The Making of National Economic Forecasts

The Making of National Economic Forecasts

Edited by Lawrence R. Klein

This important book, prepared under the direction of Nobel Laureate Lawrence R. Klein, shows how economic forecasts are made. It explains how modern developments in information technology have made it possible to forecast frequently – at least monthly but also weekly or bi-weekly – depending upon the perceived needs of potential forecast users and also on the availability of updated material.

Chapter 2: Forecasting the Sustainability of China’s Economic Performance: Early Twenty-first Century and Beyond

Wendy Mak

Subjects: economics and finance, behavioural and experimental economics, econometrics, financial economics and regulation

Extract

Wendy Mak INTRODUCTION China’s economic progress in the past several decades has been exceptional. Since the end of the Cultural Revolution around the late 1970s, the Chinese economy has been strengthening year after year, with only one interruption, in 1989, during the Tiananmen Square uprising. Such a record long expansion caught many economy-watchers by surprise. Between 1980 and 2000, the Chinese economy quadrupled its GDP (see Figure 2.1). During those 20 years, China gradually evolved from a tightly planned economy to a more market-oriented structure. Throughout its economic transition, income inequality has greatly increased, but at the same time, the poverty crisis has lessened significantly. According to a World Bank report, 400 million of China’s population were raised out of poverty between 1980 and 2000 (Ravallion and Chen, 2004). In recent years, while developed countries in the Western world have struggled with lackluster economic performance, China has proven its resilience, with double-digit economic expansion. An abundant supply of 20 15 % 10 5 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 Source: The National Bureau of Statistics, China. Figure 2.1 Annual GDP growth rates (1980–2006) 27 28 The making of national economic forecasts inexpensive labor, among other factors, has become China’s competitive edge against its trading partners in the manufacturing sector. Trade and investment have been expanding at record paces month after month. By 2006, China had become the world’s fourth largest economy, in terms of aggregate GDP, and can likely surpass Germany to become the third...

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