MADE IN CHINA: MUCH ADO ABOUT NOTHING
MADE IN CHINA: MUCH ADO ABOUT NOTHING?
Comment By: Samirul Ariff B Othman
China's economic growth has been breathtaking. The Chinese economy grew by an average of 9.6 percent per year between 1990 and 2010, according to the International
Monetary Fund. During the recent global financial panic, some feared that the
Chinese growth engine would come to a grinding halt. However despite Chinese exports faltering in 2008, the nation did survive the bumpy ride without experiencing political instability or popular revolt. Despite concerns about inflationary pressures and China's property bubble, but nevertheless most economists continue to predict sanguine growth for the country. They seem to be of the opinion that China's growth will be rapid and that this rate of growth will continue for many more years to come.
It is noteworthy though; these predictions are adjusted extrapolations of current trends. The cornerstone for these projections is based on stringent methodical economic modeling. But are they fail-proof and time-tested? Extrapolating from current trends will only make sense when predicting growth in the next year and the following year, however once the years become decades, such assumptions certainly become more questionable. To see things in perspective, if Christopher Columbus had invested one cent in a trust fund in 1492 at a real compound interest rate of six percent per year above inflation, that penny would now be worth $95,919,936,112. The final worth of a penny invested at 6% compound interest for 513 years is 95 billion.
Unfortunately though, reliable high-yielding 513-year investments are impossible to find. What is very certain though is that things do change; and things can go wrong.
Therefore past returns are in no way a guarantee of future performance.
To be fair, when it comes to projecting China's future growth, economic modeling can offer only so much guidance. These models predict future economic outputs on the
basis
Comment By: Samirul Ariff B Othman
China's economic growth has been breathtaking. The Chinese economy grew by an average of 9.6 percent per year between 1990 and 2010, according to the International
Monetary Fund. During the recent global financial panic, some feared that the
Chinese growth engine would come to a grinding halt. However despite Chinese exports faltering in 2008, the nation did survive the bumpy ride without experiencing political instability or popular revolt. Despite concerns about inflationary pressures and China's property bubble, but nevertheless most economists continue to predict sanguine growth for the country. They seem to be of the opinion that China's growth will be rapid and that this rate of growth will continue for many more years to come.
It is noteworthy though; these predictions are adjusted extrapolations of current trends. The cornerstone for these projections is based on stringent methodical economic modeling. But are they fail-proof and time-tested? Extrapolating from current trends will only make sense when predicting growth in the next year and the following year, however once the years become decades, such assumptions certainly become more questionable. To see things in perspective, if Christopher Columbus had invested one cent in a trust fund in 1492 at a real compound interest rate of six percent per year above inflation, that penny would now be worth $95,919,936,112. The final worth of a penny invested at 6% compound interest for 513 years is 95 billion.
Unfortunately though, reliable high-yielding 513-year investments are impossible to find. What is very certain though is that things do change; and things can go wrong.
Therefore past returns are in no way a guarantee of future performance.
To be fair, when it comes to projecting China's future growth, economic modeling can offer only so much guidance. These models predict future economic outputs on the
basis