Opinion | 3 theories of why China’s ‘economic miracle’ has hit a wall
Despite their opposing ideologies, they may well offer valuable insights into the future of country
Just a few years ago, China’s rise to superpower status seemed inexorable. Today, many independent experts no longer think so. To avoid all the noises about its inevitable dominance or collapse, it may be worthwhile to consider three social-economic theories – neoclassical, Marxist and demographics, all of which aim to account for China’s “economic miracle” and its slowdown – from across the whole ideological spectrum.
‘Neoclassical theory can explain China’s growth’
It’s been called “the tyranny of neoclassical growth”, meaning low-income or developing economies such as China’s can grow quickly at the starting line with low-hanging fruit – until they reach the “frontier” conditions of contemporary advanced economies and technologies. By that time, which is now, growth must slow.
“China has performed exactly as the representative Asian economy did when it was at the same level of economic development,” the authors wrote.
“If anything, China seems to be underperforming since the early 2010s … In other words, China’s growth is not exceptional per se (or the product of a particularly insightful combination of economic policies that could serve as a template for other economies) but for the size of China’s population.”
Japan, Taiwan, and South Korea have all slowed once reaching frontier levels. The same is happening to China.
Formally, the authors use what is called the Ramsey-Cass-Koopmans growth model, combined with “total factor productivity” (TFP), a measure of productive efficiency as it gauges how much output can be produced from a certain amount of input, which helps account for differences in cross-country per-capita income.
