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OU Lecture 2008: China's miracle

Updated Thursday 29th May 2008

Rapid expansion in production, coupled with a massive population, is changing the rules, says Professor Kaplinsky in part three.

China's exports have been steadily and rapidly growing since 1979 - this, along with the fact that they account for 20 per cent of the world's population, is beginning to have a big impact and the rules of the game are changing.

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Well, China’s a miracle isn’t it? It’s been growing at 10 per cent a year between 1979 and 2007. Actually, this year it’s growing at ten and a half, just over 11 per cent. It’s never happened before. Well maybe, or maybe not. If you look at China’s miracle as the growth of exports, and you take three countries here China, Japan and Korea, and you look at Japan’s miracle since 1960, all the years are lapsing since 1960. Korea’s miracle since 19.., what have I got there, 1963. And China’s miracle since 1979, you can see that China’s export growth is actually if anything, slightly slower than other countries. And if ever, the GDP growth which is the growth of living standards basically, almost. Let’s keep it crude for the moment. You can see again using the same principles. China grows a bit more rapidly. In fact this is a log scale so the differences are bigger than they appear. But nevertheless the story is essentially the same.

There is no miracle in China in the sense that it hasn’t happened elsewhere before. But if you take Korea and Japan, as a share of the world’s population, you will see that although they grew very rapidly, at no stage together did the two of them account for more than five per cent of the world’s population. China alone accounts for 20 per cent of the world’s population and India for another 17 per cent. In fact by 2030 India will have a bigger population than China. So yes, it’s not a miracle in the sense that it’s never happened before. But the size of China and India means that you have to take away the small country assumption which is that some countries can grow very rapidly and it doesn’t affect what the rest of us do. When 40 per cent of the world are growing at 10 per cent compound for 25 years, it changes the rules of the game. And that’s what I want to talk about today.

And one of the ways in which this has affected now is the share of different parts of the world in world manufacturing. And now if you look at 1985 and 1998, I am afraid there are no more recent figures for rather peculiar reasons, using this time series. You can see that the share of East Asia grew from 4 to 14 per cent. Most of that was due to China. And if you look at the share of all developing country manufacturing, East Asia now has 60 per cent by 1998 and China alone 30 per cent. Project forward to 2005 and include Hong Kong, and it’s about 40 per cent of all developing country manufacturing value added occurs in China, in Greater China. And something like I would guess about 20 per cent of world manufacturing value.

Now you may say, so what? But think of the decades and hundreds of years it took for Germany, France, Italy and the US to catch up with Britain after the Industrial Revolution. In historical terms this is very, very rapid change indeed. And that has begun to have a big impact, and I’m going to talk about that, on the whole challenge of development strategy. So my first part was essentially around how I got to where I’m at. I’ll now try to give you some sense of how China and India are big aggregates out there and they are changing the world. They have disruptive factors, which means that the rules of the game change for everybody else. And the rules of the game I’m going to talk about now is the strategy of industrialisation which has been the dominant strategy in Africa over the last 30 years and the dominant strategy in the world, in fact since the Industrial Revolution.

 

Next: Segment 4

The Open University Lecture 2008

 

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