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Sunday, November 22, 2009

China's tough road ahead

China got the money.

But don't mistakenly think China will catch up with the US soon. According to estimates by Robert Fogel at University of Chicago (see graphs below), China will catch up the US around 2020 in total GDP, but only until after 2040 will China reach the same living standards, measured by GDP per capita, as the US.

Currently, the GDP per capita in China is a little over $5,000 (in PPP term), way below US average of $45,000.





(click to enlarge; source: Robert Fogel)



China's big problem is it's non-democratic. The implications are 1) China's political system is inherently unstable; 2) Political freedom and free expression of ideas are closely tied to human creativity and innovation, which is the long-term driver for a country's wealth. That's where I worry most about China.

On the optimistic side, we should know political system itself is an evolutionary system. The hope is that as Chinese are getting richer, the current political system will evolve into something similar to western democracy.

Also listen to this NPR report on "While US economy struggles, China rises".




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