Rising China

Abstract

At the time of its 2015 annual meetings, the International Monetary Fund published estimates of national incomes of several large countries using “purchasing power parity” (PPP) methodology. This method uses PPP rather than the official exchange rate for converting national incomes. According to this methodology, China is now the world’s largest economy, having overtaken the United States. That notwithstanding, its rate of GDP growth has slowed significantly. For 35 years, from 1980 to 2015, the country’s gross domestic product increased at the rate of 10 % a year, but for the next decade or so the rate is likely to slow down to only 6 %. The old growth model Beijing used to develop its economy may not sustain even this lower rate of growth. What is required is a move towards a new development paradigm. China will have to rely more on domestic consumption as the driver of growth. It will need to reduce its dependence on exports to the markets of the developed world. Questions are also being asked about the future of China’s political system based on the dictatorship of one tightly controlled political party. At this time the party is headed by Xi Jinping who, unlike two of his immediate predecessors, seems inclined to use the methods deployed by Mao Zedong to establish one-man rule in the country. But Mao governed a poor country in which the main concern of the vast majority of the citizenry was to gain access to basic needs. Today’s China has a vast middle class with different aspirations, including the desire for greater political freedom. Will such people accept one-man rule?