CHINA’S economic growth has been breathtaking. Its economy grew by an average of 9.6% 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 grind to a halt. However, despite Chinese exports faltering in 2008, the nation survived the bumpy ride without experiencing political instability or popular revolt.
Despite concerns about inflationary pressures and property bubble, most economists continue to predict sanguine growth for China. They seem to think that its growth will be rapid and that this pace will continue for many more years to come. It is worth noting though that these predictions are adjusted extrapolations of current trends.
The cornerstone for these projections is based on stringent methodical economic modelling. But are they fail-proof and time-tested? Extrapolating from current trends will make sense only when predicting growth in the next year and the following year. However, once the years become decades, such assumptions certainly become more questionable.