The Future of China, Take 2

A couple of weeks ago I linked to a paper predicting that China’s growth would start to slow down in about five years, when its per capita income reaches $17,000. The authors based this on a comparison to a set of other countries that had also experienced high growth rates but eventually slowed down.

This week the Economist gathered a host of economists to comment, and for the most part they all agreed with the gist of the paper. However, they didn’t invite Stuart Staniford, who thinks the $17,000 number is all wet. Roughly speaking, he thinks the authors chose the wrong set of countries for comparison, so he set out to get a more apt sample set:

To try to get a better grip on the situation, I did two things. Firstly, to formalize the instinct that the US has been at/near the productivity frontier at most times, I expressed every country’s GDP/capita as a fraction of the US value in the same year. Then I started kicking countries out of the sample, unless they met the following criteria: they started out the sample clearly less productive than the US (I took less than 60% as my threshold), and ended up significantly more productive, relative to the US, than they had started out. Ie, we want countries where it’s somewhat plausible that there’s a story of underdevelopment, period of rapid catchup, followed by slowing growth once the country is a fully developed country with modern capital infrastructure and levels of productivity.

Long story short, Stuart produced the chart below, which suggests China can keep growing at a fast pace until its per capita income is somewhere in the $25,000 range, which is probably still 15-20 years away. I don’t have the chops to adjudicate this, but I thought it was worth highlighting a contrarian opinion anyway. China might very well slow down in the next five or ten years anyway, since it faces multiple constraints (resource scarcity, productivity limits, demographics), but the $17,000 limit is just a guess, and you should probably put some fairly large mental error bars around it.

Fact:

Mother Jones was founded as a nonprofit in 1976 because we knew corporations and the wealthy wouldn’t fund the type of hard-hitting journalism we set out to do.

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation so we can keep on doing the type of journalism that 2018 demands.

Donate Now