In US vs China, size does matter

Larry Summers and Lant Pritchett have written a paper predicting a Chinese growth slowdown. In 2013, Barry Eichengreen, Donghyun Park, and Kwanho Shin wrote a paper with much the same message, which accurately predicted the recent Chinese slowdown from about 10% annual growth to about 7.5%.

In fact, the most basic model of economic growth, the Solow Model, predicts that a country’s growth slows as it gets richer. Yes, the case for a Chinese slowdown is pretty incontrovertible at this point.According to many pundits, this means that, like the Soviet Union and Japan before it, China doesn’t threaten to supplant the US as the world’s biggest economy.

For example, here is Neil Irwin of The New York Times: “Put aside the challenges China faces this quarter, or next year, and there is one view that is overwhelming: China is a long-term economic juggernaut that will stand astride the global economy in another generation’s time...