crecimiento de china a largo plazo ( en los próximos 40 años)

8/7/2019 Crecimiento de China a largo plazo ( en los prximos 40 aos)

1/11

TELLUS Something New

China in the Long Run

A Macro Update by Torgeir Hien, Portfolio Managerof SKAGEN Tellus

avanger, orway, arc


2/11

nese ong- erm perspec ves

Its too early to tell

Chinese prime minister Chou En-Lais reply when asked by Frenchstudents whether anything good came out of the 1789 French Revolution


3/11

e roa trave e s nce 1978

GDP in USD

15,015,0 The Chinese economy came to life in 1978

when the government substituted central

planning with a market-based economy.

USD

10,0

,

USD

10,0

,

US

economy was let loose:

From 1980 to 1990 real GDP grew

9.3 percent per year.

From 1990 to 2000 real GDP grew

Trilli

on

5,0

7,5

Trilli

on

5,0

7,5

Japan

. percen per year

From 2000 to 2010 real GDP grew10.5 percent.

Measured in USD, Chinese GDP was larger

than Japanese GDP in 2010.

0,0

2,5

0,0

2,5China

After impressive growth numbers since the

1950s, Japanese GDP plateaued in 1990.

Why? Could this happen in China too? And

when?

Source: Reuters EcoWin


4/11

A significant part of Japans recent growth

decline is due to demographics. The labour

force began to shrink in 1998, the population

peaked in 2005. This had a direct impact on

GDP growth. Per ca ita rowth too was ve oor durin the

Japanese real GDP per capita

4,0

4,5

4,0

4,5

1990s, in the aftermath of the real estate bust.

From 2002 to 2007, however, GDP per capita

advanced 2 percent per year. Since then the

great global recession has reduced GDP per

capita. Trend peer capita growth has clearly07JPY

3,0

3,5

07JPY

3,0

3,5

been lower over the last 20 years than the 3.6

percent Japan averaged between 1970 and1990.

The main reason for stagnating per capita

rowth is that Ja an had been benefittin from

Million2

1,5

2,0

,

Million2

1,5

2,0

,

catch-up growth in previous decades. Japan

was a poor country after WW2, and this set the

stage for rapid growth during a transition

period. Since the early 1990s, however, percapita GDP in Japan has been around 901960 1970 1980 1990 2000 2010

0,5

1,0

0,5

1,0

percent of the US level, when measured in

USD. This signals much less scope for catch-

up growth.



5/11

a c -up grow n nese o s oo s Chinese-populated Taiwan and Hong Kong

and heavily Chinese-populated Singapore,

-

China. In 1980 GDP per person in Hong Kong

and Singapore was already 40 percent of the

US level. In Taiwan it was 20 percent.

Since then all three countries have closed in

per cap a n

45000

50000

45000

50000

USA

on e , par cu ar y ngapore, w ere

per capita is now 90 percent of the US level.

In Hong Kong it is 70 percent and in Taiwan

40 percent.

On average GDP per capita growth betweenSD

30000

35000

SD

30000

35000

Singapore

Hong Kong

Taiwan

an was . percent n ngapore,

5.8 percent in Taiwan and 4.8 percent in HongKong. Average annual population growth in

was 2.5 percent in Singapore, 1.1 percent in

Hong Kong and 0.9 percent in Taiwan during

U

10000

15000

20000

U

10000

15000

20000

.

The purchasing power of local currencies has

edged higher versus the USD but they are not

yet at parity. Hence in purchasing power

adjusted terms, GDP per capita in Singapore1980 1985 1990 1995 2000 2005 2010

0

5000

0

5000

an ong ong now ops a o e , w e

the Taiwanese GDP is 80 percent of the US

level.



6/11

-

GDP per capita in China was USD 4300 in

2010, measured at current exchange rates.That is 9 percent of the US level. Adjusted

GDP per capita

45000

50000

45000

50000

PP-adjusted volume in 2010 prices

for the different purchasing powers in the

two countries, per capita GDP in China last

year was 20 percent of the US level.

A low GDP per capita level means that there

is still a massive catch-up potential in China.30000

35000

40000

30000

35000

40000urrent

China is still far off the GDP per capita

levels that Japan had when its economyslowed down in the early 1990s.

High growth rates during a catch-up period

is what traditional macroeconomic theor

U

S

15000

20000

25000U

S

15000

20000

25000

-predicts. A precondition for catch-up growth,

though, is free market institutions. Political

reforms are not irreversible, though. Hence,

should China become more planned, itsGDP growth will slow down and could tail0

5000

10000

0

5000

10000

Current USD and USDCHY

off.

Sources: Reuters EcoWin and The Conference Board


7/11

er cap a grow epen s on nves men ...

Investment in fixed capital as a share of GDP

has been trending upwards over the last 30

years, and was over 45 percent in 2009. If

that rate is sustained, there is a huge yearlyaddition of capital per person in the labour

Fixed capital investment and the net real rate of return

27

30

45,0

47,5

orce. s r ves up pro uct v ty.

The rate of return on capital was on average

over 20 percent from 1992 to 2005. During

this period the rate of return fell somewhat in

state-owned enterprises, but it increased inent18

21

24

ofGDP

37,5

40,0

42,5

Net real rate of return on capital (r.s.)

privately owned enterprises.

Thus, the high share of output devoted toinvestment has not had a significant negative

effect on the overall rate of return. Net real

return on capital was a solid 24 percent in

P

erc

9

12

15

Percent

30,0

32,5

,

2007, about the average from 1978.

A high rate of return indicates that the

investment share will remain high for some

time. Hence, capital accumulation should

keep per capita growth rates solid in the1980 1985 1990 1995 2000 2005

0

3

6

22,5

25,0

,

Investment share of GDP (l.s.)

future.Sources: Reuters EcoWin and Professor Jessie Zhenjie Qian


8/11

an on ec no ogy

Technology refers broadly to how labour and

capital produce GDP. In the short run it is mostly

about politics. In the long run it is about science

and engineering. Substitution of central lannin with a mixed

Annual technological growth

7,5

10,0

7,5

10,0

economy set the Chinese economy in motion.

But there is still room for huge improvements, as

state owned enterprises dominate in certain

industries and the capital market is still tightly

regulated. Whether China adopts Hong Kongent2,5

5,0

ent 2,5

5,0

style capitalism remain to be seen. But how far

China institutes reforms determines the percapita GDP level China can expect when it has

caught up with advanced economies.

When the catch-u otential is exhausted,

P

erc

-2,5

0,0Perc

-2,5

0,0

USA

further per capita growth depends on how fast

the sciences advances.

Participation of Chinese scientists should help to

speed up that process, as will the output fromresearch universities and firm-level R&D in other1990 1995 2000 2005

-7,5

-5,0

-7,5

-5,0China

flourishing emerging markets.Source: The Conference Board


9/11

The Chinese population is set to grow up to

2030, with an average growth rate of 0.3 percent

per year from 2010 to 2030. The growth rate isdwindling though, and the growth rate in the 20-

Population and labor force

140

150

1,4

1,5

ties will be modest to say the least.

Labour force growth has slowed down since

1990. Over the last 20 years it has grown on

average 0.8 percent per year. During the same

eriod o ulation rowth was 1.1 ercent ern100

110

120

130

n1,0

1,1

1,2

1,3

Chinese population (l.s.)

year.

Japan gives a hint at what is on the cards for

China: although the population grew until 2005,

the labour force peaked in 1998. This suggests

that the labour force in China will row ver

M

illi

70

80

90B

illi

0,7

0,8

0,9

Japanese population (r.s.)

slowly until late this decennium and then start to

shrink.

A slowdown and eventual negative rate of labour

growth means that while GDP per capita may1980 1990 2000 2010 2020 2030 2040 2050

40

50

60

0,4

0,5

0,6Chinese labor force (l.s.)

Japanese labor force (r.s.)

,

down markedly over the coming decades.Source: EcoWin, IMF, The World Bank IMF and the UN


10/11

-

I estimate that real GDP growth will average 10

percent per year over the next 10 years, and then

fall to 7 ercent the followin decennium then 5

percent from 2030 to 2040, and 3 percent from

2040 to 2050.

Overall GDP growth slows due to demographics.

Growth rates per capita dwindle over time as the

Projected GDP in current USD

300300

,

productivity of capital falls with a higher ratio.

China will nevertheless manage to grow more

than the US in per capita terms until at least

2050, though, due to lingering catch-up effects.

SD

200

250

SD

200

250

China

US growth of 3 percent from 2010 to 2050, in linewith the historic trend. I also assume 2 percent

inflation in both the US and China plus 2 percent

annual renminbi appreciation. This closes the

Trillion

100

150

Trilion

100

150

USA

.

According to these projections, Chinese GDP will

surpass US GDP in USD terms in 2023. In 2050

Chinese GDP per capita will be 85 percent of the

US level and Chinas GDP is 150 percent higher0

50

0

50

.

capitalism, this will either speed up growth in

coming decades or prolong the period of catch-

up growth beyond 2050.

Source: SKAGEN Funds


11/11

Chinese growth has been very impressive since 1980 and is set todecline only gradually over the next 40 years.

The most important drivers are market reforms and a high investmentshare of GDP.

GDP per capita growth rates.

Adapting to a dwindling labour force could be problematic, as seen in. .

Convergence in GDP per capita levels is a time consuming process.But in 2050 China might end up with a GDP per capita that is just 15

.

The overall Chinese economy will then be 150 percent higher than the

US economy, both in current USD and purchasing power terms. e ere m g e paper wa s or e nese economy, ere s no

reason to think that it cannot continue to grow substantially over thenext 40 years.

crecimiento de china a largo plazo ( en los próximos 40 años)

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