Apr 18, 2011

Investors and pundits alike have shown unbounded excitement, and some anxiety, about China’s economic growth. Extrapolating current trends, some forecasters predict that China’s economy will vault ahead of America’s in 15 years. Yet simple extrapolation is the economists’ poorest guide. To accurately map the future, we need to consider whether the factors that fueled China’s rapid growth in past decades will continue in years to come.

From 1980 to 2010, the growth in China’s labor force was among the fastest in the world. At 1.7 percent per year, it contributed almost one-fifth of annual economic growth. Urbanization — a key source of productivity gains, as workers shifting from farms to urban manufacturing and services brought huge increases in output per worker — rose by 3.8 percent annually, as city residents soared from 20 percent to 45 percent of China’s total population. Education underwent a similar boom: The number of undergraduates rose 25 percent annually, from 3.4 million in 1998 to 13.3 million in 2004. The number of Western-style PhDs awarded leaped from just 19 in 1985 to 50,000 in 2006. These trends underwrote annual growth rates of 10 percent.

Jack A. Goldstone is Hazel professor and director of the Center for Global Policy at George Mason University

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