From poor to super rich in 40 years
In 2003 analysts at Goldman Sachs caused a stir when they predicted that the mainland would overtake the United States to become the world's largest economy soon after 2040. Now new research published by the US National Bureau of Economic Research goes even further, forecasting that by 2040, the mainland economy will be twice as big as the United States, the core European Union countries and Japan - put together.
And the mainland will not just be big, it will also be rich. By 2040, according to the research report, per capita income in the mainland will be US$85,000, measured in terms of the purchasing power of year 2000 US dollars. That is more than twice the forecast for the European Union. As the report declares; 'China is forecasted to go from a poor country in 2000 to a super-rich country in 2040.'
By then the world's economic balance will have shifted fundamentally towards Asia, according to the report's author Robert Fogel, director of the Center for Population Economics at the University of Chicago's Graduate School of Business. He predicts that by 2040, the economies of both India and a bloc comprising Singapore, Malaysia, Indonesia, Thailand, South Korea and Taiwan will be almost as large as that of the US.
Together Asian countries will make up two-thirds of the world's gross domestic product, with the mainland alone making up 40 per cent, compared with just 11 per cent in 2000.
Meanwhile both the European Union and Japan will decline drastically in economic importance. The share of the EU's core 15 countries in the global economy will drop to a measly 5 per cent from 21 per cent in 2000. Japan's share will fall to 2 per cent from 8 per cent.
These are bold forecasts. Professor Fogel predicts that by 2040, the mainland's GDP will be a massive US$124 trillion. To put that into perspective, that is nearly three times the world's entire economic output in 2000, and more than 12 times US GDP for that year. To realise that forecast the mainland will have to grow at an average 8.3 per cent annual rate for the whole period between 2000 and 2040.
Professor Fogel thinks such a sustained high growth rate is eminently achievable. He points out that the mainland has maintained a 9 per cent growth rate in worker productivity for the last quarter century, partly by improving productivity within different sectors and partly by shifting workers from agriculture into manufacturing and services, where their output is much higher.
And there is plenty more room for improvement, according to Professor Fogel. He argues that a college-educated worker is around three times as productive as one who left school aged 15. In the mainland, enrolment in tertiary education is rising fast, reaching 19 per cent in 2004 from 12.5 per cent in 2000. Simply by raising the enrolment ratio to 50 per cent - similar to European levels - over the next generation, the mainland can add a hefty six percentage points to its annual growth rate.
Professor Fogel rubbishes the idea that a weak financial system, environmental degradation, endemic corruption or political instability could derail the mainland's growth. He not only expects the mainland to be rich in 2040, he also expects the Communist Party still to be firmly in power.
