China: The pitfalls of playing catch-up
China is the world’s largest-ever catch-up economy. It will soon be the world’s largest economy, period. But policymakers in Beijing face some tough choices in the years to come to cope with the strains that industrial revolution brings, writes Diana Choyleva.
Director and head of UK service
Lombard Street Research
China’s reawakening has transformed the global economy. For many centuries it was the world’s greatest. Chinese steel production in 1066, using blast furnaces, exceeded Britain’s in 1866. In 1421 a Chinese fleet of 1,000-ton ships sailed the world, south to Australia and New Zealand, east to America’s west coast. The Spanish Armada was puny compared with Kubla Khan’s attempted Japanese invasion. But China ignored the 18th and 19th century Industrial Revolution. It then failed to tackle its 20th-century weakness, culminating in the 30-year economic catastrophe of Mao’s leadership. Since 1978, China has gone down the export-led, catch-up path pioneered by Japan and Korea, with similar near-10% growth rates. The growth of GDP per capita is a huge 8% to 9%, meaning the standard of living doubles every eight and a half years. The starting point was low, however. China’s average standard of living is still only 17% to 18% of America’s, up 10 percentage points in 15 years.