The Economist estimates China’s past and current growth. They also examine China $600 billion stimulus effort.
Any analysis of China’s growth prospects is clouded by the widely held belief that the government smoothes its GDP numbers and always overstates growth during economic downturns. The chart plots China’s official growth rate against an alternative estimate calculated by Dragonomics from expenditure data (ie, investment, household spending and exports). This estimate shows much bigger swings than the politically smoothed official numbers.
Although China’s planned fiscal expansion is still vague, it promises, if it is implemented and it works, to save the economy from a hard landing. And if stronger domestic demand sucks in more imports of raw materials and infrastructure-building machinery, that is the best way China can help the rest of the world.
Most economists think the stimulus package will be enough to keep growth at 7.5-8% for 2009 as a whole.
Nouriel Roubini, a professor at the Stern Business School at New York University, who has been accurate in predicting the scale of the current downturn so far indicates that the worst is not over. He believes the US could see -4% GDP in 2009 and China 6% GDP growth before China stimulus.
China and India Out to 2020
The proportion of intra-regional trade in East Asia grew from 40% in 1980, to 50% in 1995, to 60% today. The strong dependency on the US market (single market dependency) of the 1980s and 1990s is rapidly diminishing.
After Japan and the newly industrialised countries (NIC) of Northeast and Southeast Asia, which managed to break out of the “third world” in two generations, China and India have been in a phase of remarkable expansion since the 1980s and 90s. With 33% of the world’s population, their share of global gross domestic product (GDP), calculated in terms of purchasing power parity (PPP), has risen from 3.2% and 3.3%
respectively in 1980, to 13.9% and 6.17% in 2006 (while global GDP has tripled). At the same time the GDP (PPP) per inhabitant, a more subtle measure, has increased by a factor of 16 in China ($419 to $6,800) and by a factor of five in India ($643 to $3,490). The share of global GDP produced by Asia as a whole, currently 34%, should reach nearly 45% in 2020: 20% for China, 9% for India and 6.2% for Japan (the total share for “emerging” regions is estimated between 55% and 60%) [World Bank and IMF data]
Yangtze River Delta Could Be US$3-5 Trillion by 2020
Wang Fanghua, a scholar from Shanghai Jiao Tong University, forecast
the GDP in the delta would hit 15.95 trillion yuan by 2020, based on the annual growth rate of 11 percent. If the yuan appreciates to 5 yuan to 1USD that forecast would be USD3.2 trillion, if the yuan appreciates to 4 yuan to 1USD that forecast means US$4 trillion [the current size of China’s economy which is about the same as Germany as well. As the region is on route to modernization, its plan of building a high-speed railway network is brewing.
According to the plan by the Chinese government, the Yangtze River Delta will build five major railways, including three inter-city railways, namely, Shanghai-Nanjing railway, Nanjing-Hangzhou railway and Shanghai-Hangzhou railway.
China Demographics and Current Cash
China demographics are discussed.
China is also expected to see its largest population mobilization when 300 million people enter urban centers in the next two to three decades.
China’s cash reserves are estimated at more than $3,000bn – 70% of the world’s total reserves – compared with $800bn in 2000.
China’s Cars and Trains
Ou Guoli, a professor at Beijing Jiaotong University, said it was necessary to develop subways in Beijing as it was one of the best ways to ease traffic congestion.
As car-ownership rapidly increases, Liu hinted that the city was considering containing growth. He did not elaborate.
He said currently Beijing has 3.4 million cars and if there is no restriction, the number will exceed 4 million in three years.
Other infrastructure build, Jan 2008 started work on 1,300km line between Beijing and Shanghai that, when completed in five years’ time , will reduce rail time between the two cities from ten hours to five—and thus be a competitive alternative to flying.
China had 78,000km of track at the end of 2007. The original plan, published in 2004, was to increase this to 100,000km by 2020. Last October this was revised to 120,000 km (and officials now say the target will be met by 2015). Even sticking to the 2020 target, this will mean laying 60% more track in the next dozen years than was built since the start of the economic reform programme 30 years ago. Huang Min, the Ministry of Railways’ chief economist, says that by 2020 the railway system’s freight-handling capacity should be greater than demand. At present, he says, it can handle only 40%.
Mr Huang reckons that railway expansion will bring down logistics costs, which he says amount to 18% of GDP in China compared with 10% in America. It will also help reduce pollution, he says, since fewer polluting lorries will be needed.
China’s stimulus plan will boost and accelerate existing infrastructure projects.
Spending on priority areas such as railway and power grid expansion can now be front-loaded to support economic growth. To cover an expected fiscal deficit in 2009, the government is likely to increase its government bond issuance by a wide margin.