The great China growth slowdown is coming. If history is any guide, and if economists Barry Eichengreen, Donghyun Park and Kwanho Shin have read the numbers right, the sustainable Chinese growth rate is set to decline by at least two percentage points some time around 2015.
In a paper, the trio identified 58 growth tipping points at which the long term growth rate of gross domestic product drops by at least that amount. For developing countries like China the slowdown generally came when GDP per capita was in the $13,000-$18000 range. The median was $15,058.
The precision is spurious, but the idea is sound. The easy and fastest phase of growth lasts as long as unskilled workers can be hooked into a rudimentary industrial economy. The next phase involves less dramatic changes in industrial productivity and a shift towards less productive service businesses. Japan’s economy grew by 9.5 per cent a year from 1963 to 1970; in the following decade the growth rate slowed to 5 per cent a year. In South Korea, the slowdown was from 8.7 to 5.8 per cent.