EuroBiz: China's Hidden Weaknesses

My new article about China's Savings and Pension Problems is posted at the EuroBiz website.  I write:

Western think tanks and consulting groups like to issue reports that analyse global economic environment decades in the future. Projecting China's future growth rates, researchers at Goldman Sachs last year, for instance, claimed that China's economy could overtake the United States by 2041. In March, PricewaterhouseCoopers (PwC) reached a similar conclusion in a report called "The World in 2050" when it predicted that in the next 44 years China will likely overtake Japan and Germany and rank alongside America as the most powerful country in the world.

While such predictions may prove to be true, it is important for foreign politicians and business leaders dig a little bit deeper into these reports and try to separate the myth from the reality. With soaring GDP growth rates in the past three decades and a huge population, China has generated its share of oft-repeated myths involving its massive labour market and high national savings rate. A complex new reality is starting to emerge.

To read more:

http://www.sinomedia.net/eurobiz/v200610/economy0610.html

Comments

[jakedanger]

Allow me to suggest that having the world's no.1 aggregate GDP will not make China the world's No. 1 economic power. At the time that China's aggregate GDP passes that of the US, its per capita GDP will be about one-fifth that of the US (because China's population is about 5 times that of the United States). With a GDP equal to the US but with a billion more people to ffed and clothe, China's aggregate disposable income (available for R&D, investment overseas, etc.) will lag well behind that of the US and Japan even then. At best, it will take a few decades after China becomes No.1 in the rankings for it to become No. 1 in reality.