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.