“In the case of China, there is a lack of balance, co-ordination and sustainability in economic development.”
Who dares to make such a downbeat assessment of the world’s most dynamic economy before a gathering of influential foreigners in the heart of China itself? The answer is Premier Wen Jiabao at last week’s “summer Davos” in Tianjin. He is right. When almost everybody believes China is invulnerable, what might go wrong? As Andy Grove of Intel said: “Only the paranoid survive.” Mr Wen is wise to be similarly cautious.
Yet, as Mr Wen also noted, “the past two years have seen China emerge as one of the first countries to achieve an economic rebound, and maintain steady and relatively fast economic development under extremely difficult and complex circumstances.” Mr Wen added: “We owe our achievements to the ... implementation of the stimulus package.” As a result, the economy grew by 9.1 per cent in 2009 and 11.1 per cent in the first half of 2010.
This success has followed three decades of very fast growth. At purchasing power parity, gross domestic product per head has risen almost tenfold since the “reform and opening up” began, under Deng Xiaoping, in 1978. It is a remarkable record, but not quite unprecedented. China’s rate of “catch-up” on the US is not so very different from that of Japan prior to the mid-1970s and South Korea’s between the early 1960s and the financial crisis in 1997.
What is different, however, is the scale of the country and its initial poverty. China’s GDP per head (at purchasing power parity) was a mere 4 per cent of US levels in 1978. Even now, it is less than a fifth. The latter was in the position of Japan in 1950 and of South Korea as long ago as 1978. If China were to achieve Japan’s relative GDP per head before growth slowed sharply, it would enjoy another 25 years of fast economic expansion, to emerge with much the world’s biggest economy.
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