Email of the day - on China's growth potential
Comment of the Day

May 13 2021

Commentary by Eoin Treacy

Email of the day - on China's growth potential

That some manufacturing will move to other parts of Asia makes sense (especially as Chinese labour costs rise)

But the comparison some make with Japan needs to take account of the facts that:

a) Even now only 60% of the Chinese population is urbanised (93% for Japan)

b) Output per capita must still be much lower than advanced countries so they can also catch up in that? Most developing countries have the constraint that they don't have the capital to invest for that but lack of capital is not China's constraint.

Eoin Treacy's view

Thank you for this email which raises some important points. The base effect helps to spur economic growth for frontier markets because small improvements tend to have big effects on economic potential for poor countries. Obviously, the larger a country becomes, the greater the challenge to maintain high growth rates. That’s where China is today.

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