Fault lines may hamper China growth

While China takes the Olympic limelight and China’s rising influence in Asia was on the front page of New York Times, FinanceAsia had an article asking “Why RAND’s economic growth forecasts for China are below consensus?

“The consensus among many organizations, from supranationals to investment banks to think tanks, is that China’s GDP growth rates will average 7-8% a year until 2015. These estimates are based on China’s phenomenal track record, averaging 8.6% annual GDP growth since the late 1970s, a rate faster than Japan during its ‘miracle’ growth spurt throughout the 1970s and 1980s. At that rate, China will nearly reach America’s GDP by 2025 (although even then its per capital GDP would be only 15% of the United States’).

One forecaster, however, thinks the consensus is too rosy. Washington, DC-based RAND Corporation, a think tank, argues China’s annual growth rates in that period will be more like 6%, because of the sheer number of risks, or “fault lines”, as senior economic advisor and fellow Charles Wolf puts it. ”


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