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 Another article about China--from FT |
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作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
China has further to grow to catch up with the world
By Martin Wolf
Published: April 13 2005 03:00 | Last updated: April 13 2005 03:00
For how long can China's rapid growth continue? This is an obvious, even banal, question. But asking it suggests that there is something extraordinary about the growth of the Asian colossus over the past two-and-a-half decades. Yet the only way in which China is exceptional is in its scale. Otherwise, it is merely at an early stage on the path of rapid convergence previously trodden by Japan, Taiwan and South Korea.
According to data from the economic historian Angus Maddison (updated to 2004), China's gross domestic product per head at purchasing power parity rose by 370 per cent between 1978 and 2004, a trend rate of 6.1 per cent a year (see chart). Yet between 1950 and 1973, Japan's GDP per head had increased by 460 per cent, a trend rate of 8.2 per cent. Between 1962 and 1990, South Korea's GDP per head rose by 680 per cent, a trend rate of 7.6 per cent, while Taiwan's rose by 600 per cent, between 1958 and 1987, a trend rate of 7.1 per cent.
China's growth then has been far from spectacular by the standards of its smaller Asian neighbours. Yet there are reasons to believe that China should have been able to outperform them all.
First, the speed with which a country can grow is a function of how far it is behind the productivity levels of the world's most advanced economies. This is why each generation of catch-up economies has tended to grow faster than the previous one. When China's surge began, its GDP per head at PPP was only one-twentieth of that of the US. Even now, after a quarter century of fast growth, China's output per head is about one-sixth of that of the US. Japan's GDP per head was one-fifth of that of the US in 1950, even before its unmatched surge began (see chart).
Second, China possesses all the ingredients of rapid growth, as did Japan, South Korea and Taiwan before it: a hard-working and initially cheap labour force, the ability to transfer huge numbers of workers from low productivity agriculture to higher productivity manufacturing, an accommodating external environment, political stability and a development-oriented government.
Third, China apparently possesses an extraordinarily high rate of gross fixed investment, at over 40 per cent of gross domestic product (see chart). What makes China's high investment rate so extraordinary is that it is occurring at such a low level of GDP per head. China's GDP per head (at PPP) is today the same as that of South Korea's in 1982, Taiwan's in 1976 and Japan's in 1961. In those years, the gross fixed investment rates of South Korea and Taiwan were both below 30 per cent of GDP, while Japan's was 32 per cent.
Given the opportunities it enjoyed and its investment effort, China should have grown even faster. The failure to do so is explained by the inefficiency of investment.
A simple measure of investment efficiency is the "incremental capital output ratio" - the ratio of investment to additional output. The lower the ICOR the greater the bang for the investment buck. China's ICOR has now risen to a five-year moving average of five. In its period of rapid growth in the 1960s, Japan's ICOR was close to three. In the 1960s and 1970s, the ICORs of South Korea and Taiwan were between two and three.
Several further pieces of evidence support the view that China's growth pattern has been inefficient. One is the high level of bad loans in the banking system. If an economy growing at close to 10 per cent a year generates bad loans on this scale, the misallocation of capital has to be huge.
The principal explanation for the high level of losses has been the pouring of credit into the voracious maw of the state-owned enterprises. Between 1993 and 2000, more than 60 per cent of all credit to enterprises went to state enterprises. According to two economists from the International Monetary Fund, the share of private investment in total investment was only between 15 and 27 per cent between 1991 and 1997, largely because private business had little recourse to bank lending. Yet jobs created by the private sector accounted for 56 per cent of the total*.
Still more remarkably, inward foreign direct investment was only about 4 per cent of GDP in the first half of the 1990s and 5 per cent in the second. Yet, according to two other IMF economists, FDI generated almost all of the efficiency gains**. The share of foreign-owned companies in gross exports is also close to 50 per cent. Their share in the gross output of industrial enterprises rose from nothing in the early 1980s to 12 per cent in 1995 and 29 per cent in 2002.
Objectors to the position that China could have grown even faster may argue that a country of China's scale needed higher investment in infrastructure than its smaller neighbours. But this high investment is likely to bear fruit in the years to come.
Some also argue that China's GDP is underestimated and its investment rate exaggerated. But if the investment rate is indeed lower than officially estimated, it may well go even higher in the years ahead.
Furthermore, at present rates of economic growth, it would take more than a quarter of a century for China to achieve Japan's current level of GDP per head. It would take more than three decades for China to achieve the same GDP per head, relative to the US, as South Korea has today. The potential for catching up remains immense.
Do not assume that China's rapid growth is an extraordinary flash in the pan. It is neither extraordinary nor a flash in the pan. The social and political obstacles to rapid and sustained growth are large. But the catch-up opportunity remains enormous. The era of China's rapid catch-up growth could well be in its middle, not at its end.
* Christopher Duenwald and Jahanguir Aziz, The Growth-Financial Development Nexus, in China: Competing in the Global Economy (International Monetary Fund); ** Wanda Tseng and Harm Zebregs, Foreign Direct Investment in China: some Lessons for Other Countries (IMF)
An earlier version of this column appeared as Why is China Growing so Slowly, Foreign Policy, January/ February 2005 .. [email protected]
作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 Another article about China--from FT -- Nowonder - (6243 Byte) 2005-4-13 周三, 21:30 (783 reads)
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