A key feature of the recent 19th Congress of the Communist Party of China (CPC), and the events leading to it, was the strong emphasis placed on Marxism in China. This was underlined in Xi Jinping's report to the Congress. It was stated explicitly in official reports Chinese reports of the Congress in the mainstream Western media. For example the Chinese Ambassador to the UK, Liu Xiaoming, noted in the British Daily Telegraph: 'The Congress has adopted the Xi Jinping Thought on socialism with Chinese characteristics for the new era. This is the latest adaptation of Marxism to Chinese conditions. It is the CPC’s understanding of the laws of social progress and it answers the question of how to adhere to and continue building socialism with Chinese features.'
This CPC emphasis on Marxism is of key significance for both wings of the political spectrum:
This Congress on Marxism is clearly a further step in China entering into dialogue with Marxists in other parts of the world and is in direct line with the events at the 19th CPC Congress. Because of the importance of this the announcement in Xinhua of the Congress on Marxism is reproduced in full below.
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BEIJING, Oct. 22 - The 2nd World Congress on Marxism is scheduled to be held in Peking University in Beijing next May, the organizer said Sunday.
The congress, to be held from May 5 to May 6, is expected to attract more than 300 Marxism researchers to discuss Marxism in the 21st century and its developments in China.
The congress coincides with the 200th anniversary of Karl Marx's birth and 40th anniversary of China's reform and opening-up, said Gu Hailiang, head of the academic board of the organizing committee.
It will be a significant event for the world Marxism research and scientific socialism, Gu told a press conference.
The conference, with the theme of "Marxism and the current world and China", will have 17 subforums covering topics like Chinese solution and modernization approach by the developing countries, said Sun Daiyao, vice president of the School of Marxism of Peking University.
Gu said the congress will focus on Marxism research by the global academic circle and Marxism in current China.
The congress will help to interpret to the world academic circle the "China road, China theory and China experience", Gu said.
China was ready to support Greece at the height of the 2015 debt crisis says former Greek Finance Minister Varoufakis - an important lesson for Europe
In an important and revealing video former Finance Minister in Greece's Syriza government, Yanis Varoufakis, has revealed his successful negotiations for a mutually beneficial investment agreement between China and Greece at the height of the Greek debt crisis in 2015. This revelation explains several important recent developments regarding Greece and China and has important implications for the Europe and international left wing parties.
In his account of these events Varoufakis strongly commends China's ability to achieve what China would term a 'win-win' outcome - simultaneously meeting Greece's need for investment to revive its economy with expansion of activity in Europe by Chinese companies. He also reveals this mutually beneficial deal was then blocked by intervention by the pro-austerity Berlin government.
These revelations, and his praise of China, by Varoufakis are important for several reasons.
First, Varoufakis is a respected figure internationally among those of a left wing political orientation and among left wing political parties. His clear praise of China's role will help weak anti-China confusion among such political circles.
Second, this revelation that at the height of the Greek debt crisis China offered a constructive way forward for both Greece and its own interests helps explain the positive attitude the Syriza government has taken to China - including blocking attempted EU propaganda against China.
Third, although Germany blocked the comprehensive deal between China and Greece this has not stopped Chinese investment in Greece. The New York Times recently noted regarding the port of Piraeus: 'China invested nearly half a billion euros in the port, transforming it into the busiest harbor in the Mediterranean.' And: 'Prime Minister Alexis Tsipras returned from a summit meeting in Beijing in May, where he signed billions of euros worth of new investment memorandums with Chinese companies.' Such investment is clearly of mutual benefit of the Greek people as well as China.
This clear explanation of the background to these events by Varoufakis therefore has important lessons for Europe and more widely. The text of Varoufakis video is below but the original contains much interesting information and readers are strongly recommended to view it.
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Greece and China, two ancient civilizations, two countries whose peoples have had a long experience, and quite recently, of colonialism, of being treated like the sick men of the world. Europe in our case, Asia in the case of China.
In 2015, when I was conducting negotiations with the Chinese side, in parallel to the negotiations we were having with the European Union and the International Monetary Fund, I was very pleasantly surprised by the way in which the Chinese authorities managed to combine their sense of self-interest with a patient investment attitude and a genuine commitment to renegotiate and negotiate and discuss again and again and again with us, with a view to achieving a mutually advantageous agreement. The discussions began regarding the Port of Piraeus, where COSCO, a state owned Chinese company, already had their foot in the door, so to speak, and there was a discussion about how to extend its operations. They were very surprised when I proposed to them that this should be part of a broader investment exercise in Greece by China, involving railways, technology parks, involving all sorts of activities where our economy needed patient capital, like shipbuilding and shipyards and tourism.
We came to a magnificent agreement. The showed broadmindedness, they were prepared to accept collective bargaining agreements with trade unions. They were prepared to take it step by step in a way that would, of course, benefit them but would also benefit us in a non-colonial manner. What stopped it was an intervention by Berlin insisting that no deal should go through until and unless the Eurozone had finished with the Greek government.
New US data shows that China's economy is growing at 6.8% and US at 2.3% - China growing almost three times as fast as US
New US data published on Friday shows that the US economy in the year to the 3rd quarter of 2017 grew by 2.3%. In comparison China's economy grew by 6.8%. That is China's economy is growing almost three times as fast as the US. This is shown in the chart.
Some confusion in the media is caused by the fact that the official reports of China's and US economic growth are presented in different ways. China emphasizes real year on year growth - that is China's latest data, for 6.8% growth in the 3rd quarter of 2017, is a comparison to the 3rd quarter of 2016. As the same period in the two years is being compared no seasonal adjustment has to be made to the data.
The US instead takes growth over the last quarter and compares it to the previous quarter - that is US growth in the 3rd quarter of 2017 is compared to the 2nd quarter of 2017 and the result is annualized.
The strong disadvantage of the US method is that is relies on the calculated seasonal correction being correct. But it is well known that at least one of the US seasonal adjustments, that for the first quarter of the year, is seriously incorrect - resulting in reported US growth in the 1st quarter being seriously under reported, and that in the next quarters therefore being too high. Furthermore purely short term fluctuations can seriously affect a quarter by quarter adjustment. For this reason China's method of comparing growth to the same quarter in the previous year is more statistically robust.
The data therefore confirms that China's economy is growing almost three times as fast as the US.
By 2022 China will enter the ranks of world high income countries - creating a 'new era' in the global economy
China at the 19th CPC Congress reaffirmed its immediate domestic goal as to ‘comprehensively build a moderately prosperous society’ by 2020. This forms a corner stone of China’s ‘new era of socialism with Chinese characteristics’. But to judge the international impact of this goal it may be noted that ‘moderate prosperity’ is a specifically Chinese term and therefore a criterion which cannot be judged in comparison to other countries. It therefore helps to understand the international impact of the ‘new era’ to also analyse China according to the standard World Bank international classification of countries. The results obtained by such comparisons are extremely striking and indeed strongly confirm that what is involved is a ‘new era’ – not only for China but globally. To be precise:
In order to demonstrate these developments, and avoid any suggestion of using exaggeratedly pro-China sources, all data in this article is calculated from the latest database of the IMF’s World Economic Outlook – a bastion of Western economics which cannot in any sense be described as under China’s control.
World Bank classification of high-income economies
The World Bank standard international classification divides economies into four groups:
When will China become a high-income economy?
In order to calculate when China will become a high income economy by international classification it should be noted that the World Bank uses a three year moving average of exchange rates in its estimations – this is done to avoid the distorting effect of any extremely sharp short term exchange rates movements (the method is known technically as ‘Atlas methodology’). It should be noted that using this criterion China’s current per capita GNI in 2016 was $8,260 - fractionally higher than its 2016 per capita GDP of $8,123.
Evidently it is not possible to predict the exact precise three year moving average of the RMB’s exchange rate against the dollar in five years’ time (anyone who could do that would be so rich they would make Bill Gates look like a mere pauper!). Therefore, a certain margin of error must be allowed for, but the fundamental statistics are clear. By 2022 the IMF projects China’s per capita GDP will be $12,834. The IMF’s is a conservative estimate as it actually assumes a substantial slowdown in China’s economy, without justifying this, to an annual average growth of 5.7% by 2022. Taking this trend, and the relation between per capita GNI calculated by World Bank ‘Atlas methodology’ and China’s current per capita GDP means than in 2022, or slightly before or slightly after depending on the exact exchange rate, China will enter the ranks of ‘high income’ economies by standard World Bank international classification. But this, as already noted, will more than double the proportion of the world’s population living in high income economies.
The conclusion regarding the global significance of these trends in China’s economy are clear. More than doubling the number of people living in high income economies, which is what will be achieved when China enters that status, is in reality a transformation of the global economic situation. In short, the ‘new era of socialism with Chinese characteristics’ was designated from the point of view of China’s domestic development. But the reality is that it will also be a ‘new era’ from the point of view of the world situation.
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This article was originally published in Chinese at Sina Finance Opinion Leaders.
I have two videos published analyzing why real Western politics is far more sinister than the purely cardboard villains in House of Cards. It is an illusion that in the West the key decisions are decided by 'democratic votes', they are decided by money and power. A short video looking at the situation following the election of Trump, 5 minutes long, was made this year and is at this link. It is a follow up to a much longer one 1 hour lecture, also in English, delivered last year which has been viewed more than 1.2 million time - this long lecture is here.
The following analysis of the significance of the 19th Communist Party of China (CPC) Congress is by Liu Zhiqin, Senior Fellow of Chongyang Institute for Financial Studies, Renmin University of China. Its focus is not only the significance of the Congress within China but China's international role in the strengthening of Marxism. It originally appeared in China's Global Times.
One of the arrogant, 'colonialist mentality' illusions of Western analysis of China, both the 'right' and some sections of the 'left' was that Western writers knew better than China itself what was the ruling theory of China. This was the significance of the claim made in major parts of the Western media that Marxism in China was merely paid lip service to, that it was merely 'for show'. This 'colonialist' intellectual illusion made many Western analysts incapable of understanding the dynamics in China.
This analysis of the 19th CPC Congress shows just how mistaken that Western idea was. China's policy was not only based on Marxism but China's success is now by far the most powerful force strengthening Marxism internationally after the collapse of the USSR. It is vital for those interested in progress in all countries to learn from China and it is greatly to the benefit of the international community that new global conditions make China more active in helping others learn from it. China's impact both in general, and specifically in Marxism, will of course increase with the continuation of China's success.
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The 19th National Congress of the Communist Party of China (CPC) takes place at a crucial time in world affairs. The report to the 19th CPC National Congress delivered by General Secretary of the CPC Central Committee Xi Jinping on Wednesday is undoubtedly the manifesto of the Communist Party in a new era, as it bears historic and practical significance. The report not only serves as a guide to China's political direction and destiny, but also exerts a profound influence on the development of the international situation and the world political landscape.
Since the early 1990s, the collapse of the Soviet Union has set people's understanding of socialism and communism into a swirling maelstrom and devastated the European socialist camp led by the Soviet Union. After the color revolution hit eastern Europe, almost no political party and public figure dared promote socialist and communist theories and engage themselves in activities in this regard. Marxism was treated unfairly, something that had not happened in the previous century. Society was divided and chaotic. People's beliefs were distorted. As some politicians in the West defamed socialism and communism at that time, Marxism and socialism reached an unprecedented low ebb.
How Marxism and socialism would develop has baffled the international community for almost 30 years. However, China, with the fruitful results of its reform and opening-up over the last 40 years, announced to the world that Marxism and socialism are still an attractive theoretical guide and development path, full of vitality for developing countries. China, through countless facts, has proven a simple truth: Adapting Marxism to a country's reality is the most effective guiding ideology to develop its politics and economy and also to modernize its culture.
Fortunately, China upholds the principle of adapting Marxism to the Chinese context in its reform and opening-up. The astounding achievements China has made in reform and opening-up result from the practice of Marxism in China and the socialist path in line with China's national conditions.
Xi's report to the 19th CPC National Congress proves to the world that more than one path is available for countries striving to pursue socio-economic development and modernization. The development pattern in the West doesn't fit all nations. China's development experience shows that one can follow China's path to head toward the modernization that was achieved in the developed world. If China's path turns out to be feasible to a country home to about 1.36 billion Chinese people, it can serve as an important reference for most nations around the globe.
This is the global significance of China's experience in its reform and opening-up as well as the value of the informative report delivered by Xi at the opening of the 19th CPC National Congress. The past five years have witnessed unprecedented progress and groundbreaking achievements.
The CPC, by training cadres and officials using strict criteria, conforming to people's wishes and keeping up with the times has completed missions and undertakings that the West considered impossible. This is the key to the CPC's consistent achievements.
Socialism with Chinese characteristics has entered a new era. The CPC has given shape to the Thought on Socialism with Chinese Characteristics for a New Era which builds on and further enriches Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Theory of the Three Represents and the Scientific Outlook on Development. It is a long-term guide to action that the Party must adhere to and develop in a bid to address new challenges and fulfill new missions in a new era.
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This article was originally published under the title 'Xi’s report: manifesto of CPC in a new era'.
Chinese socialism's rapid economic growth, Western capitalism's 'new mediocre' - economic background to the 19th Communist Party of China Congress
The present 19th Congress of the Communist Party of China (CPC) occurs on the 20th anniversary of the Asian financial crisis and the 10th of the US subprime mortgage collapse which ignited the international financial crisis. This necessarily leads leads to analysis of the achievements and trends of China’s economy in comparison with these major crises and of China’s relations with the rest of the world. Such comparisons are even more necessary because as will be seen these crises were not purely historical events but their effects continue to shape the present international situation at the time of the 19th Congress.
To summarise the results, both the Asian crisis and the US sub-prime crisis showed in a striking practical way the economic superiority of China’s ‘socialism with Chinese characteristics’ to the Western capitalist system - China was able to come through these two crises with little economic damage, unlike the West. Indeed, China’s success during these crises sharply increased its weight within the global economy. These events therefore demonstrated the superiority of ‘socialism with Chinese characteristics’ not merely in an historic sense but as China’s best defence confronted with current problems in Western economies.
Asian financial crisis
Analysing first the 1997-98 Asian financial crisis, this had devastating effects on most Eastern Asia developing economies. In 1998 South Korea’s economy contracted by 6%, Malaysia’s by 7%, Thailand’s by 8%, and Indonesia’s by 13%. Knock on effects depressed the regions advanced economies – both Singapore and Japan’s economies declining.
Given the devastating effect on East Asian developing economies Western commentators predicted China would be affected by economic crisis – a prediction which turned out to be totally false. In 1998 China’s economic growth was 7.8% and in 1998 7.6%. In contrast to the other major East Asian developing economies China came through the Asian financial crisis without significant economic slowing.
Sub-prime mortgage crisis
The 2007 US sub-prime mortgage crisis inaugurated an even more severe international crisis as it originated within the US creating the worst world economic crisis since the post-1929 Great Depression.
Under the impact of the US crisis the world economy contracted in 2009 for the first time since the aftermath of World War II. The US economy in 2007-2009 declined by 3%, its worst performance since the Great Depression.
But even more serious cumulatively growth in the advanced Western economies entirely failed to regain its pre-international financial crisis rate. IMF managing director Christine Lagarde accurately described the post-2007 period in the Western economies as a ‘new mediocre’ - average annual economic US growth in 2007-2016 was only 1.3%, in the EU 0.6% and in Japan 0.4%.
Despite this most severe global crisis for almost a century China’s economy continued rapid expansion. In 2007-2016 China’s economy grew by 106% - compared to only 9% in the US, 6% in the EU and 3% in Japan. The combined effect of China’s rapid economic development with the West’s ‘new mediocre’ therefore sharply changed the situation in the world economy.
China not only raised its own population’s living standards amid the extremely negative effects of the international financial crisis, but China became the most important support of the world economy. In 2009, the crisis’s worst year, China’s GDP increase was greater than the whole of the rest of the world. In 2007-2016 overall China was responsible for 44% of world growth.
These trends created a ‘win-win’ outcome between China and the rest of the world – practically confirming Xi Jinping’s concept of a ‘community of common destiny’. China’s economic expansion aided China’s own people, while Western living standards were falling, but China’s growth aided world economic recovery - thereby avoiding greater international problems for China itself.
These two financial crises demonstrated in the most practical way the superiority of China’s ‘socialism with Chinese characteristics’ compared to capitalism.
In capitalism the economy is entirely dominated by private ownership of the means of production. In the US, for example, 83% of investment is private and only 17% state - with no large state banks which can provide easy finance for private company investment. Therefore, when the collapse of the sub-prime mortgage market led to plummeting US private investment, which fell 24% in 2006-2009, there was no state mechanism strong enough to prevent the US falling into severe recession. This repeated the experience of the Asian financial crisis, when investment in South Korea fell 21% in 1997-98, while in 1997-1999 investment fell by 45% in Indonesia and by 47% in Thailand and Malaysia.
In contrast China’s ‘socialism with Chinese characteristics’ has a powerful state sector which in a crisis can maintain investment and powerful state banks which can lend to private companies. Over 35% of China’s fixed investment is by the state. Therefore during the Asian financial crisis, while investment was falling sharply in other Asian economies, in China it rose by 22% in 1997-1999. During the sub-prime crisis, while in the US total investment fell by 18% in 2006-2009, In China it rose by 54%. China’s ‘socialism with Chinese characteristics’ was therefore the direct reason China came through the two great international economic crisis without the severe problems which affected the Western economies.
This confirmed the words of the Third Plenum of the 18th Central Committee of the CPC: ‘We must unswervingly consolidate and develop the public economy.’ This state sector provided a precise mechanism through which the China’s government could prevent China’s economy falling into crisis. It illustrated the point stated by Xi Jinping ‘that state-owned enterprises become the most reliable and power of the party and the country, which can resolutely implement the party's central decisions.’
Within China’s economy the state and private sectors worked together, illustrating the point made by Xi Jinping that China could use both the ‘visible’ and ‘invisible’ hand’ – a much more powerful mechanism than the purely ‘invisible hand’ of private Western capitalist economies.
The West’s ‘new mediocre’
However, while China successful economic development after the US sub-prime mortgage crisis showed the superiority of China’s economic system nevertheless the simultaneous combination of China’s economic success with the West’s ‘new mediocre’ created a new international economic situation.
China’s post-1978 ‘reform and opening up’ had produced far more rapid economic development than the West – China’s average annual economic growth in 1978-2007 was 9.9% compared to 2.6% in advanced Western economies. Nevertheless, in that period significant growth in the Western economies created a favourable international economic context for China – all major economies grew with China growing faster than any other. China’s economic growth in this period successfully achieved ‘upper middle income’ status by World Bank classification, within striking distance of its immediate goal of ‘moderate prosperity’. But the West’s post-2007 ‘new mediocre’ created a new international context in which China had to make the transition to ‘moderate prosperity’ amid slow Western growth.
Perspectives for global economy
To understand how different is the international economic situation facing China now compared to before the international financial crisis, it may be noted that the highest circles of Western economic experts now understand that while the international financial crisis did not produce as great a fall in output as in the Great Depression long term Western economic growth will is slower than after 1929.
This month the New York Times, under the self-explanatory headline ‘We’re About to Fall Behind the Great Depression’ featured joint analysis by former US Treasury Secretary Larry Summers and former IMF chief economist Oliver Blanchard: ‘By 2019, a prime measure of the [US] economy’s health — gross domestic product per working-age adult — will likely have recovered less in the 12 years since the crisis began than it did during the 12 years since the start of the Great Depression.’
Internationally the situation is more severe. By the end of 2017 total growth since the international financial crisis in advanced Western economies will be slower than after 1929 – 12.3% in the 10 years after 2007 compared to 15.1% in the 10 years after 1929. IMF projections are that by 2021, fourteen years after 2007, annual average growth in the advanced economies will be less than half that in the same period after 1929 – 1.3% compared to 2.9%.
The next five years
As the IMF’s projection of very slow growth in Western economies is by a bastion of Western economic orthodoxy, which cannot be accused of pro-China and anti-Western bias, analysing the IMF’s projections for the five years after the 19th Party Congress shows clearly that China will continue to face a situation of slow Western growth.
The IMF does not doubt that China itself will achieve its target of ‘moderate prosperity’ by 2020. Indeed, the IMF projects China will achieve the World Bank’s criteria of a ‘high-income economy‘ by 2021/2022.
The IMF estimates that in 2016-2022 China’s economy will grow by $7.1 trillion, compared to a US $4.8 trillion, with China accounting for 28% of world growth, compared to 18% for the US and 16% for the EU - China will be the largest motor of world growth with its contribution to global GDP expansion being almost half as much again as the US.
Significance of the 19th Congress
Such very slow growth in the West does not just have direct economic effects on China, as with exports. It changed China’s geopolitical context - which was met with successful initiatives in foreign policy, global governance and military reform since the 18th Party Congress. This international economic situation, as well as China’s domestic one, therefore explains why these initiatives were so successful.
In global economic governance, as the Western economies were in a ‘new mediocre’ they were unable to take the initiatives leading the world economy forward which other economies as well as China required. China therefore took increasing initiatives. These were underpinned by Xi Jinping’s fundamental concept of a ‘community of common destiny’ and included major practical initiatives such as One Belt One Road and very high-profile defence of globalisation by Xi Jinping at the Davos World Economic Forum earlier this year. These became still more significant when protectionism was adopted by forces within the US.
The impact of China’s global initiatives may be simply noted from the Financial Times headline regarding this month’s annual meetings of the IMF and World Bank: ‘China moves in as US pulls back from global institutions’. It noted World Bank president Jim Yong Kim’s analysis: ‘the accolades this week have been directed at China’s president Xi Jinping. “I quote him all the time,” Mr Kim… told a packed room on Thursday as he invoked Mr Xi’s call earlier this year for a defence of free trade and internationalism. “In a period where we see countries becoming more inward looking, in a period where we see countries becoming more nationalistic what President Xi said at Davos was extremely important”.
Geopolitically slow growth in Western countries led to popular discontent within them and increased international instability – for example in the Middle East. In some cases, the traditional Western political elites lost control of key decisions – as with the UK’s economically irrational vote to leave the EU. In the US Trump was elected president against the overwhelming majority of the political establishment. While China has strongly promoted peace, such risk of international instability justifies focus on military reform strengthening the PLA.
In summary, China’s domestic transition to moderate prosperity, combined with the new mediocre in the Western economies, required a successful series of international initiatives since the 18th CPC Congress. This will continue at the 19th with great consequences not only for China but the global economy.
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This is a slightly expanded version of an article originally published in Chinese by Global Times.
China is the World's Most Rapidly Growing Major Economy - But Don't Wait for Most Western 'China Experts' to Admit They Made Wrong Analyses
The latest international data strongly confirms that China has resumed its position as the world’s most rapidly growing major economy. In the year to the second quarter of 2017 China’s economy grew by 6.9% compared to 2.2% in the US, the world’s largest developed economy – China’s economy was therefore growing more than three times as fast at the US. Compared to India, which after China is the world’s largest developing economy, China’s GDP growth was 6.9% compared to 5.7%.
China’s growth is particularly striking as it is clearly outpacing both the major advanced centres of world growth, in the G7, and the largest grouping of developing economies - BRICS. The IMF projects that in the five years 2016-2021 BRICS will account for 38% of world growth and the G7 for 30% making China clearly the largest source of world growth – in comparison only one country outside the G7 and BRICS, Indonesia, will account for more than two percent of world growth.
A situation where China is both the main source of world growth, and the most rapidly growing major economy, is evidently important for the global economy itself. But this trend also reveals a continuing error of analysis in some sections of the media which during the last period failed to foresee China’s growth. Comparison of projections to actual economic results therefore shows the necessity to draw lessons for more accurate predictions of China’s growth in the future – put technically it revealed the existence of an inaccurate ‘pessimism bias’ in a number of circles regarding China’s economic prospects.
To examine these issues first the latest data for China and global growth will be given and then these will be compared to earlier analyses.
China compared to the G7 and BRICS
Comparing China’s growth with the advanced G7 economies the latest data, for the year up to the 2nd quarter of 2017, is shown in Figure 1. As may be seen, China’s 6.9% growth far outperformed Japan’s 1.4%, the UK and Italy’s 1.5%, France’s 1.8%, Germany’s 2.1%, the US’s 2.2%, or Canada’s 3.7%.
Figure 2 similarly shows that China outperformed the main developing economies - the BRICS. China’s 6.9% growth compares to India’s 5.7%, Russia’s 2.5%, South Africa’s 1.1% and Brazil’s 0.3%. The data for Indonesia, the largest contributor to world growth outside the G7 and BRICS is also shown – Indonesia’s 5.0% growth ranked only behind China and India.
China and US in the last period
Analysis of prospects for world economic expansion naturally focuses on China and the US as these are the world’s two largest economies - accounting for almost 40% of world GDP at current exchange rates and over a third in purchasing power parities. It is therefore clarificatory to make a bilateral comparison of China and the US over the recent period and to compare this to some predictions.
A significant yardstick is that almost two years ago, in November 2015, the US Council on Foreign Relations held a survey China’s economy. The Council, a leading foreign policy body, sought the opinion of a wide range of US economists and specialists. Its conclusion was that: ‘the most common forecast was that China will avoid a hard landing but fall short of implementing necessary reforms, sentencing it to something similar to China’s “lost decade” of the 1990s, with average real growth rates around 1 to 3 percent.’ The Wall Street Journal summarised: ‘At a recent workshop hosted by the Council on Foreign Relations… 35 or so academic economists, Wall Street professionals and geopolitical strategists—lined up around three different growth scenarios for China… 61% foresaw a “lost decade” of 1% to 3% growth… what’s interesting is that apparently nobody considered the possibility that the Chinese government could deliver on its promise of “medium to fast” growth, meaning 6.5% or higher...
'All this matters because, as former U.S. Treasury Secretary Larry Summers wrote recently... China will inevitably experience a “reversion to the mean.” In other words, it will become merely average, crawling ahead at around 2% along with its peers.’
It is therefore clarificatory to compare these predictions of two years ago to a detailed examination of what occurred during the recent period. Figure 3 shows year on year GDP growth in China and the US from the beginning of 2015 up to the latest data. As may be seen over this period China’s growth fell only extremely marginally from 7.0% to 6.9% - the maximum dip was to 6.7% in mid-2016 with acceleration after this. In contrast, over the period US economic growth fell significantly from 3.8% to 2.2% - with extremely slow growth of 1.2% in mid-2016. In summary China did not suffer a significant slowdown but the US did.
Per capita GDP
The difference between China’s and US performance becomes even more striking when considered in per capita GDP terms as opposed to total ones. This distinction is signifcant because US population growth rate is significantly faster than China’s. This boosts US performance in total GDP terms but, calculated in that way, China’s relative performance in output per person is understated compared to the US.
Figure 4 shows that by the time of the latest data China’s per capita GDP growth was over four times as fast as the US – 6.4% compared to 1.5%. The reason for strong economic discontent in the US in mid 2016 approaching the Presidential election is also very clear - as at that time US per capita GDP had fallen to a very slow 0.5%.
In summary, contrary to the major predictions collected by the US Council on Foreign Relations, China’s economy suffered no significant slowdown while the US experienced deceleration.
To summarise on recent trends and projections regarding China, it is relatively well known that there is a long record of inaccurate predictions that China will experience a severe economic slowdown – that it will suffer a hard landing, that it is a ‘dragon out of puff’ or even that China is going to suffer collapse. Summarising the data from the latest period and comparing it to predictions, however, confirms that a substantial ‘pessimism bias’ still continues in many projections regarding China’s economy. There are, of course, some serious Western analysts of China's economy who carry out objective analyses - of those which are widely available I would recommend Gavyn Davies blog on the Financial Times. But as the Council on Foreign Relations survey showed the great majority of Western 'China experts' are entirely inaccurate in their predictions - they are engaged in propaganda not accurate analysis.
The data showing China’s position as the most rapidly growing major economy is therefore both crucial for global economic prospects and in pointing to the necessity of allowing for, and in future correcting, underestimates of China’s economic prospects. But don't hold your breath waiting for most Western 'China experts' to admit that their predictions on China were entirely inaccurate.