China’s Miracle
By Shlomo Maital
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…..
TIMnovate 
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November 6, 2013 at 6:15 pm
Eelker
Now when I was in Japan, I was thought at a business school how the Japanese culture, politics and business ethics were at the heart of the halt of Economic Growth that started somewhere in the early 90’s. However when I was in Hong Kong a Chinese business professor asked us to look at it differently. He told us that the economic growth per capita actually never really slowed down, it’s just that population started to shrink at about the same rate as the growth per capita resulting in a flat line. Now only recently China is gradually saying goodbye to its one child policy. They are doing so because demographics show that the one child policy has been kept effective way beyond its expiration date of effectively slowing growth down to actually causing a major shrinkage of the population on a scale incomparable to the one that is currently causing the Economy from Japan to still flat line. That shrinkage isn’t about to start tomorrow, however the saying goodbye to the one child policy is still that much overdue that the shrinkage can’t be prevented anymore. Let’s hope when the time comes China will have closed the gap with the rest of the world to make it a desirable place to migrate to, that just might save it for the rest of us.
November 7, 2013 at 12:19 am
timnovate
Thank you for your insightful observation, Eelker! Shlomo