Chinese Economy 'to Hit $123 Trillion' in 2040

      January 06, 2010 10:14

      In 30 years the Chinese economy "will reach US$123 trillion," writes Robert Fogel, a Nobel laureate in economics and professor at the University of Chicago, in an article in the January issue of Foreign Policy magazine.

      This means China will account for 40 percent of the world's GDP in 2040, dwarfing the U.S. (14 percent) as the world's largest economy. "Fogel's GDP estimate, which is apparently based on purchasing power parity, is remarkable as only a decade ago China's PPP-based GDP was merely half that of the U.S.

      "China's per capita income will hit $85,000, more than double the forecast for the European Union" and much higher than that of Japan, although lower than that of the U.S., Fogel forecasts.

      His estimate is much different from the general forecast that China's PPP-based GDP will not be two times that of the U.S. until 2050. "Most accounts of China's economic ascent... usually grossly underestimate the extent of the rise," Fogel claims.

      One factor that is commonly overlooked is "the enormous investment China is making in education," Fogel points out. After providing massive support for higher education in 1998 under then-President Jiang Zemin, enrollment in higher education in China soared by 165 percent in only four years, and the number of students studying overseas by 152 percent. Between 2000 and 2004 the number of university students rose an average of 50 percent per year. This growth will have a huge impact on China's economy since "more educated workers are much more productive workers," Fogel says.

      Other factors that have been underestimated include the role of the rural sector, which accounts for a third of China's economic growth; statistics released by the Chinese government that are often flawed and vague; and the nation's economic structure where reforms in most cases are led not by the central government but by the provincial governments.

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