Will China’s Growth EVER Slow Down?

China has been going through a period of explosive growth.  This has implications for all manner of things.

Will it overtake the US as the #1 world power?  Will it gobble up all the remaining oil reserves?  A lot of the answers to such questions depend on whether the Celestial Empire can sustain its current growth levels.  According to the Economist, some economists believe a long term slow down is inevitable.  Barry Eichengreen of the University of California, Berkeley, Donghyun Park of the Asian Development Bank and Kwanho Shin of Korea University have teamed up on research that tries to predict when the slowdown will take place:

[On] average, growth slowdowns occur when per-head GDP reaches around $16,740 at PPP. The average growth rate then drops from 5.6% a year to 2.1%.  This estimate passes the smell test of history (see chart). In the 1970s growth rates in western Europe and Japan cooled off at approximately the $16,740 threshold.

All of which suggests that China may be approaching that tipping point in about four years, which could provide some respite from the upward pressure on commodity prices.   Stay tuned.


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