WB chief economist optimistic of China economy
Updated: 2012-01-07 15:03
CHICAGO - World Bank chief economist Lin Yifu said Friday he was "quite optimistic" of sustained Chinese economic growth, and that he believed China has the potential to maintain an annual economic growth rate of around 8 percent for the next 20 years.
"The reason why I think China has potential to maintain 8 percent growth rate for another 20 years is because of the 'advantage of backwardness,'" Lin said at a talk at the University of Chicago.
He cited the phenomenon where developing countries use the technologies and business practices from more advanced economies efficiently that they actually grow faster than when those advanced economies had undertaken the innovation process themselves.
According to Lin, also senior Vice President of World Bank, China's per capita income measured by purchasing power parity (PPP) was 21 percent of US per capita income in 2008, the most recent year for which data had been collected.
Lin believed this statistic was an especially positive sign for continued and dynamic Chinese economic growth, as it was historically consistent with the development experiences of other East Asian countries that experienced 20 years of high percent growth after reaching the same 21 percent per capita income mark compared with the United States.
When Japan's PPP per capita income reached 21 percent of US per capita income in 1951, the country experienced a 9.2 percent average annual growth rate until 1971. Likewise, South Korea experienced 20 years of 7.6 percent average annual economic growth until 1997, after reaching the 21 percent PPP per capita income of the US in 1977, according to Lin.
Lin said he believed that the similar experiences of these countries could be used as a way to gauge Chinese growth, and that they all shared the advantage of operating in a modern world where they could utilize ideas from other developed economies and thus progress very quickly.
Since China's economic reforms 32 years ago, the country has maintained an average 9.9 percent annual growth rate, though some doubted the sustainability of such growth.
Lin said historical experience shows the trend has the potential to continue for the next two decades.
Lin believed other developing countries could also tap into the "advantage of backwardness" like China and similarly achieve annual economic growth rates around 8 percent, if they developed their economy in line with their competitive advantages.
According to the World Bank, Chinese per capita income increased from $182 in 1970 to $4,376 in 2010.