Whither China’s economy ?

There was an article in the NY Times this weekend about the direction of China’s economy. There has been a spate of these articles lately as certain economic indicators coming out of China point to a slow down. I think there is not a small amount of envy behind these trendy headlines about China’s slowdown, for Americans are not happy to see so much growth in China and so little growth here at home. Whenever economic markers point to a slowdown in China, the media here in the US jump immediately and all the headlines are about “…the slowing Chinese economy.” This seems to be the pattern. In the meantime the Chinese economy marches forward.

The point of the article is that no one really knows what is going to happen to China’s economy over the long run. There are indications that the phenomenal growth we have witnessed in China over the past 30 years will soon come to an end. But others say we have to ignore those signs, based on historical data and statistical models, and look at what is happening inside of China right now. Here is the article. NY Times article

For my own part I don’t see things slowing down in China for a long time, and for the same reason someone quoted in the article gives: China’s drive to urbanization. For all it’s progress over the past 30 years, which saw 30% of the Chinese population move from rural to urban areas, China remains a country mired in rural backwardness. About half of the country sill lives in rural areas where the average wage is less than $5.00 per day. In fact only two years ago did the urban population of China surpass the rural population. In contrast only about 20% of the US population lives in rural areas and in Japan the figure is less than 10%. I have been in some of these rural areas 3rd and 4th tier cities in inland provinces and they are huge, but underdeveloped. Some of them remind me of Shanghai 25 years ago and when I drive through them I think to myself “ wait until these places start developing as well….” And that is what is going to happen over the next 25 years.

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