Hold on to your seats; according to The Conference Board, perhaps the most important business oriented forecasting group in the world, revolution is coming to China.
That’s not what the group’s latest global forecast says literally, but this or something like it is the clear meaning of the forecast that China’s growth is likely to slow to 8.7 percent next year, 6.6 percent in each of the four years after that, and then average 3.5 percent per year between 2017 and 2025. It has long been an article of faith inside China and among most China watchers that the country needs 9 percent growth per year to avoid widespread instability.
If China’s growth decelerates that fast, that far, the biggest question in world politics won’t be how the rest of us will accommodate China’s rise. The question will shift to whether China can last.
The report, well covered in the Wall Street Journal, is a sober read. Overall, world growth is expected to decline, with both China and India leading the decline. The advanced countries are expected to recover from the current slump, but growth will remain anemic for years to come. In other parts of the developing world, growth could slow to a crawl, presumably reflecting poor demand for basic commodities in a slow growth world.
Forecasts almost never come true, and economic forecasts at this point are much less reliable than weather reports. But the main story here is that some of the best trained, and best connected economic minds in the business are changing their tune about China and India. The inexorable rise of the supergiants has been the dominant meme in the fashionable chit-chat about global economic and geopolitical trends for some time. The Conference Board report gives respectability and visibility to a more textured and, in Via Meadia’s view, more realistic view of what lies ahead.
The Conference Board could still be understating the problem. If growth deceleration results in serious instability, blows out the financial system (a distinct possibility), or simply ties the hands of China’s policy makers so that they can’t respond in a timely fashion to changing circumstances, deceleration could turn into something much more dramatic very fast.
The next ten years will be full of surprises; this report offers a welcome if occasionally grim peek under the curtain to see what some of those surprises might be.