What’s wrong with lion?

.  .  .  as long as the public believes it’s true?  I’m disgusted with the Western media, the way they keep picking on China.  Henan is a poor, heavily polluted inland province of 90 million people.  So what if the lion at their zoo looks a bit dog-like:

Screen Shot 2013-08-16 at 10.39.59 AM

That shows why the China bears are oh so wrong.  No country with that level of creativity, that enthusiasm to “git er done” will ever get stuck in a middle income trap.

Fortunately the Economist magazine dares to tell the truth about China:

China is broadly right about one thing: its environmental problems do have historical parallels. With the exception of Chongqing, the largest municipality, most Chinese cities are no more polluted than Japan’s were in 1960 (see chart 1). Excluding spikes like that in Beijing this year, air quality is improving at about the same rate as Japan’s did in the 1970s.

 

 


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63 Responses to “What’s wrong with lion?”

  1. Gravatar of babar babar
    16. August 2013 at 07:36

    q: what do the internet and chinese zoos have in common? a: nobody knows you’re a dog

  2. Gravatar of Justin Irving Justin Irving
    16. August 2013 at 07:55

    I noticed as teenager, that it was “ok” to tell jokes about Chinese people in America, in a way that it would absolutely not be ok to tell jokes about other nonwhite ethnic groups. If the goal were to report sad/offbeat stories from abroad, the media could endlessly cover Africa or the middle east, but they seem to give China (and Russia)undue coverage. I wonder what that’s about.

  3. Gravatar of Saturos Saturos
    16. August 2013 at 08:51

    What’s wrong with lion?

    . . . as long as the public believes it’s true?

    Business Insider: “Scott Sumner defends Chinese Orwellianism

  4. Gravatar of brendan brendan
    16. August 2013 at 08:52

    Justin, well, we good progressives know that everyone from everywhere is equal, but these Chinese kids who are competing with my kid to get into Cal-Tech seem a bit more equal than expected…

    Seriously though, the neatest reductive summary of the press’ filtering process is: that which casts outperforming racial groups in a negative light is news, that which casts under-performing racial groups in a negative light is not.

    The idea that China is filled with a billion people as innately capable as the Chinese we see in America, people that are set to rise from 3rd to 1st world in a single generation, basically destroys the egalitarian worldview.

    You’d need Robin Hanson to explain in ‘status’ terms how it is that ‘egalitarians’ seem lukewarm towards the prospects of China’s emergence. The logic is too twisted for me.

  5. Gravatar of Mark Mark
    16. August 2013 at 09:33

    Lord I laughed hard when I got to ‘git er done’.

  6. Gravatar of TravisV TravisV
    16. August 2013 at 09:42

    It’s spelled “Git R Dun.”

    Yglesias looks at previous Chairmen of the Fed and says he prefers Protestants!

    http://www.slate.com/blogs/moneybox/2013/08/16/jews_protestants_and_central_banking.html

  7. Gravatar of Suvy Suvy
    16. August 2013 at 09:44

    The problem with China are the structural factors. Their population maxes out in the next year or two(along with their workforce size). In about 15 years, China falls off a demographic cliff. The rule of law in China and the institutions that exist there are absolutely horrible. Very few of the companies actually have much profitability due to the lack of accounting standards. The atmosphere isn’t conducive to risk taking as the only businesses that can get funding are those who are well connected. The size of the banking system is very worrying(3-4 times the size of the US banking system relative to GDP) and the previous growth rates in the assets of the banking system could create major issues. I’m pretty sure the entire Chinese banking system is insolvent and when push comes to shove, I don’t know if the Chinese government will be able to recapitalize it because of the cost of doing so.

  8. Gravatar of Suvy Suvy
    16. August 2013 at 09:46

    Also, I’m pretty sure that China wasn’t actually growing at 8% with 2% CPI inflation ever. You can’t trust anything the government puts out over there. The way the Chinese account for GDP is completely flawed. Personally, I think the Politburo just chooses to publish whatever they actually want over there.

  9. Gravatar of TravisV TravisV
    16. August 2013 at 10:12

    Yikes!

    “Larry Summers’ Fed Chair Odds Surge Again, Cross 70%; Yellen In The Dust”

    http://www.zerohedge.com/news/2013-08-16/larry-summers-fed-chair-odds-surge-again-cross-70-yellen-dust

  10. Gravatar of TravisV TravisV
    16. August 2013 at 12:05

    Prof. Sumner,

    You really should go after Krugman’s latest post:

    http://krugman.blogs.nytimes.com/2013/08/16/stagflation-stagnation-and-intellectual-asymmetry

    He just asserts that the Great Recession demolishes the Efficient Markets Hypothesis and Monetarism and vindicates Keynesianism. Apparently all conservatives = crude dogmatic hard-money Austrians.

    He’s acting as if Market Monetarists don’t exist. Rather annoying.

  11. Gravatar of StatsGuy StatsGuy
    16. August 2013 at 12:05

    People pick on those who they perceive to be threats

    Try to consider it a complement…

    [My first thought, on reading this post, was that you were retaliating against Krugman's penchant for cute cat pictures.]

  12. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    16. August 2013 at 12:17

    I’m claiming vindication for my Krugman-driven-by-jealousy Theory;

    ‘The first success led to Friedmam’s promotion to demigod status; the second success has not produced any comparable elevation.

    ‘But never mind the personal aspect.’

  13. Gravatar of ssumner ssumner
    16. August 2013 at 13:06

    Suvy, I don’t know where you get your data, but China’s population doesn’t “max out” in a year or two, nor does it fall of a cliff in 15 years. Indeed in 15 years it will be higher than today.

    You are right that they have not been growing at 8%, they’ve been growing at roughly 10% for 35 years. If you travel to China frequently, the very fast growth is patently obvious. The cost of living in China is far lower than in America, which means their PPP GDP is much higher than the nominal GDP.

  14. Gravatar of Suvy Suvy
    16. August 2013 at 13:21

    “Suvy, I don’t know where you get your data, but China’s population doesn’t “max out” in a year or two, nor does it fall of a cliff in 15 years. Indeed in 15 years it will be higher than today.”

    1. Don’t believe anything the government says
    2. Just look at their population pyramids
    3. The demographic issues are due to the one child policy
    http://www.ibiblio.org/chinesehistory/contents/02cul/c06s02.html

    This is the Chinese population workforce size.
    http://www.directorship.com/a-coming-labor-shortage/

    If you forecast out the workforce size, you’ll find that the size of the Chinese workforce is falling and in 15 years, it does fall off a cliff due to the one child policy.

    It’s also well noted that China’s trading data doesn’t match their trading partners, so I don’t know why you’d assume that the growth rates they give are worth a damn.

    Michael Pettis(professor at Peking University), who actually lives and teaches in China, says that growth and GDP could be overstated by as much as 30-40%. Did you know that the USSR “grew” at 7-8% in the 70s? But did they really grow that fast? Of course not. The way they account for GDP in China really is just bogus and most of China’s growth is due to an unsustainable mercantilist policy anyways.

  15. Gravatar of Suvy Suvy
    16. August 2013 at 13:28

    In my previous post, I didn’t even include the costs of the issues their banking system will have. The banking system has been expanding at a rate of 50-75% of GDP over the past few years and the total size is around 3-4 times GDP. If the value of the assets of the banks moves even a little bit, the equity of the banking system would go to zero. In order to adequately recapitalize a banking system that size, it would take around 30-40% of GDP(assuming a 10% capital/assets ratio). Or you could just let a bunch of assets totaling over 3 times GDP just liquidate all at once?

    There’s a whole bunch of other issues with China too that I could spend a whole lot of time getting into, but I don’t feel like it.

  16. Gravatar of Suvy Suvy
    16. August 2013 at 13:32

    One more thing on my first post about China’s population. It’s not the population that peaks out over the next few years, it’s the workforce size. The population actually keeps increasing for another 5-10 years, which would mean that dependency ratios will have to rise significantly. That puts an even worse drag on growth.

  17. Gravatar of Justin Irving Justin Irving
    16. August 2013 at 13:36

    Suvy, if you think Chinese growth will collapse, you should find ways of expressing that in markets. Look at long dated copper contracts. You could be rich.

  18. Gravatar of Suvy Suvy
    16. August 2013 at 13:42

    “Suvy, if you think Chinese growth will collapse, you should find ways of expressing that in markets. Look at long dated copper contracts. You could be rich.”

    Way ahead of ya.

  19. Gravatar of Suvy Suvy
    16. August 2013 at 13:45

    Justin,

    I’m short base metals(copper, aluminium) and I’m about to open up positions to be short various miners. I think we could see a correction in various commodities like copper and iron ore of around 50-75% if the Chinese try to correct their investment boom.

  20. Gravatar of Collin Collin
    16. August 2013 at 14:26

    Like every in the post-modern world, The Simpsons got it first:
    Blinky The Fish…Of course hopefully Mr. Burns does not have to take a bite of the lion dog
    .

  21. Gravatar of Edward Edward
    16. August 2013 at 16:13

    Suvy,
    make sure you have buy stops! (stop losses)

    I learned the hard way to cut my losses after loses 15,000 dollars in one idiotic, disastrous trade

  22. Gravatar of Edward Edward
    16. August 2013 at 16:13

    “losing”

  23. Gravatar of ssumner ssumner
    16. August 2013 at 16:32

    Suvy, I really hate it when commenters provide links that don’t support their points. I have to waste time reading the links, only to find out they are useless. I need to remember not to read the links you provide in the future.

    How many times have you been to China?

  24. Gravatar of Steve Steve
    16. August 2013 at 16:43

    Patrick Sullivan,

    BINGO! Krugman is a jealous narcissist.

    I’m claiming vindication for my Krugman-driven-by-jealousy Theory;

    ‘The first success led to Friedmam’s promotion to demigod status; the second success has not produced any comparable elevation.

    ‘But never mind the personal aspect.’

  25. Gravatar of W. Peden W. Peden
    16. August 2013 at 16:48

    Krugman may be a jealous narcissist, but I wish I could be a jealous narcissist in his position.

  26. Gravatar of benjamin cole benjamin cole
    16. August 2013 at 17:52

    I am always surprised that Scott Sumner mentions not the PBOC. Until recently it has been pro-growth. It has been key to China’s growth.

  27. Gravatar of Robert Robert
    16. August 2013 at 19:36

    Spot on. A frivolous story but quite right…..

    China’s growth is in large part due to creativity. The China of today is unrecognisable compared to the one where I spen a year as an undergrad.

    People want to succeed, want to learn, want to try new things, to “take the plunge” as the local idiom puts it… Nothing bad ever came from that.

  28. Gravatar of Robert Robert
    16. August 2013 at 19:58

    Suvy,

    You were challenged on your assertion that the Chinese population peaks in the next couple of years. And your own data shows you were wrong. Indeed, its larger 15 years fom now. So your claim was plain wrong. For sure, if there is no immigration and no baby boom, China will gave a higher dependency ratio than the US in maybe 2025 or so, but why assume that?

    And anyway, UN projections out to 2100 would still have the Chinese working poplation greater than the Total poplation of the US and Germany combined….

  29. Gravatar of Gordon Gordon
    16. August 2013 at 20:49

    I’m a bit surprised that the Economist article focuses on China’s plans for renewable energy while only giving a brief mention of China’s nuclear energy plans. The Economist states that China is planning for 100 gigawatts to come from wind power. David Mackay who is the chief scientific adviser to the UK’s Dept. of Energy and Climate Change estimates that wind power farms generate on average 2.5 watts per square meter. That means China would need 40,000 square kilometers of wind farms.

    China’s efforts to bulk up its nuclear power generation is much more interesting. They’re investing in technologies (such as pebble bed and thorium) which have the potential to be far safer than the reactors which have been used throughout the world up until now.

  30. Gravatar of ssumner ssumner
    16. August 2013 at 21:44

    Ben, I suppose I focus too much on failed policies.

    Robert, Good point.

    Gordon, I agree, that nuclear would be the logical way to go for China. Thorium sounds interesting although I suppose at best it still years away. I guess they are testing it in Norway right now. (Ironic given the name comes from the god Thor.)

  31. Gravatar of Lorenzo from Oz Lorenzo from Oz
    16. August 2013 at 22:59

    Ah, the god Thor, who everyone knows is Australian. As is Wolverine and Robin Hood (old and new; well, Kiwi cum Australian, but that will do), Galadriel, Elrond, while The Hulk used to be :)

    On the demographics of China, since China has no state old age pension, why would a lot of poor old people be an issue for the Beijing regime? What are they going to do, shake their walking sticks and frames in the streets?

    Even if the gap between China’s population and the US’s will begin to shrink, there is still a lot of growth potential.

  32. Gravatar of Lorenzo from Oz Lorenzo from Oz
    16. August 2013 at 23:24

    Brendan: but these Chinese kids who are competing with my kid to get into Cal-Tech seem a bit more equal than expected… Worth a good chuckle, thanks.

    Something else Asian-Americans have in common with Jews (along with voting Democratic). Though it probably will be a while before they also start muscling in on the Supreme Court. (A US Supreme Court which is 6 Catholics and 3 Jews; we are not in WASP-run America anymore … )

    Though still one run by graduates of Harvard and Yale.
    Harvard: Barack Obama, John Roberts, Antonin Scalia, Stephen Breyer, Elena Kagan, Anthony Kennedy, Ruth Bader Ginsburg.
    Yale: Clarence Thomas, Sonia Sontomayer, Samuel Alito.

    The last member of SCOTUS not to go to Harvard or Yale was Sandra Day O’Connor, and she went to Stanford, and John Paul Stevens (Chicago and Northwestern).

    Seriously, don’t you guys have any other decent law schools? Or is there a very powerful network effect here? Apparently getting more powerful.

    Harvard: Mitt Romney, George W Bush
    Yale: Bill Clinton, George H W Bush

    The last President not go to to Harvard or Yale was Ronald Reagan. If the UK was as dominated by graduates of Oxford and Cambridge, it would be regarded as an indication of the embarrassing strength of the British class system …

  33. Gravatar of Suvy Suvy
    16. August 2013 at 23:40

    Edward,

    I use all sorts of stuff to hedge. I set strict stops and have a risk management strategy. Right now, all of my bets are convex and I hold around 50% in straight cash.

    Robert,

    You said, “You were challenged on your assertion that the Chinese population peaks in the next couple of years. And your own data shows you were wrong. Indeed, its larger 15 years fom now. So your claim was plain wrong.”

    If you bothered to read what I said, you’d understand that I actually point to this and correct my mistake. I specifically point to my mistake and correct it in a post right after it.

    “One more thing on my first post about China’s population. It’s not the population that peaks out over the next few years, it’s the workforce size. The population actually keeps increasing for another 5-10 years, which would mean that dependency ratios will have to rise significantly. That puts an even worse drag on growth.”

    Prof. Sumner,

    You said, “Suvy, I really hate it when commenters provide links that don’t support their points. I have to waste time reading the links, only to find out they are useless. I need to remember not to read the links you provide in the future.”

    I said the Chinese workforce maxes out over the next few years AND posted a link that supports my point with a chart that clearly shows the workforce size maxing out by around 2015. I posted another link about China’s aging demographics and has a population pyramid on the page. I don’t know how that possibly doesn’t support the point I was trying to make.

    As for your point about visiting China, I haven’t done so, but I have traveled other places(much more often than you would think) that have seen massive quality of life improvements and growth, but growth rates weren’t at 10%. What still doesn’t make any sense is that you actually trust what the Chinese government puts out, which has been shown to be wrong many, many times over(see inconsistencies between Chinese trade data as an example). Take my word for it, I’ve done my homework on China.

  34. Gravatar of Suvy Suvy
    17. August 2013 at 00:21

    By the way, Mike Shedlock makes the exact same comment on his most recent post about the way Chinese GDP is calculated. So it’s not just me that’s saying this. See his post on Friday August 16th at 8:45 PM(I’m doing it this way so that my post doesn’t get deleted for containing links that “that don’t support their points”, which was never the case to begin with).

  35. Gravatar of James in London James in London
    17. August 2013 at 00:49

    There is some academic respectability to China’s overstated GDP.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2307054

    And the academic has a blog too!

    http://www.baldingsworld.com/2013/08/12/why-does-anyone-still-believe-chinese-data/

  36. Gravatar of Mattias Mattias
    17. August 2013 at 01:42

    I think the Zoo director might have sold the lion on the black market and replaced it with a dog. In that case it’s a good illustration of how much corruption there is in China.

  37. Gravatar of Geoff Geoff
    17. August 2013 at 03:12

    “That shows why the China bears are oh so wrong. No country with that level of creativity, that enthusiasm to “git er done” will ever get stuck in a middle income trap.”

    Non sequitur.

  38. Gravatar of Geoff Geoff
    17. August 2013 at 03:16

    Data showing Chinese cities are generating less sulphur dioxide over time has little to nothing to do with business cycle “bearishness” about China.

    It’s apples and oranges.

    People are bearish on China for many reasons, one of which is that the Chinese central bank has created an unsustainable economic BUBBLE BUBBLE BUBBLE BUBBLE.

  39. Gravatar of Steve Steve
    17. August 2013 at 06:39

    Lorenzo from Oz,

    Top candidates (based on network effects)
    1 Summers – Harvard
    2 Ferguson – Harvard
    3 Yellen – Yale
    no chance Romer – MIT

    current Board:
    Bernanke – Harvard
    Stein – Harvard
    Raskin – Harvard
    Yellen – Yale
    Powell – Princeton
    Duke – NC State / Old Dominion
    Tarullo – Duke / Georgetown / UM Law

  40. Gravatar of vidk vidk
    17. August 2013 at 08:57

    The China bears aren’t just wrong, they’re not even real bears.

  41. Gravatar of lagus lagus
    17. August 2013 at 13:57

    Commenters mention dodgy GDP figures, but what about those pollution figures in the chart? I figure the World Bank relies on official Chinese statistics and those numbers are horsepuckey. The US Embassy reports much higher smog values for Beijing than the official Chinese announcements. If anything Expats and ordinary Chinese complain the air is steadily getting worse, contra what the chart is claiming. Some years back Hong Kong was celebrating their environmental policies which had finally produced a smog free year, then the next year smog began drifting in from mainland China, and it gets worse every year. That seems to fly in the face of the chart claiming a steady drop in Chinese pollution. Tokyo hadn’t experienced smog for a generation until a vast cloud blew over from China last year.

    It’s great that China finally appears to take pollution seriously, but unfortunately it seems local authorities would rather meet official targets by cooking the statistics than enforce pollution laws.

  42. Gravatar of cbu cbu
    17. August 2013 at 16:01

    Here is my question: why would anyone want to dodge up the numbers? That means you pay more taxes. Chines GDP is more likely underestimated because of the wide practice of dodging tax.

    Chinese government can solve the real estate bubble problem and budget problem (if there is one) by simply levying a real estate tax nation wide. Reduce or eliminate income tax and VAT at the same time.

    When anyone talks about China’s demographic problem, he /she should remember that the one-child policy will be relaxed then entirely abolished in the next couple of years.

  43. Gravatar of ssumner ssumner
    17. August 2013 at 20:17

    Lorenzo, Good points.

    Suvy, You said;

    “I said the Chinese workforce maxes out over the next few years AND posted a link that supports my point with a chart that clearly shows the workforce size maxing out by around 2015.”

    Nope, you said China’s population peaks in a couple years.

    The arguments about GDP are unimpressive. No one claims the US or Chinese GDP data is exactly right. But anyone with two eyes knows the following:

    1. China’s GDP has grown at an extraordinary rate over the past 30 years. In 1980 China was poorer than India, and the Indian economy has grown at a fast rate since then. Everyone agrees that China is now several times richer than India. How fast do you think India has grown?

    2. Regardless of the true rate of inflation in China, their cost of living is still far below that of developed countries. Which means their PPP GDP is far higher than their nominal GDP.

    You said;

    What still doesn’t make any sense is that you actually trust what the Chinese government puts out”

    What doesn’t make sense is that you continue to make claims about my beliefs that are completely false. I’ve never once said I trusted Chinese data. If you are as sloppy with Chinese data as you are reading my blog, why should I trust you?

    James, That paper doesn’t impress me in the slightest, for reasons I explain in my response to Suvy.

    lagus, I don’t trust any of the Chinese pollution data. Having said that, the pollution in Beijing doesn’t seem as bad today as when I visited in the 1994 and 1996. But who knows? I’m there in the summer, and I believe the winter is worse.

    cbu, Good point. One of the weird things about the Chinese GDP debate is that most places in China look much richer than their GDP numbers suggest.

  44. Gravatar of Steve Steve
    17. August 2013 at 20:41

    Larry Summers stint as “youngest tenured Harvard professor” overlapped entirely with both Alan Krueger’s PhD program and Barack Obama’s JD program.

    Elena Kagan overlapped with Michelle Obama’s brother at Princeton and with Barack Obama at both Harvard and U Chicago.

    I think Lorenzo’s intuition is right on. Obama likes to nominate people he knew back in school.

  45. Gravatar of Steve Steve
    17. August 2013 at 21:01

    For that matter, Jeremy Stein was a young assistant finance professor at Harvard at the same time Barack Obama was in law school at Harvard. Stein also enjoys pickup basketball.

    So Obama, Stein, Summers, and Kagan were all at Harvard for the same four years. Krueger was a couple of years earlier, but also overlapped with Summers.

  46. Gravatar of Steve Steve
    17. August 2013 at 21:15

    I can just picture Barack Obama, Michelle Obama, Elena Kagan, Jeremy Stein, Larry Summers, and Alan Krueger back in the late 80s sitting together at the Cambridge Common or Bartley’s sharing food and drink while plotting world domination. Muahahaha!

  47. Gravatar of Steve Steve
    17. August 2013 at 21:20

    Christina Romer must have looked like a real b**** for giving advice like she was on an equal footing with that crew. Oil and water.

  48. Gravatar of Steve Steve
    17. August 2013 at 21:34

    Obama apparently has a lot in common with Putin.

    Doing Judo With Vladimir Putin Is Apparently A Good Way To Become A Billionaire

    http://www.businessinsider.com/judo-with-vladimir-putin-apparently-makes-billions-2013-8

  49. Gravatar of What’s wrong with a little "lion?" No country with that level of "git er done" will ever get stuck in a middle income trap. « Economics Info What’s wrong with a little "lion?" No country with that level of "git er done" will ever get stuck in a middle income trap. « Economics Info
    18. August 2013 at 07:01

    [...] Source [...]

  50. Gravatar of Suvy Suvy
    18. August 2013 at 07:50

    “How fast do you think India has grown?”

    Incredibly fast and I guarantee you the living standards are about the same. The issues about China’s growth rates are well verified. I’ve been to a lot of countries that have seen incredible growth and increase in living standards, but that doesn’t mean that China’s actual growth rates are anywhere close to the truth.

    “ope, you said China’s population peaks in a couple years.”

    Then I corrected myself on that typo in a post immediately and acknowledged my mistake. This is exactly what I said to someone else too. I quote myself on a post immediately after I wrote my initial comment(which I was very quick in doing so).

    This is what I said, which actually makes the your argument less palpable because it necessarily means dependency ratios are rising.

    “One more thing on my first post about China’s population. It’s not the population that peaks out over the next few years, it’s the workforce size. The population actually keeps increasing for another 5-10 years, which would mean that dependency ratios will have to rise significantly. That puts an even worse drag on growth.”

  51. Gravatar of Suvy Suvy
    18. August 2013 at 07:53

    I never said that China hasn’t grown enormously; I said China’s growth rates are exaggerated. I’ve seen estimates as large as 30-40% overestimated and they’re at least overestimated by $1 trillion, as others have pointed out. You’re still ignoring the fundamental fact that you actually trust what the Chinese government is telling you when they’re basically serial liars.

  52. Gravatar of Suvy Suvy
    18. August 2013 at 07:55

    Also, there’s a difference between historic growth rates and future growth rates(just ask the Japanese in the late 80s or Indonesia, South Korea, or Thailand that in the late 90s). High growth rates can come crashing down very, very quickly.

  53. Gravatar of ssumner ssumner
    18. August 2013 at 10:20

    Steve, Good observations.

    Suvy, South Korea was a huge success. You worry that the same will happen to China? That would prove the bulls right. Even the bulls don’t expect China to do as well as SK.

    You said;

    “Incredibly fast and I guarantee you the living standards are about the same.”

    India and China? Please just stop. I beg you.

  54. Gravatar of Suvy Suvy
    18. August 2013 at 16:05

    “Suvy, South Korea was a huge success.”

    Did you see what happened to South Korea in 1997? Yes, South Korea did have massive growth and improvement in living standards up until then, but the growth rates slowed down significantly. Having 8% GDP growth is not sustainable, especially when 50% of your economy is fixed asset investment and your workforce size goes negative in two years while dependency ratios rise.

    Do you even know anything about the Asian financial crisis? It sure seems like you haven’t even looked at the historical record of investment led growth models. Every single country basically enters a major financial crisis and growth rates stall massively.

  55. Gravatar of Suvy Suvy
    18. August 2013 at 16:13

    By the way, South Korean growth rates went to -6.65% in 1998 by the way. You should bother to take a look at the facts before trying to call me out for being wrong.

    Here’s a link to the GDP growth over the past few years. Do you see the huge dip in 1998?
    http://www.tradingeconomics.com/south-korea/gdp-growth

  56. Gravatar of Suvy Suvy
    18. August 2013 at 16:14

    “India and China? Please just stop. I beg you.”

    What about the rest of Southeast Asia like Vietnam? The living standards there have increased enormously.

  57. Gravatar of ssumner ssumner
    18. August 2013 at 23:22

    Suvy, The China bears say China will fail to develop, it will get stuck in the middle income trap. The bulls think China will become a developed country. South Korea went from being one of the poorest countries in the world in 1960 to a developed country today. China will be very lucky if they fail in the way you suggest S. Korea failed. Name one country in the entire world that’s done better than S. Korea over the past 50 years. Just one. Yes, they had a severe recession in 1998, it was a speed bump on the road to prosperity. No one is saying China won’t have recessions in the future.

    Yes, Vietnam is growing fast, but China is growing much faster, and is much richer. No one disputes that.

    A few years back China was far behind Thailand. Now it’s caught up.

  58. Gravatar of MarkC MarkC
    19. August 2013 at 03:28

    Suvy,

    your claim that China overestimated its GDP by more than $1 trillion seems to come from Christopher Balding’s paper as provided in a link by James in London.

    A quick look at it seems to suggest that his whole point is based on the Chinese underestimating their housing price inflation in the CPI.

    Somebody please correct me if I am wrong, but instead of CPI shouldn’t he be looking at the GDP deflator? after all, they don’t really measure the same thing.

    Furthermore, if some one is really interested in estimating the actual real GDP of China, I bet she can’t overlook its shadow economy. A recent study seems to suggest European countries’ shadow economies constitute on average about 20% of GDP.

    http://www.google.com/url?sa=t&rct=j&q=shadow%20economy%2C%20spain&source=web&cd=2&cad=rja&ved=0CDEQFjAB&url=http%3A%2F%2Fwww.visaeurope.com%2Fidoc.ashx%3Fdocid%3D6c1cf1fd-0b40-4d36-a594-997f05284281%26version%3D-1&ei=Of4RUsfzN4yxrgeEi4DwAw&usg=AFQjCNFt4h6xn0Cn7_6scMynEF7O5CNyVQ&bvm=bv.50768961,d.bmk

    So could anyone care to take a guess how big is China’s? 30%? 40%? 50%? Even if you were right that 1 trillion needs to be deducted from China’s PPP GDP, how many more need to be added back?

  59. Gravatar of ssumner ssumner
    19. August 2013 at 09:17

    Mark, That’s right, and I’d add that errors in inflation affect the growth rate of RGDP, not it’s level. So it doesn’t tell us if the current level is wrong. It could be the past level is wrong. You need PPP estimates for current levels.

  60. Gravatar of Suvy Suvy
    19. August 2013 at 11:13

    Prof. Sumner,

    I agree that China will develop and they will continue to see massive improvements in standard of living. I just think that Chinese growth rates will slow significantly as the imbalances will be corrected. I think the Chinese economy will have a financial crisis coming up, but I don’t think it’ll be the end of the world for the Chinese.

    The main problem I worry about China in the longer term are demographics, which could create major, major issues 15-20 years down the line.

    Mark,

    My doubts on China’s reported growth rate come far before that paper. Michael Pettis actually has said that reported Chinese GDP could be overestimated by as large as 30-40%. I think China Chinese real growth and inflation has been overstated. I’m pretty sure that inflation has been much, much higher than what’s being reported in China and I’m pretty sure that the Chinese have had negative real interest rates for around 10-15 years.

  61. Gravatar of Suvy Suvy
    19. August 2013 at 11:16

    Prof. Sumner,

    I think growth rates will probably be around 3-4% over the next decade or so, nowhere close to the 8-10% growth rates China has been having and I think growth rates could even be lower than 3-4% depending on how the Chinese transition is managed.

    China has basically taken upon a mercantilist trade policy and investment led growth model that has crushed household income(this is why consumption is such a small share of GDP). I believe China will have to transition out of a investment led economy to a more sustainable growth model. The same thing has happened to almost every single developed country at some point.

  62. Gravatar of Suvy Suvy
    19. August 2013 at 12:52

    Prof. Sumner,

    I actually think that if China manages its transition well, the average Chinese person will benefit much more over the next decade even in the face of 10-15 years of much slower GDP growth. It all depends on how the transition is managed.

  63. Gravatar of ssumner ssumner
    21. August 2013 at 12:37

    Such, Everyone agrees that China’s growth will slow. It would have helped if you’d made your point at the beginning.

    I’d expect growth to average closer to 5 percent over the next decade.

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