On China’s Economic Potential

The best functional equivalent of today’s China isn’t India or the E.U. or the United States. It’s the Roman Empire, were it still around today. Both have ancient origins. Both are fairly diverse both climatically and demographically, but not as diverse as the post-1492 European empires. The Roman Empire region’s population today is half that of China (at the Roman Empire’s height, its population was basically equal to that of China). Like China today, the Roman Empire was a nominal Republic that was in practice a despotism. Both empires were similarly technologically advanced when the Roman Empire was at its height.

This comparison is extremely useful today in understanding where China will end up over the next few decades, first economically and secondly in terms of national power. China’s current per capita GDP is similar to Mexico’s. The best predictor of per capita GDP in a country is its human capital. Both China and the Roman Empire region contain areas of very high and very unimpressive human capital. As a result, we should expect China’s GDP per capita to end up around where Roman Empire’s would be were it a modern-day Mediterranean state.

All evidence shows math is a special strength of the Chinese (especially Southeastern Chinese, e.g., Hakka and Fujianese), but math scores as not a useful predictor of economic development once one already has Verbal/Science scores. Korea and Japan are basically as rich as Britain and France, even though their math scores are obviously superior. Beijing-Shanghai-Jiangsu-Guangdong’s 2015 smart fraction for PISA Science was right between Britain and Belgium (verbal scores were relatively worse). The population of B-S-J-G is around 240 million. Half of this would be 120 million -precisely as one would expect if China were comparable to the Roman Empire region and England, France, and the Netherlands were comparable to B-S-J-G. The 2018 numbers released last year were clearly gamed (as the Chinese leadership is wont to do) and are, thus, worthless for analysis. Fujian and Zhejiang are, I presume, comparable in non-math human capital to Switzerland, Northern Italy, and the formerly Roman-occupied parts of Germany.

So where is China’s equivalent of the Muslim Mediterranean? One would expect it to exist. China is, after all, the fairly recent origin of the Filipinos/Maori/Polynesians, as well as of the Thais and Laotians. None of these groups have large smart fractions. And, indeed, though evidence is far from conclusive, there are strong indications that China’s equivalent of the Muslim Mediterranean does exist in the regions of Guangxi, Guizhou, Yunnan, Jiangxi, Anhui, Hebei, and Sichuan. Though the test used in the paper linked to isn’t particularly predictive of national outcomes, and the idea intellectual will and ability in these provinces are actually the lowest in the world seems extremely doubtful, the assumption that the state of human capital in Guizhou and Jiangxi is not much different from that in -and these regions are not richer than- Indonesia and Egypt seems a fairly safe one to make.

Since China for obvious reasons cannot hope to economically surpass the most successful post-Communist countries -Slovenia and Czechia- and since it is already almost at Bulgaria’s (≈Mexico’s) level of GDP per capita, a reasonable observer should conclude China will probably stop its above-trend growth with its current institutions at a level of GDP per capita somewhere in between these -say at around that of Croatia, Latvia, or even Hungary. Given China’s not as impressive as advertised human capital state, this indicates a rather positive assessment of current Chinese Communist economic institutions- that they are at least as good as those that can be expected from the post-Communist European Union. Further institutional reform (since all agree China’s economic institutions are far from ideal -an identical Chinese worker will never earn as much in real terms in a comparable part of China as in Taiwan, and especially not under current Chinese Communist economic institutions) would thus surely guarantee China’s economy being at least as large as the U.S. by exchange rates, and more than twice the size of the U.S. by PPP.