Thursday, August 11, 2005

Fisher on China's Economy

Richard W. Fisher of the Federal Reserve Bank of Dallas* has given a wonderful speech on China's economy. (Hat Tip: Simon World, who calls it "today's must read")
One can paint two starkly different pictures of China right now, the Big China view and the Little China view.
The two views are best illustrated by a pair of statistics comparing the sizes of the Chinese and American economies:
On a purchasing-power-parity adjusted basis, economists put China's gross domestic product at $7 trillion, compared with our $12 trillion-making it already 60 percent of our size. [...]

On a straight U.S. dollar basis (not adjusted for purchasing power parity), their economy is roughly the size of California's!

I don't want to offer too many quotes for fear that you won't follow the hyperlink, but here is one last excerpt:
Manufacturing is a means to an end. It's not the top rung on the income ladder. No economy can reach the pinnacle of wealth without its labor force becoming highly educated, and highly educated people tend to work in services. Doctors, lawyers, dentists, accountants, engineers, scientists, professors, computer programmers, systems architects, consultants, financial advisors, pharmacists, actuaries--these are all service-sector jobs, and high-paying ones at that. They all have one thing in common--education. To keep climbing the income ladder, China will have to make a huge investment in education.

*Note: This is not the Richard Fisher of the Jamestown Foundation, from whom we are used to hearing about China.