Nobelist Robert Fogel Predicts China’s 2040 GDP

Nobelist Robert Fogel Predicts China’s 2040 GDP

In 2010 Robert Fogel, Nobel laureate in economics, writing in Foreign Policy, estimated that China’s economy will reach $123 trillion in 2040: twice as big as the USA and the EU combined. Since Foreign Policy has suppressed the article, it is reproduced in full, below.

This examines China’s progress in the eight years since Professor Fogel wrote it. The chart corrects for what Dr. Fogel called systematic under-reporting by China and shows the actual GDP of both countries.As we can see, China’s economy surpassed America’s in 2010, the year in which Dr. Fogel made his prediction and continues to grow three times faster. This how it will look in 2040:Robert Fogle China's GDP 2040


*China’s estimated economy by the year 2040. Be warned.


In 2040, the Chinese economy will reach $123 trillion, or nearly three
times the economic output of the entire globe in 2000. China’s per
capita income will hit $85,000, more than double the forecast for the
European Union, and also much higher than that of India and Japan. In
other words, the average Chinese megacity dweller will be living twice
as well as the average Frenchman when China goes from a poor country
in 2000 to a superrich country in 2040. Although it will not have
overtaken the United States in per capita wealth, according to my
forecasts, China’s share of global GDP — 40 percent — will dwarf
that of the United States (14 percent) and the European Union (5
percent) 30 years from now. This is what economic hegemony will look

Most accounts of China’s economic ascent offer little but vague or
threatening generalities, and they usually grossly underestimate the
extent of the rise — and how fast it’s coming. (For instance, a
recent study by the Carnegie Endowment for International Peace
predicts that by 2050, China’s economy will be just 20 percent larger
than that of the United States.) Such accounts fail to fully credit
the forces at work behind China’s recent success or understand how
those trends will shape the future. Even China’s own economic data in
some ways actually underestimate economic outputs.

It’s the same story with the relative decline of a Europe plagued by
falling fertility as its era of global economic clout finally ends.
Here, too, the trajectory will be more sudden and stark than most
reporting suggests. Europe’s low birthrate and its muted consumerism
mean its contribution to global GDP will tumble to a quarter of its
current share within 30 years. At that point, the economy of the 15
earliest EU countries combined will be an eighth the size of China’s.

This is what the future will look like in a generation. It’s coming
sooner than we think.

What, precisely, does China have going so right for it?

The first essential factor that is often overlooked: the enormous
investment China is making in education. More educated workers are
much more productive workers. (As I have reported elsewhere, U.S. data
indicate that college-educated workers are three times as productive,
and a high school graduate is 1.8 times as productive, as a worker
with less than a ninth-grade education.) In China, high school and
college enrollments are rising steeply due to significant state
investment. In 1998, then-President Jiang Zemin called for a massive
increase in enrollment in higher education. At the time, just 3.4
million students were enrolled in China’s colleges and universities.
The response was swift: Over the next four years, enrollment in higher
education increased 165 percent, and the number of Chinese studying
abroad rose 152 percent. Between 2000 and 2004, university enrollment
continued to rise steeply, by about 50 percent. I forecast that China
will be able to increase its high school enrollment rate to the
neighborhood of 100 percent and the college rate to about 50 percent
over the next generation, which would by itself add more than 6
percentage points to the country’s annual economic growth rate. These
targets for higher education are not out of reach. It should be
remembered that several Western European countries saw college
enrollment rates climb from about 25 to 50 percent in just the last
two decades of the 20th century.

And it’s not just individual workers whose productivity jumps
significantly as a result of more education; it’s true of firms as
well, according to work by economist Edwin Mansfield. In a remarkable
1971 study, Mansfield found that the presidents of companies that have
been early adopters of complex new technologies were on average
younger and better educated than heads of firms that were slower to

The second thing many underestimate when making projections for
China’s economy is the continued role of the rural sector. When we
imagine the future, we tend to picture Shanghai high-rises and
Guangdong factories, but changes afoot in the Chinese countryside have
made it an underappreciated economic engine. In analyzing economic
growth, it is useful to divide an economy into three sectors:
agriculture, services, and industry. Over the quarter-century between
1978 and 2003, the growth of labor productivity in China has been high
in each of these sectors, averaging about 6 percent annually. The
level of output per worker has been much higher in industry and
services, and those sectors have received the most analysis and
attention. (I estimate that China’s rapid urbanization, which shifts
workers to industry and services, added 3 percentage points to the
annual national growth rate.) However, productivity is increasing even
for those who remain in rural areas. In 2009, about 55 percent of
China’s population, or 700 million people, still lived in the
countryside. That large rural sector is responsible for about a third
of Chinese economic growth today, and it will not disappear in the
next 30 years.

Third, though it’s a common refrain that Chinese data are flawed or
deliberately inflated in key ways, Chinese statisticians may well be
underestimating economic progress. This is especially true in the
service sector because small firms often don’t report their numbers to
the government and officials often fail to adequately account for
improvements in the quality of output. In the United States as well as
China, official estimates of GDP badly underestimate national growth
if they do not take into account improvements in services such as
education and health care. (Most great advances in these areas aren’t
fully counted in GDP because the values of these sectors are measured
by inputs instead of by output. An hour of a doctor’s time is
considered no more valuable today than an hour of a doctor’s time was
before the age of antibiotics and modern surgery.) Other countries
have a similar national accounting problem, but the rapid growth of
China’s service sector makes the underestimation more pronounced.

Fourth, and most surprising to some, the Chinese political system is
likely not what you think. Although outside observers often assume
that Beijing is always at the helm, most economic reforms, including
the most successful ones, have been locally driven and overseen. And
though China most certainly is not an open democracy, there’s more
criticism and debate in upper echelons of policymaking than many
realize. Unchecked mandates can of course lead to disaster, but
there’s a reason Beijing has avoided any repeats of the Great Leap
Forward in recent years.

For instance, there is an annual meeting of Chinese economists called
the Chinese Economists Society. I have participated in many of them.
There are people in attendance who are very critical of the Chinese
government — and very openly so. Of course, they are not going to say
“down with Hu Jintao,” but they may point out that the latest decision
by the finance ministry is flawed or raise concerns about a proposed
adjustment to the prices of electricity and coal, or call attention to
issues of equity. They might even publish a critical letter in a
Beijing newspaper. Then the Chinese finance minister might actually
call them up and say: “Will you get some of your people together? We
would like to have some of our people meet with you and find out more
about what you are thinking.” Many people don’t realize such back-and-
forth occurs in Beijing. In this sense, Chinese economic planning has
become much more responsive and open to new ideas than it was in the

Finally, people don’t give enough credit to China’s long-repressed
consumerist tendencies. In many ways, China is the most capitalist
country in the world right now. In the big Chinese cities, living
standards and per capita income are at the level of countries the
World Bank would deem “high middle income,” already higher, for
example, than that of the Czech Republic. In those cities there is
already a high standard of living, and even alongside the vaunted
Chinese propensity for saving, a clear and growing affinity for
acquiring clothes, electronics, fast food, automobiles — all a
glimpse into China’s future. Indeed, the government has made the
judgment that increasing domestic consumption will be critical to
China’s economy, and a host of domestic policies now aim to increase
Chinese consumers’ appetite for acquisitions.

Of course, China faces its own demographic nightmares, and skeptics
point to many obstacles that could derail the Chinese bullet train
over the next 30 years: rising income inequality, potential social
unrest, territorial disputes, fuel scarcity, water shortages,
environmental pollution, and a still-rickety banking system. Although
the critics have a point, these concerns are no secret to China’s
leaders; in recent years, Beijing has proven quite adept in tackling
problems it has set out to address. Moreover, history seems to be
moving in the right direction for China. The most tumultuous local
dispute, over Taiwan’s sovereignty, now appears to be headed toward a
resolution. And at home, the government’s increasing sensitivity to
public opinion, combined with improving living standards, has resulted
in a level of popular confidence in the government that, in my
opinion, makes major political instability unlikely.

To the West, the notion of a world in which the center of global
economic gravity lies in Asia may seem unimaginable. But it wouldn’t
be the first time. As China scholars, who take a long view of history,
often point out, China was the world’s largest economy for much of the
last two millennia. (Chris Patten, the last British governor of Hong
Kong, reckons China has been the globe’s top economy for 18 of the
past 20 centuries.) While Europe was fumbling in the Dark Ages and
fighting disastrous religious wars, China cultivated the highest
standards of living in the world. Today, the notion of a rising China
is, in Chinese eyes, merely a return to the status quo.

So that’s it, folks: Nobelist Robert Fogel Predicts China’s 2040 GDP will be $123 trillion–twice as big as America’s and Europe’s combined!


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Written by Godfree
Visiting China and studying it since 1967. Interested in its culture, politics, education and economy.