China’s Miracle

By Shlomo  Maital  

         China

                                                                            1970                        2001

CHINA adjusted for inflation   (rmb b.)                  

Gross domestic product (GDP)    Q           225.3                        9,593

   Exports of goods and services   X            4.1                          2,478

   Imports of goods and services  IM         4.2                          2,246

   Household consumption expenditure   C  142.6                  4,409

   General government consumption expenditure   17.5       1,314

   Gross capital formation  Ig                            65.4                          3,638

 

  I’ve been reviewing macroeconomic data for China, 1970-2001.  And the numbers are astounding.  The world’s most populous nation has moved from a country disconnected from world trade, with almost no exports or imports, and abysmal poverty, a Cultural Revolution in which millions starved, in which backyard furnaces tried and failed to make steel – to a nation that has grown by an average of 10% yearly.  GDP has risen by almost 45 times, doubling five times..and then some.  Exports have risen by 600 times, which is 8 doublings!   And investment (capital formation)?   That rose almost 60 times, or almost 8 doublings!

   This has never happened in history. No country has come close, let alone with the world’s most populous country. 

   How did all this happen?  A leader named Deng Xiao Ping was placed under house arrest, during the Cultural Revolution, and had a lot of time on his hands.  He looked around the world, saw countries that were rich and growing, and countries that were poor and stagnant – and decided that ‘rich’ was better than ‘ideology’.  The rest is history.

   Lots of people seem to believe the ‘bubble’ will burst, and even wish it would, complaining about civil rights, human rights, etc.  China will soon be the world’s biggest economy. We all should wish China well – because if China’s growth slows, so will all of Asia, and then all of the world.  Ask not for whom the bell tolls…..

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