Monday, October 21, 2013

China. Fast now, slow later - Treasury

China will be by far the biggest economy in the world within 17 years but it’s growth rate will have slowed to a trickle, according to a new Treasury analysis.

Labelled a working paper and posted on the Treasury website with the annotation that its conclusions are “those of the authors and do not necessarily reflect those of the Australian Treasury” the study uses measures of labour productivity and long term population growth to produce economic growth projections for six major regions of the world and six individual countries.

It finds China’s growth rate will plummet from an average of 10.5 per cent in the first decade of the century to 8 per cent this decade, then to 4.3 per cent, 2.4 per cent and 2 per cent between 2040 and 2050.

India, whose growth rate had been expected to overtake China’s, will do so as its growth slows from 7.5 per cent last decade to 6.5 per cent this decade, then 6.1 per cent, 4.5 per cent and 3.3 per cent.

Growth among developed nations will slip from 2.1 per cent per annum to 1.6 per cent before settling at 1.7 per cent from 2040...

The authors, Wilson Au-Yeung, Nghi Luu and Dhruv Sharma from Treasury’s international division and Michael Kouparitsas from Treasury’s domestic division, say the projected slid in growth rates need not concern Australia because its potential trading partners woill be quite big.

“Our analysis suggests that the economy of the emerging and developing region is currently larger than
the economy of the advanced region,” they write. “This reflects the rapidly shifting weight of global
economic activity to fast-growing economies of Asia.”

“We project that Asia will become the world’s largest economic region by 2020. Underlying this is the expectation that the combined economies of China and India will become larger than the advanced economies by the middle of the 2030s.”

They expect China to overtake the United States as the world’s largest economy by the start of the 2030s.

China’s economic growth rate will slow as its population growth rate slows. Chinese productivity is expected to climb from around 20 per cent of US productivity where it is today to 50 per cent by the middle of the century and then to 70 per cent.

In  The Sydney Morning Herald and The Age

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