cancel2 2022
Canceled
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As he embarks on a third term, Xi Jinping’s goal is to make China a mid-level developed country in the next decade, which implies that the economy will need to expand at a rate of around 5 per cent. But underlying trends — bad demographics, heavy debt and declining productivity growth — suggest the country’s overall growth potential is about half that rate.
The implications of China growing at 2.5 per cent have yet to be fully digested anywhere, including Beijing. For one thing, assuming that the US grows at 1.5 per cent, with similar rates of inflation and a stable exchange rate, China would not overtake America as the world’s largest economy until 2060, if ever.
Growth in the long term depends on more workers using more capital, and using it more efficiently (productivity). China, with a shrinking population and declining productivity growth, has been growing by injecting more capital into the economy at an unsustainable rate.
China is now a middle-income country, a stage when many economies naturally start to slow given the higher base. Its per capita income is currently $12,500, one-fifth that of the US.*There are 38 advanced economies today, and all of them grew past the $12,500 income level in the decades after the second world war — most quite gradually. Only 19 grew at 2.5 per cent or faster for the next 10 years, and did so with a boost from more workers; on average the working age population grew at 1.2 per cent a year. Only two*(Lithuania and Latvia) had a shrinking workforce.
Read more:
https://www.ft.com/content/cff42bc4-f9e3-4f51-985a-86518934afbe
As he embarks on a third term, Xi Jinping’s goal is to make China a mid-level developed country in the next decade, which implies that the economy will need to expand at a rate of around 5 per cent. But underlying trends — bad demographics, heavy debt and declining productivity growth — suggest the country’s overall growth potential is about half that rate.
The implications of China growing at 2.5 per cent have yet to be fully digested anywhere, including Beijing. For one thing, assuming that the US grows at 1.5 per cent, with similar rates of inflation and a stable exchange rate, China would not overtake America as the world’s largest economy until 2060, if ever.
Growth in the long term depends on more workers using more capital, and using it more efficiently (productivity). China, with a shrinking population and declining productivity growth, has been growing by injecting more capital into the economy at an unsustainable rate.
China is now a middle-income country, a stage when many economies naturally start to slow given the higher base. Its per capita income is currently $12,500, one-fifth that of the US.*There are 38 advanced economies today, and all of them grew past the $12,500 income level in the decades after the second world war — most quite gradually. Only 19 grew at 2.5 per cent or faster for the next 10 years, and did so with a boost from more workers; on average the working age population grew at 1.2 per cent a year. Only two*(Lithuania and Latvia) had a shrinking workforce.
Read more:
https://www.ft.com/content/cff42bc4-f9e3-4f51-985a-86518934afbe
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