On the Future of the Chinese Economy

Scott Sumner, a generally smart, insightful, and well-read economist who has frequently visited China, has a Chinese wife and half-Chinese daughter, and claims to have predicted the rise of China in 1980 (though has shown no pics of this amazing feat) claims China will catch up to the GDP (PPP) per capita level of the former Axis powers. I thoroughly dispute this assertion.

Unlike Sumner, who sees modern-day Communist-ruled China as simply a Westward extension of the East Asian miracle, I view China as a corrupt, though fairly economically successful, descendant of Communist administration. I see its economic institutions to be somewhat less advanced than those of Russia today, although I, like Sumner, recognize the high intelligence of the Chinese people.

Today, the highest GDP per capita (PPP) in the post-Communist world (excluding Germany) is in the Czech Republic and Slovenia-two democratic countries with strong capitalist institutions bordering advanced Germanic democracies formed by the U.S. and Britain out of the ashes of the Third Reich. Communist China does not, cannot, and will not have institutions as good as this, at least, for another half-century, or until Communist China reunifies with Nationalist China. Neither the Czech Republic nor Slovenia has a GDP (PPP) per capita even 87% of that of Italy, the poorest Axis country, despite the fact that Italy has been in a depression since 2011. As no post-Communist country has ever surpassed any Axis power in GDP per capita (PPP), despite a quarter century’s worth of catch-up opportunities, with some countries starting from a much higher base than Communist China, there is no reason whatsoever to expect Communist China to surpass any Axis power in GDP per capita (PPP) terms any time soon, even a quarter century from now. There is also no reason to expect Communist China to surpass Slovakia, Slovenia, the Czech Republic, or Estonia in GDP per capita (PPP) terms any time soon, even with a democratic government.

The best existing parallel to China today is not Taiwan, Japan, or South Korea, but Belaroos’. Like China, Belarus today is a dictatorial industrial country which frequently uses protectionist policies and restrictions on foreign investment while developing its manufacturing exports to the First World. Of course, China, due to its people’s higher natural intelligence and work ethic, as well as its higher urban productivity (which is probably the most important factor here) can probably surpass Belarus’s GDP per capita (PPP) within fifteen years, despite the huge gap between Chinese and Belorussians in working full-time for an employer. And the best existing economic parallel to China twenty or thirty years from now is unlikely to be Germany, Austria, or Finland, but is more likely to be Russia- a large, post-Communist Great Power with a machine-style political system with real elections, but no real political choices. To those who say “but is not Russia simply a fossil fuel exporter” I reply “but what would it be doing if it weren’t”? Does Russia have no auto industry? No tech talent? No agriculture? No ability to develop high-value-added services? And is Russian economic success no less worthy than Chilean economic success, as these two have pretty much the same natural resource rents as a percentage of GDP, as well as a similar GDP per capita?

And while it is, indeed, true that China likely has higher urban productivity than Russia, as China’s GDP per capita is more than half of Russia’s, what will happen when the rural population is all sucked up into urban apartments, which I expect to happen within the next thirty years? At that point, due to lack of Chinese w

Author: pithom

An atheist with an interest in the history of the ancient Near East. Author of the Against Jebel al-Lawz Wordpress blog.

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