The NYT ran a column this morning by M.I.T. economics professor Lester Thurow in which he argued that China will take a full century to catch up with the U.S. in per capita GDP. There are so many things wrong in the column that it is difficult to know where to begin, but the crux of the argument is that he disputes China's official statistics. China's official data put its annual growth rate at more 10 percent over the last five years. Thurow argues instead that its growth rate is in a range of 4-6 percent. Furthermore, he puts its current per capita GDP at $1,000 a year, the level of extremely poor countries in Sub-Saharan Africa. Okay, it's fun with math time. Thurow's per capita GDP measure puts China's current GDP at approximately $1,300 billion. If China's growth averaged 4 percent over the last decade, then its GDP has grown by a total of 48 percent over this period. If its growth rate averaged 6 percent, then its cumulative growth was 79 percent. The 4 percent growth rate implies that China's GDP was $880 billion 10 years ago, menaing that its GDP expanded by $420 billion over the last 10 years. The 6 percent growth figure implies that China's GDP was $725 billion in 1997 and that its economy has grown by $575 billion over the decade. So, Lester Thurow believes that China's economy has expanded by between $425 billion and $725 billion over the last ten years. Okay, now lets' move to U.S. data. According to the Commerce Department, the annual U.S. trade deficit with China increased by $185 billion over the last decade (annualizing first half data for 2007). This means that Lester Thurow must believe that between 25.5 and 43.5 percent of China's growth over the last decade went to increasing the its trade surplus with the United States. This leaves very little room for increasing investment and improving living standards in China. Mr. Thurow certainly has a very different view of China's economic progress than almost all other observers. For example, the CIA Factbook puts China's GDP last year at $10.2 trillion and its per capita GDP at $7,700. Given its reported growth, these figures imply a total GDP of about $11.2 trillion at present, and a per capita GDP of $8,400. These figures fit much better than Thurow's with a country that has more cell phones users than the United States, and almost as many computer users, and produces more steel and more college graduates with science and engineering degree each year than the United States.
--Dean Baker
