When you predict on such a long timeframe, it is precisely when political factors become important (also 'isn't the sort of thing economists can base predictions on'). This is grossed over in one paragraph. And westerners conveniently forget (or are ignorant of) that when China was the number one economy in the world for 18 out of the last 20 centuries, it was plagued by intervals of chaos between dynasties.

This article reminds me very much of the kind of analysis which not to long ago predicted that Japan would now be the world's dominate economic power. Did you take into account that China's population is also aging? I believe that that by 2040 the Chinese population won't be that much younger than Europe's. I'm tired of the assumption that population growth is always an economic plus and that higher GDP makes the US or China superior to Europe or anyone else. Both India and China are going to struggle in the coming years to find enough resources to provide for billions of people. Its going to be a lot easier for Europe to maintain a reasonable standard of living. I don't understand why economists still don't seem to recognize such obvious physical limits. The total amounts of fossil fuel, farmland and fresh water and many other critical resources are fixed and will seriously impact China and India's potential for economic growth. GDP measures spending which does not reflect quality of life once basic needs are met. If I buy a giant SUV so I can drive 1/2 mile to buy a quart of milk I spend a lot more than those who use public transit or walk. Therefore, my contribution to the GDP is higher however, I would guess that most Europeans and NYC residents would take issue with my living standard being better.

The author might benefit from a closer reading of Edward Vickers' essay "China's Uneven Development: Nationalism and Inequality on the Mainland" and a number of other recent studies done at UCL on China's educational system.

Undeniably, education is emphasized in China, in keeping with a long tradition. Yet, as has been generally true since the establishment of the civil-service exams, education's role in China is demonstrably functional in nature for both the government and the nation's citizenry (this is not necessarily a bad thing). At the governmental level, China does not make massive investment in all areas of education; rather it apportions the majority of its investment in "key" schools, creating severe disparities and leaving behind the overwhelming majority of students, a fact testified to by comparative statistics for employment. To give you an idea of how dramatic this difference in investment may be, I cite a passage from Guo Hua, a researcher at UCL: "In 2003, key institutions, accounting for 10% of the total number, were granted 71.44% of the government funding." China invests in this manner because it is focused on building prestigious research centers and cultivating technocrats (i.e. an elite), whom it hopes will drive economic growth in the future and work closely with the military. Productivity, if it is even appreciable (I know many HR managers who would suggest otherwise), is an afterthought.

Why does this matter? Because the largest segment of educational expansionism predictably occurs in the less accredited, less capable schools. Most of the increase in university enrollment will happen on the fringes of China's educational industry. With consequences for the relevance of degrees and successive employment. As one might expect from this condition, the quality of the overwhelming majority of schools and programs in China (and therefore the overwhelming majority of new students) is very low. Hence the central government's 2003-2007 "Action Plan for Invigorated Education" (yes, you can't take the rhetoric out of the Party member), a quality assessment drive.

Additionally, it should be noted that China's investment in education as a percentage of GDP has fallen, not risen, since the mid 1990s. Naturally, due to China's outstanding economic growth, this still means gross investment has risen. But the percentage speaks to the priorities of the state.

I agree that is highly likely that China will surpass both US and EU in GDP.

But to argue that Chinese GDP will be over 35 times what it is today is ludicrous. He assumes constant growth of 13% for 30 years straight. So that China will grow substantially faster than it is growing today. All this is supposed to happen as growth moves form extensive (peasants moving to cities) to intensive growth (increasing productivity of workers who are already working in industries). it also assumes that the world's current resource and energy base can support this kind of growth

This is way too simplistic, even for an economist... More fodder for Drezner's anti-econ jabs.

Mainly, are we assuming Chinese in megacities will only buy local low cost products? there will be no inflation? ie Dubai and Doha ... are we also assuming no other country in the world will increase its production output? what will be the population in megacities in comparison to the other 90% of the country?

With all the product recalls, rising protectionism in the West as an uninteded consequence from China's 'investments', with a weakening dollar, and high risk investments by its Sovereign Fund, should we assume that African consumers will create this $123 billion economic superpower?

The economy of the People's Republic of China is the third largest in the world after the United States and Japan with a nominal GDP of US$4.6 trillion (2008) when measured in exchange-rate terms. It is the second largest in the world after that of the U.S. with a GDP of $7.8 trillion (2008) when measured on a purchasing power parity (PPP) basis. China has had the fastest-growing major economy for the past 30 years with an average annual GDP growth rate above 10%. China's per capita income has likewise grown at an average annual rate of more than 8% over the last three decades drastically reducing poverty, work at home, but this rapid growth has been accompanied by rising income inequalities.[6] The country's per capita income is classified in the lower middle category by world standards, at about $3,180 (nominal, 104th of 178 countries/economies), and $5,943 (PPP, 97th of 178 countries/economies) in 2008, according to the IMF.

At the risk of repeating what seems to be a consensus, I am surprised by the oversimplification (or perhaps better, the lack of sophistication) of this article. It appears to have been lifted from a copy of Newsweek circa 1999. I wonder whether FP would have even published if its author were not a Nobel Prize winner.

China's GDP is going to continue to grow for the foreseeable future, but it will eventually hit up against the constraints of both its beggar the citizenry export-oriented policies (primary fiscal asset -- US dollars), its poor university educational system, and its inability to make the necessary political and social reforms to become a truly developed state. You simply can't put 1.2 Billion people to work manufacturing widgets, while purposely deflating your own currency to keep the widgets selling, and expect to become rich. Bob Chen, who above has attempted to be realistic in predicting China will get to a per capita GDP of around US $20,000, is probably too optimistic. A Mexico-like US$12,000 per capita is probably more realistic; and that presumes that China's progress doesn't get derailed by the numerous stumbling blocks the country will have to face. Remember, that assumes roughtly a tripling of per capita GDP from today -- and the growth to date has been the easy, export oriented part. So at best, you are looking at a huge, middle-inome country; one that will have to continue to take solice in its huge aggregate GDP while actually being too poor to be a real global leader.

Such an outcome is in any case not inevitable: by 2050 the US will probably have around 500 million people -- if so, the US will likely stay the world's largest economy in aggregate terms, and vastly larger than China on a GDP basis. The concern should not be how to accomidate China on the world stage, but how to handle a China that will, inevitably, near the limits of its own economic growth.

The high GDP growth rate which China has been enjoying so far comes from rather heavy investment. Some statisitcs shows that about 40% of China growth is due to investment in the infrastructure. Those investment items are good, for their own sake. But investment can not drive the growth of GDP in a linear approach. The economic law of diminish of rutrun will hit China as soon as right now. Most Chinese do not want rule the world; they respect western people, and your produces. Do not let hatred fester.

...of those wondering what the heck this author is thinking.

Any student of the last few decades of economic history should know that poor countries can start to catch up with richer countries, particularly if they are trading with them. This means high growth rates.

However this phenomena can't continue for ever. Eventually there aren't rich enough trade partners to soak up all those exports. Eventually all the demographics change. Higher education institutes don't emerge overnight. The first painful pangs of consumerism are felt.

Some countries make this transition fairly smoothly, including China's neighbors of Korea and earlier Japan. These countries were once quite poor and now are quite wealthy. However making such a change requires, radical, radical changes to a society and some countries can't make those changes.

China has the rapid growth, yes. But does it have the capability to make a transition from a poor, export dependent country to one that sustains it's own growth? While great national pride is somewhat helpful, China has nearly every imaginable disadvantage to making this transition. No industrializing country has faced such a demographic obstacle.

Half of China is nonexistant to the world economy. China has little international goodwill and many friction points. There is no financial sector and foreign capital is not welcome. Many sectors, such as steel, are at overcapacity. There are no democratic political institutions (or acceptable substitutes). There is no social safety net, not even in healthcare. There is no consumer culture. There is no higher education. There is no sustainable niche in the world economy. In short, basically every structure that china would need to exist as a first world economy does not exist.

The question we should be asking isn't what to do when China becomes a first world economy. The question is what to do when the music stops and China doesn't become a first world economy.

But it is not just growth in manufacturing and consumer markets. It is clear that China will be the country to colonize outer space and wield true global hegemony like no one before them ever did. To grow this massively, China will have to invent new energy sources, since oil has peaked and is running down. Coal will run out in a few decades also, if usage continues to rise at the current rate. China will have to harvest energy in space and transport it to earth, and they will. Expect them to mine moon dust for He-3 (for fusion reactors), and to manufacture antimatter in space (using solar power) and transport it to earth. No other country will have the capital and human resources to do any of these things, and as the fossil fuel era dies, harvesting energy in space will be essential for the survival of civillization.

Forget about the USA. The financial mess shows that we are in an irreversible, terminal decline. While the current clowns in DC are throwing trillions into total black holes of waste, the Chinese actually are doing Stimulus right. Soon we will have shot our wad, we won't have any capacity to stimulate the economy again, and the economic collapse of the USA becomes an accelerating positive feedback spiral.

I hope that they will have a democracy soon

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I think China's growth is seriously over-hyped. Sure, they make all sorts of computers and gadgetry for us, like my acer aspire revo computer, but even if China obtains global economic dominance, that doesn't mean the West can't build itself back up by having more children.

Part of the reason why China is growing so quickly now is, despite recent claims of the government cleaning up its act, the industry is destroying the environment. Wait until they run out of natural resources and then see what happens. Also keep in mind that because China started out so low, it was easy for it to make quick gains. My guess is the growth will eventually taper off or the economy will crash.

I'm hoping China will never become a superpower because it will be a nightmare for the whole world. I'm sure, if it becomes number country, China will make the world a worse place because it will go to wars and engulf many many countries like they did in the past; the most recent one is Tibet. The next victim will be Vietnam (China is already invading Vietnamese east sea, or South China Sea), then other Southeast asian countries; I'm sure they will have confrontation with Japan and India, their traditional rivals.

http://alephblog.com/2009/06/16/problems-with-constant-compound-interest-3/

You are thinking too linearly. Even if Chinese economic statistics are accurate, and I doubt that, there are not enough resources in the world to achieve that growth.

Or, will the US Dollar inflate that much? Tack on a few more zeroes there.

This is probably the most aburd prediction I've read, what is being suggested is economically impossible unless we are getting our resources from space at that point.

It would be impossible for China to even achieve $50 trillion.....

.....but why say more, clearly the writer of this article is more into hyping up China rather than writing about the truth.

This assumes that China's economy will continue to grow at 11.8% per year for the next 30 years. Many countries have had high growth periods during there transformations from low to middle income countries. (The Mexican miracle in the 50's and 60's, the Asian export-promotion economies of Taiwan, S. Korea, and Singapore) . Once these economies moved past this period it proved impossible to maintain this growth rate. China has a number of advantages, not least among them being the size their domestic market and the fact that the one-child policy has brought a sizable demographic dividend, but it is unlikely that they will be able to continue this pace of economic growth. The author is either poorly travelled or is cherry picking his data when he says that most middle classed Chinese live better than middle classed Czechs. This article should be enough to rescind his noble prize for it's poor use of economic information.

Nothing is written in stone. Statistics might point to the obvious in the long run, but history tends to shake things up occasionally.

Let us put in case of point of the 1929 Wall Street Crash and the Great Depression, and the 2007-8 Great Financial Debacle of the Capitalist World. Were there differences in the reactions of governments and institutions, as well as the overall result of the geo-political climate?

How about the most recent U.S. presidential election? Pundits will say one thing or the other, but in hindsight, the Great Financial Debacle was a major factor in Mr. Obama's presidential electoral victory. Did the general public, or even the 'Greats' of the financial and industrial world, foresaw the impact of spending more than one earns.

Now going back to the supposed rise of China, well, such futuristic assumptions were made of Japan in the 80's. Remember Sean Connery's and Wesley Snipes' movie? Then there was the J-concept of management students in business schools still study today. In the end, it was only realized that having a zero-interest rate savings policy and cheap credit from Japanese banks enabled the Zaibatsus to blaze the way. Then reality sunk in, and now the Japanese and the world are discussing about the 'Lost Decade' in Japan. Whatever.

Suffice it to say, writers of articles that predict the future supremacy of a developing country have to consider that history is not a stream, but a river that goes to the vastness of the open seas. Whatever the means of 'legitimate clairvoyancy' that are employed, history will surprise us. For sure, China will continually transform itself, and will one day be considered as a 'developed country', or whatever that means. But it will not be in such a way that China's rise will result in the so-called 'global economic hegemony.'

The Chinese have done well for themselves in Taiwan, Singapore, Macau, Hong Kong, and... in North America, Africa, Australia, Malaysia, Indonesia...etc.

The People's Republic of China, as of 2010, in nominal value, is the world's second largest economy, the world's largest exporter, and Industrial and Commercial Bank of China is the world's largest bank by market capitalisation.

30 years of hard work.

Keep it up, China!

Does Robert Fogel know that the UK, Ireland, all of the countries of Scandinavia, France, and the Netherlands all have fertility rates higher than China's? Not to mention much more immigration and ability to absorb immigrants?

True, Italy, Spain, and Germany have lower fertility rates (in the 1.4 range vs 1.7 in China). But even the 1.7 in China is deceptive as Muslims, minorities, and the most disadvantaged poor spike that number (which is, after all, 1.0 for most families, especially in "high-productivity" cities).

In fact, China's working-age population began to decline in 2009 and will do so for decades unless the fertility or immigration trends change sharply.

China's economic achievements are truly historic, but the fact that more than 125 of China's largest public companies are state owned, that its banking system is state owned, and that its economy is driven by state-allocated capital investment will probably result in Japanese-style stagnation well before reaching half of US per capita GDP.

The key to china's economic growth is clearly it vast amount of natural resources and huge and ever growing population. Tourism and travel is starting to pick up in China and the economy is shifting towards a more internal capitalist model, rather than one based purely upon manufacture and exporting.

An ever growing population means that buisnesses are keen to make investments in China due to what is believed to be a large, captive and untapped market. China's economy will just keep growing as long as foreign investors continue to make money.

projecting forward so far based on current questionable trends is a little bit weak.

The China question is complex and many of the China bears have good points. I would add these points to future growth impediments in the medium and long term:

1. Environment/Pollution - These have been addressed well by some comments. This will become a barrier because of growing pollution, physical resource constraints and limited resources per capita. China is incredibly rich in resources but is already a net importer of many resources. The ability to mine or produce resources in parts of the world China is looking at such as Africa. South America and disturbingly Antartica, will be constrained by fierce resistance from Western environmentalists. Countries such as my own, Australia, will soon not be able to export food to China due to reduced production and growing internal demand. Chinese and other SE Asians are heading for the exits, this is noticeable in Australia where a growing number have settled to escape the effects of pollution. I over heard a woman on the train recently speaking to a friend in Hong Kong about "escaping to a city in which she can breath the air".
2. Corruption - China has extensive corruption, it is in a corruption bubble. Many Western companies will find their potential profits destroyed by corruption and there will be a re-think of doing business in China. Investors will look at other low wage countries for alternatives.
3. Automation - The decreasing cost of automation will reduce the relative benefits of low wage countries such as China. In the short term manufacturing will continue to decrease in Europe and the US. In the medium term it will be cheaper to capitalise automated factories in the US and Europe, producing closer to the end market. As Chinese wages are kept artificially low the Chinese worker will not develop enough relative purchasing power for high price products.
4. Language/Culture - China, like Japan before it, will not become a major producer of software or media content due to its complex language. All software languages are written in English, setting up sort algorithims is difficult and inexact in Chinese, and even when simplified Chinese has thousands of characters. Japan spent vast amounts of money attempting to establish a major software industry and in the main part failed, at least in terms of cosumer and business software. China will not succeed and will also play follower to the US and Europe unless it adopts English or a Roman based language (PinYin is only a partial solution). As China opens up it will import more content from the West but the West will not import content from China as there is no significant demand for Chinese content. Like Japan before it, parts of China are being progressively westernised.

http://www.guardian.co.uk/commentisfree/2009/jun/22/china-asia-west-democracy

One should pause before hauling up a Nobel laureate on numbers, but Fogel misses something essential in the Chinese education sector (where I work). "University enrolloment continued to rise . . ." - well, yes, because the government did for education what they're doing with the stimulus package now -- massive investment in hard infrastructure (in the case of education, building schools) but not so much in software (in the case of education, this means faculty).
China's academic environment was destroyed by the Cultural Revolution -- many faculty on my campus above the age of 50 don't have PhDs -- those who did were being thrown off buildings less than 40 years ago. Faculty development is a long-term exercise; so the system would be challenged in any event to rebuild a competent faculty. Add to China's problems the negative effects of the Party-controlled Ministry of Education, which retards faculty development. Now lay on massive quantities of new classrooms, and the result is . . . 6 million college graduates per year, most of whom haven't received an education worth the name.
Employers in China vote with their wallets -- new graduates face higher unemployment and lower wage increase levels than the larger workforce.
I vote with my feet. I live here, and believe in the profound power of a nascent China. But the education sector will face challenges for decades more, and therefore any comparisons with Western education systems and outcomes are facile.