What might stall the “Great Chinese Growth Engine”?
A few weeks ago, I attended a fascinating talk at Chatham House by Professor Wing Thye Woo who teaches Economics at the University of California on “The Real Challenges to China’s Continued High Growth”
He identified three important factors which might lead to the “crash of a speeding car” aka the “Great Chinese Growth Engine”:
- Hardware failure: “right tire burst” = collapse of a crucial economic mechanism
- Software failure: “fight within car” = social disorder
- Power supply failure: “no petrol” = limits from ecological barrier or external sanctions
He also cited several interesting statistics in his presentation of which the two below particularly stood out for me:
- “Social Disorder”: 1994 had 10,000 mass incidents involving 730,000 persons? in 2004 the number had gone up to 74,000 mass incidents involving 3.7 million people.
- China’s GINI coefficient has almost doubled from .24 in ‘78 to .47 in 2005
The China Policy Institute, which made it all happen, wrote its own report on the talk which can be accessed here. The report nicely summarised the key points. I would recommend it and the slides to everyone who is watching China and its impact on the global economy.
A few excerpts:
“…China had enjoyed the highest sustained economic growth rate of any country in recorded history, he said, and it was probable that this high growth model would succeed.
But it was important to examine the factors most likely to disrupt the high growth rate from continuing…
…Professor Woo said that perhaps the greatest challenge to China’s continued high growth in China would be future global disputes over resources and the environment, following what he called the unravelling of the global consensus for free trade in the United States, which was making the atmosphere ripe for protectionism.
As China and India moved up the value chain in manufacturing complexity, he said, Western countries were being forced to make painful adjustments as more and more jobs were lost. At the same time they would be faced with demands to help pay for the environmental improvements needed in countries like China and India to curb carbon dioxide emissions, he said.
…The best way to reduce CO2 emissions was to ensure that the new power generation capacity installed in China and India made use of modern, clean coal technology, he said, but this would mean that the richer countries would have to offer to pay for this in order to enjoy the benefits.
This made the atmosphere also ripe for what he called a coming global clash over the “Global Commons” not just air but also water as well. Asia, he said, faced a looming water crisis as China made plans to divert the flow of water to rivers such as the Bramaputra and the Mekong that flowed into India and Southeast Asia…”
For the curious amongst you, the 
Excerpts: