Falsifying or padding out data has been refined to an art form among China’s local bureaucrats, since good economic growth figures not only look and feel good but are benchmarks for their career advancement.This has given rise to a popular saying that “data makes an official and an official makes data”.
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For the first time since 2010, the world economy is outperforming most predictions, and we expect this strength to continue. Our global GDP forecast for 2018 is 4.0%, up from 3.7% in 2017 and meaningfully above consensus. The strength in global growth is broad-based across most advanced and emerging economies, says a Goldman Sachs report on the global economy.
Today, the world’s major economies are experiencing a steady recovery, despite the occasional setback. To be sure, economic performance is far from reaching its full potential: depending on where one looks, one can find output gaps, excess leverage, fragile balance sheets, under-investment, and unfunded longer-term non-debt liabilities. Still, financial markets show no signs of convulsion, even as monetary stimulus is gradually withdrawn.
The fixation on headline GDP overlooks deeper issues shaping the China growth debate. That is because the Chinese economy is in the midst of an extraordinary structural transformation – with a manufacturing-led producer model giving way to an increasingly powerful services-led consumer model.
The People’s Bank of China has surprised many with its tolerance for market pain as it squeezes leverage in parts of the financial system. But rest assured, China won’t clamp down so hard it endangers President Xi Jinping’s goal to keep growth above 6.5 percent, according to economists from Morgan Stanley, Mizuho Securities and Oxford Economics.
Indian Prime Minister Narendra Modi with Chinese President Xi Jinping during the G20 Summit, in Hangzhou, China in 2016. Photo: Press Information Bureau
Even if India’s economy is growing faster than China, it does not mean that India has become economically as powerful as China. While India’s Gross Domestic Product (GDP) was $2.5 trillion in 2016, China’s GDP is nearly five times of that, at $11.4 trillion. That also reflects in the per capita GDP: while it is $8,260 for China, for India it is $1,718. India might overtake China in terms of population by 2022, but to overtake its per capita GDP, the Indian economy needs to grow more than 30 percent annually.
By 2030 one in five people will be African. Combine the continent’s soaring population with technology, improvements in infrastructure, health and education, and Africa could be the next century’s economic growth powerhouse.
It will soon be three years since Narendra Modi took over as Prime Minister in May 2014; his politics has been simply brilliant, making him by far the strongest Prime Minister India has produced since Jawaharlal Nehru and Indira Gandhi. After two stumbles in Delhi and Bihar, he has corrected his politics to be a vote winner par excellence. As we saw in Uttar Pradesh recently. But one cannot say the same thing about his economics.
Since 1950, middle-income countries have nearly always grown faster than expected. Looking just at the past decade and a half, current middle-income countries that had an average gross national income of $2,381 in 2000 have seen that more than double, to $4,951 in 2015. U.S. income, in contrast, climbed just 15 percent over the same period.
