It's often said that 10 years from now China will surpass the US as the world's largest economy. Though I doubt that will happen, China's economic future is worth considering as President George W. Bush visits Beijing as part of his tour of Asia this week.
We have heard such boasts before. In the 1950s, the Soviet Union believed it would surpass the US because of its superior communist economic organization. Throughout the 1970s and 1980s we heard talk of Japan overtaking the US for top economic billing.
Now China, which with 1.3 billion people has roughly 4.5 times the population of the US, is the contender.
According to the US Central Intelligence Agency World Factbook, China's economy generated gross domestic product of US$4.5 trillion in 2000. US GDP for the same year was US$10 trillion.
Given that China has been growing at an annual rate of 8 percent to 10 percent in recent years, it is easy to see why some people expect it to overtake the US in a decade. China has achieved remarkable economic performance since late leader Deng Xiaoping (鄧小平) opened the country for foreign trade.
On the face of it, if there were no growth in the US, China would match US GDP in 10 years if it grows at an average annual rate of 8.3 percent.
How likely is that? Asking the question in terms of GDP per capita is illuminating. For the year 2000, GDP per capita in the US was US$36,200. For China, per capita GDP was US$3,600.
Suppose China's population stopped growing and the US economy grew at a modest pace. GDP per capita in China would have to almost triple in 10 years for it to become the largest economy.
To my way of thinking that shows the remoteness of the proposition. How likely is it that China could almost triple its GDP per capita in a decade? If that happens it would be great news. It would mean achieving a substantial eradication of world poverty in the space of 10 years.
By any measure that's a tall order to fill. Allow for growth in the population of both countries and economic growth in the US, and you begin to realize China would have to grow at phenomenally high rates to surpass the US in a decade.
It's not just the math that shows the remoteness of China's economy becoming the world's largest anytime soon. There are simply too many unknowns about China to make a confident projection of 10 years of economic growth.
As a currency buff I have reservations about proclaiming China king when it doesn't even have a fully convertible currency.
At present, the renminbi is convertible for current-account transactions but not for capital-account trading. I can't see the nominee for the future largest economy in the world having anything but a fully convertible currency.
A far more important issue is the country's future leadership. Sometime next year, President Jiang Zemin (江澤民) is slated to retire and be replaced by Hu Jintao (
On Feb. 14, New York Times columnist William Safire described Hu as being virtually unknown in the Western world. What little we know is not encouraging, starting with his support of the Tiananmen Square massacre and his participation in other crackdowns on dissidents.
The bottom line is that nothing much is known about China's future leadership. If we don't even know what its currency regime will be, why are so many people confident the country has a sunny growth outlook?
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