When Will Western Economists Get it?
A couple economists at the Federal Reserve Bank of San Francisco came out with a paper arguing that even as China’s GDP slows to a new normal over the next decade, poorer interior provinces will speed up and take up some of the slack. Well, of course!
Most Western economists just look at China’s macro picture but in the interior and western China, pockets of deep poverty remain. There are some 10-13% of the population still living under US$2 a day. They should instead perceive China as a multi-layered economy – advanced development along the coast and in the major cities, central areas and third and fourth-tier cities and counties that have a ways to go in catching up, and remote rural areas in central, southwestern and northwestern China that are about 15-20 years behind.
This is all part of the urbanization process that proceeds nonuniformly across the country – from the coast and major cities gradually working inward. China has a long way to go in development and the government is fully aware of the challenges ahead.
Here is their analysis on rich and poor provinces switching places by the end of the decade as the rich slow to 5.5% and the poor grow at a robust 7.5%. But, I think their dichotomy between rich and poor provinces remains crude. I expect growth to be higher all around, especially in the interior where the central government has been pouring in massive amounts to build up infrastructure and stimulate growth and will continue to so in the coming decades.
http://www.frbsf.org/publications/economics/letter/2012/el2012-31.html