Some thoughts on PPP in China, the US, and Japan

One thing I got wrong about China was their exchange rate. In the early 2010s, I expected their real exchange rate to appreciate strongly against the dollar, due to the Balassa-Samuelson effect. It hasn’t. And even after visiting China, I’m not quite sure why. FWIW, here I’ll report some things I noticed on my trip.

BTW, a quick reminder that a prediction that the Chinese yuan would appreciate in real terms is identical to a prediction that China would get much less cheap.

1. China is still really cheap. And it doesn’t just seem to related to wages. Subways in Beijing are roughly 55 cents, only about 1/5th the level of NYC. That means that if you priced the 4 billion annual subway trips in Beijing at NYC subway prices, revenue would rise from about $2 billion to $10 billion. That’s why comparisons of US and Chinese GDPs at market exchange rates are utterly meaningless. America is much richer, even in PPP terms, but the market price gap wildly overstates the actual difference. China’s total GDP in terms of actual output is obviously higher than the US.  (BTW, Beijing’s subways are also far nicer than in New York.)

2. What’s true of subways is also true of buses, taxis and intercity rail. They are all ridiculously cheap by American standards, maybe 1/5th as expensive. The “output” of China’s transit system at American prices would be huge. The difference is smaller for air travel, where the cost is mostly the airplane and jet fuel.

3. Wages have risen sharply. In the early 2000s, a lady who cleaned and cooked for households in Beijing earned about 70 cents an hour. Now she earns $3.50 an hour. In PPP terms that’s close to America’s minimum wage. But this sort of worker in New York or LA earns far more than the national minimum wage, so unskilled workers in China have much lower living standards than in the US.

4. Haircuts are very labor intensive. I paid $1.20 in 2001, $4 in 2012, and $6.90 on my most recent trip, all in the same place. There’s no tipping, so prices are a bit less than half what I pay in America.  Nonetheless, nominal wages in China are rising fast; the government is not lying about that fact.

5. Because nominal wages are rising fast (and we know this without resorting to questionable government data), we also know that China’s nominal GDP is rising fast. Debates about RGDP growth then revolve around the issue of inflation.

6. I have no reason to question China’s inflation data. Other than haircuts, most things don’t seem much more expensive than I recall from previous trips. Restaurant meals are still dirt-cheap, although compared to the US there’s much more price variation on an individual menu. That’s because labor is a much smaller part of the total cost than in the US. A stir-fried veggie dish might be $2.50, a meat dish $5, and a nice seafood dish $10. Prices include tax and there’s no tipping.

7. In 2009, a high-speed train to Tianjin cost $8. Today it’s about the same, which surprised me.  China’s clearly had only modest inflation.  The biggest constraint on urban Chinese living standards is housing, and ironically that is even truer in capitalist Hong Kong, where housing is the one socialist sector.

If we combine China’s modest inflation with the rapid nominal wage growth, it’s obvious that their real GDP has risen sharply.  We don’t need to rely on government data to know that.  But then anyone just looking around the cities (or even the countryside) would know that—the country looks much more developed.

So why didn’t the Balassa–Samuelson effect have the impact I predicted?  I’m still not sure, but over at Econlog I have a new post explaining why PPP comparisons are so important.  In the post, I point out that the real foreign exchange value of the Japanese yen has plummeted since 1994, so much so that if you believe in market exchange rates you’d be forced to conclude that Japan has experienced one of the worst depressions in global history.  Actually, Japan’s doing OK, but only in PPP terms.

We tend to think of China’s currency vis-a-vis the US dollar.  But China’s economy is more like Japan’s, another East Asian exporter of manufactured goods.  If we look at the yuan vs. the yen, then there’s been a huge Balassa-Samuelson effect since 1994.  The Chinese currency has appreciated very strongly in real terms against the Japanese yen.  So at least there’s that.

Thus it seems that part of my mistake was not anticipating the strength of the US dollar.  In 1994, I did not anticipate that countries like Japan would become much cheaper for American tourists.  At the time, Japan was quite expensive.

Perhaps the way the US dominates the global high tech industries (which also causes our stock market to outperform foreign markets) is part of the story.  In any case, I was wrong about the Chinese exchange rate.  (Lars Christensen was right.)

For me, the two biggest surprises were that the air pollution in Beijing wasn’t bad, and that the level of authoritarianism was much worse than I expected.  The air pollution may have been a fluke; perhaps factories were shut down to clear the air for the big October 1 celebration.  Air is gradually getting cleaner in Beijing, but not as dramatically as it seemed on my trip.

The authoritarianism is no fluke, although even that was probably ramped up a bit for October 1.  It’s not so much what they do (which is often the same as we do here—pointless security checks, CCTVs, etc.) rather it’s the overwhelming scale of the security apparatus.  I found it extremely annoying.  (Of course this is in eastern China, Xinjiang is far, far worse.)



38 Responses to “Some thoughts on PPP in China, the US, and Japan”

  1. Gravatar of Benjamin Cole Benjamin Cole
    23. September 2019 at 16:28

    Interesting post. Privately-run bus service between cities in Thailand is also very cheap, by US standards. But I do not know if the bus lines are essentially subsidized. The nice and clean SkyTrain in Bangkok costs about a dollar and a half a ride.

    Your haircut example suggests to me that barbers (hairdressers) in China make more money than barbers in rural Thailand. Although I get the 5-minute buzzcut treatment, about $1.50. If you went for, say, a color and perm, that would suggest some of the price differential between your haircuts and mine. Plus I am bald.

    The latest news is that China is joining the cavalcade of companies looking to open up factories in Thailand. This suggests to me that wages are higher now in China than in Thailand.

    Populations in Southeast Asia are also leveling off. Hard as it is to believe when one is in rural Thailand, where there seems to be lots of babies, population growth has stopped in Thailand.

    If India can seize the chance, perhaps it will become the world’s next manufacturing platform.

  2. Gravatar of Christian List Christian List
    23. September 2019 at 17:21

    Authoritarianism in China and its surveillance state have indeed reached crazy levels. I’m glad you admit it.

    A friend of mine came back from China a few weeks ago, he was there on a business trip. On his first evening at the hotel, he was in the lounge and suddenly said, “Hey, that’s a good playlist!” Two rare songs later: “Hey, that’s my playlist exactly!!!” So he rushed to his hotel room: They had removed his hard drive from the notebook, and after scanning it were even too lazy (or stupid) to reinstall it correctly. That’s China in 2019.

    There is no private sphere. Do not store anything on your hard drive that the Chinese state is not allowed to read 1:1 and play in the hotel bar at any time.

    (I assume you want to write another belittlement now but just save it for once.)

  3. Gravatar of E. Harding E. Harding
    23. September 2019 at 19:10

    “And even after visiting China, I’m not quite sure why.”

    Probably due to slower growth in tradeable goods and services than in the 2000s (e.g., steel, electronics, plastic toys), combined with continued growth in non-tradeable goods and services. Simply put, during the 2010s, globalization has stalled. This has had a real effect on places like China, Russia, etc. Overall, given my estimate that Chinese growth is generally overstated by a couple points each year, it makes sense that China’s economy grew ~60% over the course of the 2010s (the official statistics will say ~90%), as compared to ~25% for the U.S. One can expect this decade’s growth rates in both America and China to be very similar to the next decade’s.

  4. Gravatar of E. Harding E. Harding
    23. September 2019 at 19:20

    For the record, I do believe in using PPP data. However, the sorts of people who say China is the world’s second-largest economy do tend to also be the ones who most uncritically accept the Japanese economic decline thesis.

  5. Gravatar of John Arthur John Arthur
    23. September 2019 at 19:54

    E Harding: I think it is plausable that Chinese growth is overstated, but probably only by a little bit. I am a little more skeptical that China will continue to overperform in growth. Other high IQ countries much better run- Korea, Japan, France, Britain, Germany, have struggled badly with growth after attaining a GDP-Per Capita above $30000. I think China will stagnate to developed country growth rates by mid 2020s, but will grow fast till then.
    Scott: I generally agree that PPP matters in terms of living standards, but Market-Exchange values are more important for global power. That’s why all the media report China as the second largest economy rather than the first, since geopolitics and power is what they try to mostly cover. Michael Beckley had a good take on this a while back. His claim was that America’s net wealth far dwarfed China’s despite China being bigger in PPP as America’s economy was more efficient, and that is partially reflected in the Market-Exchange rates.

  6. Gravatar of John Arthur John Arthur
    23. September 2019 at 20:04

    One more thing. China’s productivity growth has collapsed in recent years, and has become more in line with the US’s. Another reason why I believe that Chinese growth rates will slow significantly down after the country becomes high income.
    Or maybe we will have AI and Gene Editing and Automation and that will boost everyone’s growth rates(I hope so…) and no slowdown will occur.

  7. Gravatar of John Arthur John Arthur
    23. September 2019 at 20:25

    Scott: I would argue that Japan has had a severe relative decline in recent years. It’s net wealth has completely stagnated in recent years, rising only 20% in the last twenty years, slower than per-capita growth. I guess this is the “depression” that was reflected in the Market Exchange Rates.
    PS: Does anyone know why China’s reported net wealth rose so fast from 2015-2018? I’m guessing the prior reporting was bogus, or the numbers are overestimated, much like Singapore’s per capita and net wealth results.

  8. Gravatar of John Arthur John Arthur
    23. September 2019 at 20:26

    Here is the link to countries by net wealth

  9. Gravatar of ssumner ssumner
    23. September 2019 at 20:33

    Christian, I would not rely on your friend for forming an impression of China. No one scanned my hard drive. That’s not typical.

    In any case, your anecdote is about ordinary garden variety crime, and has nothing to do with China being an authoritarian nation (which I’ve never denied.) You are at no more risk of crime in China than in America.

    And when are you going to stop apologizing for the human rights abuses in Saudi Arabia?

    John, If they want to talk about global power, then talk about that subject. But they should be consistent in how they discuss the size of an economy. It’s perfectly OK to say Israel is more powerful than Saudi Arabia despite having a smaller economy, because it’s more sophisticated. But people don’t say Israel has a bigger economy. The US is more militarily powerful than China despite having a smaller economy.

    In addition, often when the media says China has the world’s second largest economy it’s in the context of how China impacts the global business cycle. They should use the PPP data for that subject.

    I agree that China’s growth will slow.

    America is almost 4 times more efficient, but even so China’s economy is larger, as they have 4.5 times more people. I doubt America has more net wealth, but I can’t be sure.

    And China’s labor productivity (which is what matters) is still growing much faster than America’s. You may be thinking of total factor productivity.

  10. Gravatar of ssumner ssumner
    23. September 2019 at 20:38

    Net wealth data is so inaccurate as to be almost useless. There are plenty of millionaires in China who have no wealth at all in official data.

  11. Gravatar of John Arthur John Arthur
    23. September 2019 at 20:50

    Scott: Yes, I was referring to TFP growth, but it is usually a leading indicator of where things are going to head- sorry for not clarifying.
    America definitely has more net wealth than China, and it is double China’s net wealth, though I think the gap will close by the end of the next decade.
    I think gross terms are overrated and net terms are a much better way of looking at the economies of the world.
    Japan’s per capita gdp at PPP has risen by a factor of 30-35% since 2000, but its net wealth has risen only by 20%. So Japan produces more in gross output, but takes less proportionally of that after costs. This explains the broad discontent in Japan, and it jives with typical punditry of a broad based Japanese decline. Otherwise, a rise in 30-35% in Gdp Per Capita at PPP would roughly what happened in the UK, and nobody accuses them of economic stagnation the way they do Japan.

  12. Gravatar of John Arthur John Arthur
    23. September 2019 at 21:00

    Sorry Scott, didn’t see the last comment
    I dont think that the net wealth data is wrong at all. Private Corporations and Chinese government both have the figures in the same ballpark. Obviously there is change year to year, and the figures aren’t perfectly stable, but the narrative are roughly the same.
    To your point, there was a rapid acceleration in both the offical statistics and private data before so who knows, maybe next year Chinese net wealth will leap past America’s.
    It would be news if all the Banks and the Chinese government had been getting such vital data wrong though. Seems like something that they would be good at.

  13. Gravatar of John Arthur John Arthur
    23. September 2019 at 21:15

    One more point about the net wealth data: If the Chinese were indeed far richer than what is believed, then it would be very likely that they would have trumpeted that fact. I mean, America’s net wealth is already $99 trillion. If China is indeed wealthier, there would be banner headlines that the Chinese are now worth near $100 trillion. I know I would.

  14. Gravatar of E. Harding E. Harding
    23. September 2019 at 21:17

    “They should use the PPP data for that subject.”

    ? Why? International business cycle consequences are arguably where exchange rates are most useful and PPP is least useful.

    PPP is by far more useful for national power; just compare Russia to Brazil/Italy/South Korea/Canada.

    “Otherwise, a rise in 30-35% in Gdp Per Capita at PPP would roughly what happened in the UK, and nobody accuses them of economic stagnation the way they do Japan.”

    Japan’s economic problems stem largely from demographics and having invested too much into 1960s-1980s industries. All the major Axis powers (Germany, Italy, Finland) share these problems.

    Japan’s and Britain’s GDPs per capita (PPP) have been essentially the same since 2001, both in levels and growth rates. They were also roughly the same between 1977 and 1987, then diverged until 1991 as a result of the Japanese bubble and British recession.

    The real reason for the better coverage re: Britain than Japan post-2000s is simply immigration.

  15. Gravatar of John Arthur John Arthur
    23. September 2019 at 21:25

    E. Harding
    Agree with your points on Japan
    Diagree on the UK
    I would argue that you are underselling it, most immigrants to the Uk don’t really do better than the Native Born, so if anything the UK data on per capita growth is hampered by this.
    Birthrates really only affect Total output, not Per capita output. Otherwise, Singapore’s and Luxembourg’s success would be difficult to explain.
    Meanwhile, UK wealth has more than doubled in the 20 years, while it could improve, is still far better than Japan’s meager 20% increase.

  16. Gravatar of rayward rayward
    24. September 2019 at 03:37

    I’d be interested in seeing the data for U.S. imports from China of intermediate goods vs. U.S. imports from China of finished goods. My guess is that the former are greater than the latter. This should have implications for the “strong” dollar vs. the yuan. U.S. manufacturing output has soared since the economic recovery, but not U.S. GDP. I’d also be interested in seeing the data for the income of U.S. companies attributable to CFCs.

  17. Gravatar of Arilando Arilando
    24. September 2019 at 06:18

    E. Harding
    You don’t think Japan has declined economically?

  18. Gravatar of Michael Sandifer Michael Sandifer
    24. September 2019 at 06:59

    I wasn’t aware there was any controversy over when to use PPP data.

  19. Gravatar of ssumner ssumner
    24. September 2019 at 08:59

    John, Are you aware that China has frequently been accused (by the US and others) of claiming to be poorer than it really is? The argument is that China wanted to appear to be poor, so it would not be attacked for its trade practices.

    I don’t claim to know China’s net wealth, maybe it is less than the US. But I know of Chinese people that superficially look poor, but who are millionaires. Sorry, I don’t trust the numbers. I should also clarify that I am referring to PPP wealth, I agree the US has more nominal wealth. Imagine what China’s high speed rail network would be worth valued at US prices. Probably 5 to 10 times its value in the Chinese data. Their expressway system is twice the size of ours. They have many, many times more housing units. I could go on and on.

    Arilando, Just to be clear, I do think Japan has declined a bit in relative terms (compared to the US). But nothing like what the market data shows. Last year I spent a month in Japan–it seems like a normal developed country.

  20. Gravatar of John Arthur John Arthur
    24. September 2019 at 09:47

    Scott: I am referring to PPP wealth, nominal wealth doesn’t make any sense for these calculations. China’s measured net wealth is $53 trillion. Do you think a country with a nominal gdp of $13 trillion has a higher gdp to wealth disparity than Japan, a country that has been developed far longer? Not a single developed country except for the US and South Korea have a gdp to wealth disparity as big as China would if these figures were just nominal.
    All the big banks in America and China both come to the same conclusions on net wealth, and since they base their investment decisions on these numbers, it seems silly to undercount Chinese wealth.
    Chinese wealth in 1995 was 2 trillion. Today it is 50 trillion. A 25X increase in 25 years. At that point, they had suprassed everyone except the United States, which is not only large but extremely wealthy per capita. It is already wealthy enough to get accusations.
    If China was as wealthy as you believe, than there is nothing that the US could do even if they wanted nor would any other country join them.
    It’s like you constantly say in this blog, if anyone was faking these numbers, the conspiracy would be hard to pull off. I think people would begin to notice that China’s net wealth at PPP is actually twice as big as every private sector and government agency says.
    Anyways, why would American and European private sectors lie about this data? I doubt China is angry that banks are proclaming that China is rich, I think they would want that

  21. Gravatar of John Arthur John Arthur
    24. September 2019 at 09:55

    Scott: If what you say is true, then there is no reason for China to act poor. They already have the power. If you have a royal flush, you don’t play the game like you have a bad hand.

  22. Gravatar of John Arthur John Arthur
    24. September 2019 at 10:02

    I’ll leave one final data point here for thinking
    Germany’s economy at nominal terms is $4 trillion dollars. Its Net Wealth is estimated by Deutsche Bank and Credit Suisse at $14.4 trillion. That less than a 1:4 margin.
    If the net wealth figures are nominal, then China’s gdp to wealth ratio is 1:4.
    For the Chinese figures to be incorrect, then virtually every other developed, far richer per capita economy would have to be more inefficient than China. Do you honestly believe that?

  23. Gravatar of John Arthur John Arthur
    24. September 2019 at 10:18

    Sorry for leaving so many comments, but I felt my tone in the last three comments was too combative- my apologies.
    I agree with you Scott that the Chinese numbers will suprass the American ones, and it will happen in the next decade. China will become number 1, but it is not right now.

  24. Gravatar of Daniel R. Grayson Daniel R. Grayson
    24. September 2019 at 10:22

    This post agrees with my experience in Jiangxi, in a small city that I stayed in for 7 weeks. Based on GDP, I expected to see poverty, but instead I saw prosperity.

  25. Gravatar of TallDave TallDave
    24. September 2019 at 11:19

    Isn’t the same true of trains in India or any poor country? Most US wealth is explained by our institutions — they’re why you’d rather live in New York and pay 10x subway fare than in Beijing. In China, CCP is the dominant institution, and you don’t get a vote on much of anything unless you’re Party material.

    Brookings found GDP overstated by about 12%. Given the colorful history of provincial GDP restatements, that seems about right.

    China long ago surpassed the US, and distant runner-up India, and everyone else combined, in pouring concrete — perhaps more in the last ten years than everyone in the history of the world up to the year 2000. It is truly awe-inspiring. It is not clear, however, that Chinese people necessarily have some deep cultural affinity for concrete as with (say) tea or rice or pork, so much as they are the victims of colossal state-assisted misallocations that are driving up debt — despite the lack of even a typical middle-income consumption safety net for the poorest.

  26. Gravatar of TallDave TallDave
    24. September 2019 at 11:36

    You can sort of pinpoint when things ran out of steam around 2015-6… remember, up to that point everyone assumed the yuan was massively undervalued, but then suddenly PBoC was spending trillions in forex to support it as capital began fleeing China. So they locked down capital controls tighter every year since, and even with those extreme measures they’ve had to allow the yuan to “float” past 7 in order to keep reserves flat. They can probably keep this game going forever, but a gradual deval is going to lower living standards — imports are already falling, even as the pork crisis hits full swing and oil prices are spiking.

  27. Gravatar of ssumner ssumner
    24. September 2019 at 12:11

    John, I don’t understand the point you are making. China’s GDP is larger than the US GDP in PPP terms. So why is it so implausible that their wealth is also higher in PPP terms? Wealth is basically the present value of future consumption. China’s consumption is rising faster than in the US.

    Daniel, Yes, and that’s one of China’s poorer provinces.

    Talldave, If you are arguing that China is poorer than the US in per capita terms, I agree. Otherwise I can’t see what point you are trying to make. Total GDP in China in PPP terms is clearly higher than in the US.

    And yes, India’s GDP is also understated at market prices—even more than China’s.

  28. Gravatar of John Arthur John Arthur
    24. September 2019 at 12:45

    Scott: I agree that China’s wealth will rise beyond US terms, but the point that I am making is that GDP PPP is not a precise indicator of net wealth. Some countries keep a lot more “net” than other countries after accounting costs. The US has for instance, a 1:5 ratio of GDP PPP to net Wealth. Germany has slightly less than 1:4 ratio of GDP PPP to net Wealth.
    China is a very big economy, 28% bigger than the US. However, it is a very inefficient economy, and keeps much less net gains after accounting for costs than the US. So even though China’s economy is bigger than the US, its net wealth is lower.
    I am not saying that it is implausable, I think that normally bigger GDP PPP countries have a bigger net wealth, but every private and public sector in the world ranks China’s net wealth as only half of the US, and given stories of China’s inefficiency- that makes sense.
    I do think that China’s net wealth will fastly overtake America’s, but I don’t see where that has happened yet.
    There would have to be some indicator that China’s net wealth is bigger than the US, but so far there is none.

  29. Gravatar of John Arthur John Arthur
    24. September 2019 at 12:51

    Scott: Let’s put it this way. South Korea has more wealth than Brazil, despite Brazil being 50% bigger than South Korea at PPP. South Korea is very efficent, and keeps most of their output after costs. Brazil, on the other hand, does not. So South Korea’s net wealth is bigger than Brazil. Im sure that Brazil has more before cost Wealth than South Korea, with an economy 50% bigger. But I am talking about Net Wealth.
    That’s also why South Korea has a bigger net wealth than India.
    In addition, Net Wealth correlates well with economies at market-exchange rates, probably why everyone spends so much time obsessing over that metric.

  30. Gravatar of John Arthur John Arthur
    24. September 2019 at 12:56

    Another example. Huawei has revenue rivaling Apple’s, and has probably exceeded Apple’s. Yet, Apple is far more profitable than Huawei, and as a result is far, far wealthier. Same for China and the US. Will Huawei(China) surpass Apple(US)? Almost certainly. But, it has not happened yet.

  31. Gravatar of John Arthur John Arthur
    24. September 2019 at 13:07

    Scott: China’s consumption is rising faster, but it is not yet higher than US consumption

  32. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. September 2019 at 15:23

    In this poll of 25 significant countries about whether the country is heading in the right direction or not, apparently President Xi, King Salman and PM Modi are doing great jobs. Most other leaders, not so much. (With normal caveats about how much can a leader do.)

    One gets why the Brexit turmoil puts the UK at the bottom. If, however, I was President Macron, it seems I have a lot to worry about …

  33. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. September 2019 at 15:26

    Sorry, wrong link, this is the latest report I was referring to.

  34. Gravatar of dtoh dtoh
    25. September 2019 at 05:17

    I always wondered the same thing about the yen fx rate when Japan had strong growth. My thoughts were…

    1. Capital flows drive the fx rate not the trade flows.

    2. The things that are cheap can’t be exported. Taxi rides and house cleaning to name a few.

    3. Dualism in the economy. There’s a high wage internationally competitive sector and a sector that is not.

    4. Locale is very sticky.

    On your next trip to Japan you’ll need to spend more time in rural Japan. Beautiful but increasingly impoverished.

  35. Gravatar of ssumner ssumner
    25. September 2019 at 11:21

    John, I agree with most of your points, but since wealth is a forward looking concept, and income is a current flow, it’s possible for China to have higher wealth even if their have lower current consumption. And I’m not sure China’s consumption is lower—I’d say it’s similar to the US in PPP terms (i.e. 22% of the US in per capita terms), and China’s higher PPP GDP is due to investment and net exports.

    But really, it’s an academic debate. Who knows?

    tdoh, Agree about rural Japan; we did see some decay. (And it’s a delightful place to visit, as you say.) Capital flows drive short term movements in exchange rates, as you say, but long term changes are driven by the sort of structural factors I cited in the post (which clearly are factors that trigger capital flows, as they develop.) Thus the 1990s high tech boom was a “fundamental factor”, whereas it led to capital flows into the US which appreciated the dollar.

    You said:

    “There’s a high wage internationally competitive sector and a sector that is not.”

    When that occurs, you get a very strong currency. But Japan’s currency is very weak. That’s the whole point of Balassa-Samuelson. Japan’s currency in 1990 was strong because its export firms were far ahead of its domestic firms. As its exporters like Sony have fallen behind Samsung and Apple, Japan’s real exchange rate has fallen.

  36. Gravatar of TallDave TallDave
    25. September 2019 at 11:56

    Sorry Scott, to be clear I don’t agree with anyone who says China wasn’t growing pretty fast even into the early Xi years. (Although, come to think of it I’m not sure if they’ve stopped reporting a smoothed GDP average, so we might still be seeing those years in the official headline numbers.)

    At any rate, looking forward to the chapter on China in the new Acemoglu/Robinson book (Narrow Corridor). I’ve argued for a while now that CCP could achieve a lot of inclusion by simply easing its admission standards.

  37. Gravatar of ssumner ssumner
    26. September 2019 at 14:59

    Talldave, One thing I forgot to mention. While I’ve recently concluded that China is more authoritarian that I assumed, I’ve also concluded that it’s less corrupt than I had assumed. Yes, it’s pretty corrupt. But there’s less of the corruption from police and other low level officials that so afflicts people in places like Latin America. (Although even that certainly exists.)

  38. Gravatar of P Burgos P Burgos
    28. September 2019 at 02:21

    Are China’s population figures credible? I think I read an article in the SCMP that China’s population is currently more like 1.285 billion people as opposed to the widely reported 1.385 billion people (or 1.4 billion shorthand). The explanation given for the overestimate was that the provinces were sending the central government inflated estimates of their student age population in an attempt to game some kind of education funding mechanism. The upshot being both that China’s per capita GDP growth has been even more impressive, but also that aging and population decline would set in much sooner and harder than expected due to a rather large overcount of the rising generation of women of child bearing age. So I guess that would mean that business and governments have been planning on levels of inflation and NGDP growth that won’t materialize. I would guess it also means that China is closer to the technological frontier than typically reckoned.

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