown. When America passed the threshold it was the world leader and was able to keep growing rapidly so long as its own innovative prowess allowed. Britain’s experience indicates economic liberalisation or a fortunate turn of the business cycle may also prevent the threshold from binding at once.

Openness to trade appears to be a potent stimulant: the authors attribute the outperformance of Hong Kong and Singapore to this effect. Lifting consumption to just over 60% of GDP is useful, as is a low and stable rate of inflation. Neither financial openness nor changes of political regime seem to matter much, but a large ratio of workers to dependents reduces the odds of a slowdown. An undervalued exchange rate, on the other hand, appears to contribute to a higher probability of a slowdown. The reason for this is not clear but the authors suggest that undervaluation could lead countries to neglect their innovative capacity, or may contribute to imbalances that choke off a boom.

Middle Kingdom, middle income

The authors are careful to say that there is no iron law of slowdowns. Even so, their analysis is unlikely to cheer the leadership in Beijing. China’s torrid growth puts it on course to hit the $16,740 GDP-per-head threshold by 2015, well ahead of the likes of Brazil and India. Given the Chinese economy’s long list of risk factors—including an older population, low levels of consumption and a substantially undervalued currency—the authors suggest that the odds of a slowdown are over 70%.

It is hazardous to extend any analysis to a country as unique as China. The authors acknowledge that rapid development could shift inland, where millions of workers have yet to move into manufacturing, while the coastal cities nurture an ability to innovate. The IMF forecasts real GDP growth rates above 9% through to 2016; a slowdown to 7-8% does not sound that scary. But past experience indicates that slowdowns are frequently accompanied by crises. In East Asia in the late 1990s it became clear that investments which made sense at growth rates of 7%, say, did not at expansion rates of 5%. Political systems may prove similarly vulnerable: it has been many years since China has to deal with an annual growth rate below 7%. Structural reforms can help to cushion the effects of a slowdown. It would be wise for China to pursue such reforms during fat years rather than the leaner ones that will, eventually, come.