|Kat De Guzman |||Oct 27, 2014 05:55 AM EDT|
(Photo : Photo Distributed by Lant Pritchett and Larry Summers of Harvard University ) The economic growth rate of China in 20 years will still be smaller compared to United States based on the market exchange rates.
China's economy has just increased by 7.3 percent as they have announced the third quarter year-on-year report, and it has been seen by the international community as China's "new normal" as opposed to its slow growth.
However, a Harvard University study carried out by Lant Pritchett and Larry Summers noted that the growth in China's economy is still abnormal and it's more than likely to be lower in the future.
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According to reports, the researchers extrapolated the conclusion from the growth rates of China in past years. They have noted that it is very possible to infer the future from the past patterns of growth in the economy of any country as economies suffer from "regression to the mean". In simpler terms, countries that are growing too fast tend to drop in the long run.
The authors cited China as an example as they noticed that the growth of the country's economy is at six percent per year since 1977 until two years ago. The study then showed that China's economy has been very remote for the longest possible time and that its fast growth will probably end in a severe drop as they have calculated that the growth rate may drop to 4.7 percent.
As China has continued to defy the long-running status quo, international communities have come to view the nation's economy as a threat and question how China continues to challenge history.
According to the authors of the study, slow growth does not mean failure or poverty in the country, rather is shows that the country is persistent in rapid growth and suggests a great policy being implemented as well as good fortune amongst the people. The researches then pointed to both Brazil back in 1980 and Japan back in 1991 as examples of nations which did not have real Gross Domestic Product (GDP) even after twenty years.
Other research carried out by the International Monetary Fund has been projecting the future of China when it comes to their economy and they have estimated that from the 7.4 percent it has announced, it may drop to 6.3 percent by the end of this decade.
The authors also added that China will only be able to maintain their growth rate if they will be able to beat other odds in the near future. They have also compared it to the U.S. economy and concluded that it will still be smaller than that of the U.S. 20 years from now as it has been measured using market exchange rates.
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