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China’s share of global GDP

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Why is China overtaking Japan to be the 2nd largest economy newsworthy? But for some strange reason, it’s all over the place, some more interesting than others. The Economist has recycled Angus Maddison’s data to give some historical background.

As to The Economist’s rhetorical question,

China and India were the biggest economies in the world for almost all of the past 2000 years. Why they fell so far behind may be more of a mystery than why they are currently flourishing.

many readers have resorted to a chicken and egg answer: that China and India had the biggest populations. Hello! Doesn’t having a large population in an agrarian economy in and of itself suggests higher productivity (due to whatever reason), and hence more surplus? Chinese population was almost HALVED after the fall of the Eastern Han Dynasty in 220CE. There were numerous accounts of the horrendous famines and population loss in the early 17th century, before the fall of Ming. So it’s in fact large economies that make large populations sustainable, instead of the other way round.

As to China and India’s sudden fall from the first league, the quick and easy answer is colonialism, which I think is wrong again in terms of cause and effect. Colonialism is like germs that populate our living world. It simply invades countries that have been weakened by other reasons. By the 19th century, China was already in her dying throbs. As such, the GDP share seems like a lagging indicator of a nation’s economic wellbeing.

One of the best books that deal with this fascinating topic is The Great Divergence, by Kenneth Promeranz. Mind you, the writing is horrible, but it’s well worth the effort.


Written by Cindy Luk

August 18, 2010 at 2:33 am

Why do the Chinese save so much?

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With all the talk about savings glut and spendthrift, one theme always pops up: the Chinese like to save…a lot. The usual explanation given is the lack of a modern welfare state, so that people have to depend on their own resources for education, health care, retirement etc. etc. Another popular reason is, well, the Chinese just like to save. It’s a cultural thing!

Right. Try listening to an American who had lived through the Great Depression, and you will know how “spendthrift” Americans can be. By the same token, why should the Chinese be natural born savers?

Saving is defined as the deferral of current consumption for the benefit of future consumption. The more uncertainty we have for the future, the more we will need to save up for. And China, folks, had been the land of chaos for much of the past 150 years. Civil wars, invasions, famines, go a long way in destroying people sense of security.  The last famine was from the 1959-61 period, when an estimated 20-44 millions people STARVED to death. Memories of these are not particularly helpful in fostering a consumption habit, no matter how well off you actually are now.

Does this mean China is destined to remain the land of the savers? Afterall, you can’t erase people’s memory.

But, the older you are, the more likely that you’re going to, ahem, die.  The post-reform period has been relatively stable and prosperous. By now everyone and his mother would have heard about the 30 years double digit growth story. People who grew up during this period know only of continuous rapid improvement in standard of living. And they are entering the society en masse now.

How many are these people? How much would they spend? Well, that’s the million dollar question. But I think we can use the following as a handy proxy, as Chinese movie goers tend to be young and urban. Now, before someone screams that China will save the world economy, let’s put things into perspective. China totaled RMB6.2bn (USD908mn) in 2009 box office receipts, less than one-tenth of the USD9.87bn haul in the US. Nevertheless, the growth rate has been spectacular and is expected to continue for some more years down the road.


Written by Cindy Luk

January 20, 2010 at 2:32 am

Posted in Culture & Society

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