Imagine you’re a doctor and someone hands you the chart of a 60-year-old man, asking you to predict the patient’s health for the next decade. The guy is a probiotic-eating marathon runner and his cholesterol numbers look great. Still, your prediction will likely give more weight to the average health outcomes of sexagenarians than to the patient’s pristine individual health.
But when it comes to predicting China’s medium- and long-term growth, economists are chucking that wisdom out the window, argue former US Treasury secretary Larry Summers and Harvard University professor Lant Pritchett in a new National Bureau of Economic Research paper (registration required).
As a result, they say, even the more cautious economic forecasts for China are overestimating the country’s growth prospects. Summer and Pritchett’s calculations, using global historical trends, suggest China will grow an average of only 3.9% a year for the next two decades. And though it’s certainly possible China will defy historical trends, they argue that looming changes to its authoritarian system increase the likelihood of an even sharper slowdown.