China's Economy over the Last Ten Years
By JOHN ROSS
CHINA is approaching its once-in-a-decade change in president and government. It’s a good time to pause and reflect on the last 10 years of China’s economic performance. The data for 2012 is still being produced, so our decade has to be 2001-2011. This doesn’t give us a precise overlap with the country’s politics – 2001 was the final year of the previous administration, but that is a statistical quibble; nine tenths of the period was under the present government.
Some statistics over the 10-year period are well known. China became the world’s second largest economy and the world’s largest goods exporter. These feats are undoubtedly impressive, but in actual fact they underestimate the scale of China’s true economic achievements. The last decade can be summed up by two impressive facts that put all other economic data in context:
· In the last decade China experienced the fastest growth in GDP per capita of any major economy in human history.
· Translating this growth into a measure of living standards, in the last 10 years China has experienced by far the fastest growth in consumption of any major economy.
These are really quite outstanding achievements, and so it’s worth looking at the data in detail.
China’s annual average GDP growth over the last decade was 9.9 percent, and the total increase in GDP per capita was 158 percent. Examining World Bank data, and Angus Maddison’s standard reference work World Population, GDP and GDP Per Capita, 1-2006 AD for earlier timeframes, this makes China’s the fastest growth ever recorded by a major economy. This figure is all the more extraordinary when we take into account that the period includes 2008-2011, which saw the most serious international economic crisis for 80 years.
In terms of contemporary economic comparisons, no other major economy remotely approaches the scale of China’s economic growth during this 10-year period. The data for the largest G7 economies, the BRICS countries and South Korea are set out in Table 1. China’s 158 percent increase in GDP per capita over the period is almost twice as much as the next best performing major economy, India. China’s growth was two and a half times Russia’s, over three times South Korea’s, seven times Germany’s and 20 times the U.S.’s.
The much-peddled myth in some media is that China’s economic growth hasn’t translated into an increase in its population’s consumption. A perfunctory glance at the data is enough to dispel this viewpoint. 2011 statistics for all countries are yet to be published, so looking at the years 2001-2010 will have to do.
The total increase in China’s consumption per capita in that period was 103 percent – again, the highest recorded by any major economy. The comparative data is set out in Table 2. Only Russia’s increase in consumption compares to China’s, and that country’s figure represents a rebound after a long period of depression. China’s total rate of increase in consumption was 57 percent higher than India’s, three times South Korea’s, almost 10 times that of the U.S. and almost 16 times that of Germany. In short, China’s rate of consumption growth was far more rapid than any other major economy.
This achievement also casts light on another issue – those who regularly predicted China’s economy would fail during this period have been proven wrong again and again. It would take the whole magazine to make a comprehensive list of pundits and publications that have predicted a Chinese economic blowout. But here are a few examples:
The Economist magazine claimed in a special supplement in June 2002 Out of Puff, that: “...in the coming decade, therefore, China seems set to become more unstable. It will face growing unrest as unemployment mounts.” It argued: “The economy still relies primarily on domestic engines of growth, which are sputtering. Growth over the last five years has relied heavily on massive government spending. As a result, the government’s debt is rising fast. Coupled with the banks’ bad loans and the state’s huge pension liabilities, this is a financial crisis in the making.” But instead of “crisis,” China, as we have seen, experienced the most rapid growth ever in GDP per capita in a major economy.
– Gordon Chang predicted in The Coming Collapse of China in 2002: “A half-decade ago the leaders of the People’s Republic of China had real choices. Today they do not. They have no exit. They have run out of time.” Chang, obviously, was way off the mark.
– When the international financial crisis erupted, Michael Pettis of Beijing University in 2009 said: “I continue to stand by my comment last year... that the U.S. would be the first major economy out of the crisis and China one of the last.” In reality, in the four years since the crisis began China’s economy has grown by 40 percent and the U.S. economy by one percent.
Such statements – and many more examples could be given – are not calculation errors in the prediction of economic details. Predictions are never accurate, and we can be never sure of future data until we see it. The errors made in these publications’ analyses are so massive that they got the entire trajectory of China’s economy wrong. To predict “sputtering,” “crisis” or “collapse” when China experienced the most rapid per capita economic growth of a major country in human history would, if rational standards of debate were abided by, lead to the producers of such analyses no longer being taken seriously. Surely it’s strange that Gordon Chang continues to be employed as a “China expert” by Forbes and Michael Pettis is still printed in the Financial Times predicting three percent growth in China. Given their failures to correctly predict anything in China over the last decade surely undermines their credibility.
Do China’s extraordinary economic growth figures mean that it faces no problems? Of course not. But the fact that problems exist – as they do in any economy – doesn’t mean we should ignore the country’s impressive achievements. It’s worth reiterating the fact that no other major country in human history has ever experienced such rapid per capita economic growth as China in the last 10 years. And this growth as translated into the most rapid rise in consumption ever recorded. Surely, these are truly awesome economic facts.
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