Is Chinese Economic Growth a Myth?
Bryan Caplan, like myself, remains skeptical regarding the growth miracle of China since 1980. He notes two "weird" facts. The first is that "60% of the Chinese remain in agriculture, where they produced 12% of GDP" and the second is that "Chinese consumer spending is only 36% of GDP." Both appear odd and Bryan offers a brief explanation as to why.
I am not inclined to think that because it is a communist regime it will everywhere and always overstate its growth numbers (although it is surely possible). So why remain skeptical? Alwyn Young's paper "Gold into Base Metals" published a few years analyzes the numbers as presented by the Chinese government and explains what has actually happened in China. This is from the first paragraph:
Rather than discount the Chinese statistical record, I embrace it. Accepting all the numbers the statisticians of the People's Republic produce, but making systematic adjustments using their own data, I show that one can (a) reduce the growth rate during the reform period to levels previously experienced by other rapidly growing economies, so that (b) once one takes into account rising labor force participation, the transfer of labor out of agriculture, and improvements in educational attainment, labor and total factor productivity growth in the nonagricultural economy are found to be 2.6 and 1.4 percent per year, respectively; a respectable performance, but by no means extraordinary.
In other word, nothing special has happened nor has a Chinese path to development been revealed. The usual suspects- rising participation rates, improvements in educational attainment, and the transfer of labor out of agriculture- account for its growth. Hardly a miracle but maybe I am missing something. Does anyone know have reasons to believe that Young's analysis is incorrect?
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