Peering into the Future of China
Outline notes for a talk on China I gave a week ago...
Peering into the Future of China
J. Bradford DeLong
U.C. Berkeley
(925) 708-0467
delong@econ.berkeley.edu
March 2005
The Setting
China's historical advantages
- Literacy
- Unity
- Trade (reached in 1100s levels not reached in Europe until 1700s)
- But: office-land-corruption complex
Mao Zedong
- Leveller (land redistribution)
- Soviet tutelage (communes; heavy industry)
- Fortunately it didn't really take
- Mao goes insane
- Great Leap Forward
- Famine
- Cultural Revolution
Deng Xiaoping
- "We cannot find him"
- "To get rich is glorious"
China Today
- 1.3 billion people: population growing at 0.6% per year, 1.12 male/female newborn ratio
- All in a space the size of U.S. east of the Mississippi
- Economic growth: up to 10% per year
- Investment: 43% of GDP
- Industrial production growth: 30% per year
- Economy size: $2 trillion GDP ($1,500 per person per year)
- $6 trillion PPP GDP ($4,500 per person per year) (cf. U.S.: $40,000)
- Economy sectors: agriculture 15%, mfg mining 52%, services 33%
- But: labor: agriculture 50%
- Economy distribution:
- Top 10%: 33% of income
- Bottom 10%: 2% of income
- Exports: $500 billion a year and growing...
- Coasts disconnecting from the interior...
China's Problems
- 400 million people on the coasts
- 800 million people in the interior
- 400 million people in the cities
- 800 million people in the interior
- People doing well:
- Beijing
- Coastal cities
- Party bosses
- Peasants near coastal cities
- Migrant workers
- People doing badly:
- Heavy industry
- Rural peasants without migrants in their families
- The Communist Party's task
- Move 10 million people a year into the coastal cities
- Find them jobs
- Make them happy
The Communist Party's Strategy
- Export at all costs...
- Redistribute income to the interior...
- Hope that nobody remembers they're supposed to be Communists...
- Keep the economy growing...
- Avoid the financial crisis...
- Someday, somehow, grow a middle class big enough to serve as a source of demand...
How long can China keep growing?
- 400 million peasant workers whose productivity is 1/3 the average
- 100 million manufacturing workers whose productivity is 4 times the average
- Do the math:
- Basic mechanization of agriculture plus transfer of 250 million peasants will triple the size of China's economy and its desired manufacturing exports...
Dangers to Business-as-Usual
- The bond market
- The next U.S. recession
- China's interior
- Lack of a legitimate politics
- Taiwan
- North Korea
