Beijing’s Exceptionalism

Issue: Mar-Apr 2009

IS CHINA’S rise inevitable? Well, as we’ve learned to our great chagrin over the past twelve months, there’s nothing inevitable about continued rapid economic expansion or the near-term success of any economic model, and past performance is most emphatically not a guarantee of future returns. And, as with any lower-income developing country, there are plenty of visible and unforeseen pitfalls that could hurt China’s growth prospects over the coming years and decades.

However, as author and newspaperman Damon Runyon famously remarked, “The race is not always to the swift nor the battle to the strong—but that’s the way to bet.” And when taking odds on the potential of today’s emerging markets to mature into wealthier and more powerful states, you had best be betting on China.

The mainland is already getting there faster than any major economy before it. And, the risks of an outright economic derailing over the next ten to twenty years are much lower than commonly believed.

IN A debate often dominated by conjecture and assertion it helps to focus on hard data, and at the macroeconomic level, here are the hardest numbers we have: in the three decades between 1978 and 2007 the official Chinese GDP grew at an average real pace of 9.9 percent. Of course, the quality of historical growth figures has generated an intense academic debate, and many researchers conclude that real growth has been overstated for a variety of reasons (such as under-measurement of inflation and other distortions in the traditional socialist statistical system); however, even the most skeptical analysts still come out with numbers of 9 percent year over year (y/y) or above for the postreform era.

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