The Sunday Paper – China’s Long-Term Growth Potential: Can Productivity Convergence Be Sustained?

Koichi Yoshino from the Tezukayama University (Nara) together with others from the Bank of Japan address the China-growth question in the context of the Asian Fantastic-4 (F4, Japan, Korea, Taiwan and Singapore) who’ve already blazed the trail.

They conclude, if China can follow the same path the results should be equally impressive. However..

China differs from the F4 in some very important ways versus where the F4 were at a similar stage of development. Overcoming these China-specific problems will be exceptionally hard.

They are:

China insists on maintaining food security. This means agricultural output will need to be maintained. To allow for more to leave the land and go into more productive occupations difficult to progress agrarian reforms will be required.
China has been a success in developing it’s export manufacturing sector but there are, a) limits to these gains and, b) headwinds in terms of how the U.S. in particular is looking to circumscribe this progress. To solve this issue domestic consumption must be raised.
The population’s ageing is different from the F4 whose populations were still in the boost-phase when they were at a similar development point. This produces two problems: a potential worker shortage and, more important, a potential (lack of) savings problem.

The paper concludes that if China can grasp these nettles it should be able to double (from 2020) both the size of its economy and per capita GDP by 2035. The prescription is simple, but can/will the patient take the medicine?

You can access the paper in full via the following link China’s Long-Term Growth Potential.

Happy Sunday.

Below are some interesting charts from the work.

North to join the F4, or south to join the middle-income also-rans?