1/OK, time for a thread about a pet peeve of mine: People who use Japan as a reason to predict that China won't economically dominate the world.
This is just silly, because China is ELEVEN TIMES the size of Japan.
This is just silly, because China is ELEVEN TIMES the size of Japan.
3/People point out the similarities between China's economy now and Japan's economy in the 1980s, such as:
1) investment-driven growth
2) lots of electronics and heavy industry exports
3) industrial policy
4) bank-centric finance
etc.
1) investment-driven growth
2) lots of electronics and heavy industry exports
3) industrial policy
4) bank-centric finance
etc.
4/Many of those similarities are real, though the similarity is actually much less than people think (and I suspect they mainly associate the two because they're both in East Asia).
In fact, Japan's economic system is probably MUCH more efficient than China's.
In fact, Japan's economic system is probably MUCH more efficient than China's.
5/I'm not going to spend time explaining the differences between China's and Japan's economies because they're beside the point.
China probably won't reach Japan's level of per capita GDP within the forseeable future.
Doesn't matter. China will still dominate, because it's BIG.
China probably won't reach Japan's level of per capita GDP within the forseeable future.
Doesn't matter. China will still dominate, because it's BIG.
6/You know what country is even richer than Japan? Switzerland. But no one says "Switzerland didn't dominate the world, so China won't either."
Because that would be silly. Switzerland is small.
Somehow, though, people seem to imagine China and Japan are of similar size!
Because that would be silly. Switzerland is small.
Somehow, though, people seem to imagine China and Japan are of similar size!
7/China's economy is already almost three times as large as Japan's (four if you use PPP numbers). Because although it is much poorer than Japan, China has ELEVEN TIMES as many people.
en.wikipedia.org/wiki/List_of_c…
en.wikipedia.org/wiki/List_of_c…
8/China is also approximately four times as large as the United States.
This means that even if China's economy is only one quarter as rich as America's, China's economy will still be larger in total size than America's.
China is BIG.
This means that even if China's economy is only one quarter as rich as America's, China's economy will still be larger in total size than America's.
China is BIG.
9/Here is a graphic that I just made, depicting the relative sizes of the U.S. and China. 
10/Here is another graphic depicting the relative sizes of the U.S. and China.
11/In order to have an economy bigger than America's, Japan would have to be more than TWICE AS RICH as America.
In order to have an economy bigger than America's, China doesn't even have to be ONE FOURTH AS RICH as America.
In order to have an economy bigger than America's, China doesn't even have to be ONE FOURTH AS RICH as America.
12/The only way China's economy won't be the world's biggest (and it already IS the biggest in PPP terms) is if it either A) suffers a massive collapse, or B) almost immediately stops growing and stays at a fairly low level of income forever.
13/I predict that all of these things will be true:
1) China WILL slow down reasonably soon
2) China WILL top out at a considerably lower level of per capita income than Japan
3) China WILL be the largest economy in the world, BY FAR, by any measure you can name.
1) China WILL slow down reasonably soon
2) China WILL top out at a considerably lower level of per capita income than Japan
3) China WILL be the largest economy in the world, BY FAR, by any measure you can name.
14/In sum, comparing China to Japan is fine if you're talking about living standards, and whether China's can catch up.
But saying that because Japan didn't dominate the world, China won't either, makes NO SENSE.
Size matters. A lot.
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But saying that because Japan didn't dominate the world, China won't either, makes NO SENSE.
Size matters. A lot.
(end)
