The limits of China's growth

Abstract

Purpose

Despite the global economic slowdown, China's economy continues to grow at astonishing rates. This has led some observers to conclude that China must lead the rest of world out of the doldrums, and that China's rise to become the pre‐eminent economy is imminent. The purpose of this paper is to offer a countervailing view. China's rise, while impressive, masks some serious deficiencies in its economic structure. In particular, its growth is largely input driven, and this will constrain the rate of future growth.

Design/methodology/approach

Statistics were gathered from a number of sources to make the case that China will face limited growth in the near future. A scenario analysis was performed to model possible outcomes for China vis‐à‐vis the US economy.

Findings

In the most realistic scenario, China will close the gap with the USA from its current position of 61.5 percent of the US economy, as measured by 2009 purchasing power parity gross domestic product figures to nearly 88 percent by the year 2020. This will taper to 78 percent by the year 2050.

Practical implications

This viewpoint paper serves as reminder to academics and practitioners alike that most of the media accounts of China's growth are overly rosy, because these accounts do not consider the real difference between inputs and efficiency in total factor productivity (TFP). Just as it was once fashionable to believe that the Soviet Union and Japan would overtake the USA, or in the “Asian Miracle”, so now China is the latest economy to be offered as a model to emulate.

Originality/value

The paper builds on previous scholarship about TFP to question the sustainability of China's economic trajectory in an original way. It adds value by questioning received wisdom about China's economy and its seemingly inevitable rise to become the largest in the world.

Citation

Troilo, M. and Sun, Z. (2010), "The limits of China's growth", Chinese Management Studies, Vol. 4 No. 3, pp. 273-279. https://doi.org/10.1108/17506141011074156