The Boom
SF writers are supposed to have some skill in predicting the future... well, maybe. Here's one of the most fascinating little periods I see coming in about fifteen years.
My old home town of Perth is changing rather fast, it seems. Construction is booming, property prices went up over thirty percent just last year, it's nearly the most expensive city in Australia (huge change from the sleepy little place on the far side of nowhere when I grew up there). The reason is China. Western Australia is one of the richest mineral regions in the world, has lots of natural gas too, and Perth is its capital. WA growth is going at about %14 per year, which anyone knows, for a developed economy, is insane. China's growth needs lots of minerals and gas, which causes a boom in WA.
So where will this lead? Let's do some simple calculations. China's real GDP is about (roughly, because Chinese figures are notoriously fuzzy) $2 trillion a year. It's growing at between %9 and %10, which mean its economy doubles roughly every seven years. Say it was $2 trillion in 2005... that means it's heading to $4 trillion in 2012. If it keeps it up, it'll be $8 trillion in 2019, and $16 trillion in 2026. The USA, for comparison, is about $12.5 trillion today.
Now of course it's doubtful that China can maintain that pace, because it's easier to grow an immature economy fast than a mature one. The more mature the economy gets, the harder it is to grow fast... which is why western economies are delighted at any growth above %3 per year. Also, China's growth is more dependant on foreign investment, currently running at a ridiculous $60 billion a year. To a $2 trillion economy, $60 billion has a lot of impact. For an $8 trillion dollar economy, less so. There won't be as much money to go around, relatively speaking.
But it's still not unreasonable to assume that that growth could be maintained between 2012 and 2019, and if so, those years will see China add $4 trillion to its economy. Beyond that, even if it slows a little, maybe $6 or $7 trillion. This is going to gobble up a ridiculous quantity of global resources. Mining stocks will soar, metals prices will do crazy things, anyone anywhere in the world living in a resource-rich region, and owning real estate, is going to become wealthy. There's no reason it can't go on a lot longer than that, too. China has 1.3 billion people. If every one of them made as much money as every American, China would be a $50 trillion economy. Instead, today, it's just $2 trillion. This thing has a long way to go yet.
Just China, major hiccups aside, would have a profound impact on the world. But then there's India, which I (and increasingly many others) believe will grow faster and more strongly than China, despite having given up a ten year headstart. India's population will overtake China's at some point before levelling off, so basically, you're looking at China's impact on the global economy, and doubling it. I foresee the years 2020 and beyond seeing China and India between them adding more than $2 trillion (in today's terms) to the global economy each year. For the rest of us who trade with them, it'll be a white knuckle roller coaster ride, with the very real prospect of a great crash, or a series of smaller ones, along the way.
Better yet (or worse, depending on your outlook) that kind of growth is mutually reinforcing. SE Asia is already benefitting from China's rise, and amazingly, India is already a greater net outward investor than inward investor -- it invests more money overseas than overseas invests on it. As they both grow richer, they'll buy global companies, properties, entertainment, and their tourists will flood destinations in their hundreds of millions. SE Asia is best poised to prosper, so that's another 600 million people transitioning from third to first world within a generation (although to be fair, Malaysia and Thailand are already partway there, and Singapore entirely so).
Lots of other developing nations could also benefit. The shift in global economic and political power will be immense, and for some, traumatising. But in particular, that period of 2020-to-2030, should be a crazy ride.
My old home town of Perth is changing rather fast, it seems. Construction is booming, property prices went up over thirty percent just last year, it's nearly the most expensive city in Australia (huge change from the sleepy little place on the far side of nowhere when I grew up there). The reason is China. Western Australia is one of the richest mineral regions in the world, has lots of natural gas too, and Perth is its capital. WA growth is going at about %14 per year, which anyone knows, for a developed economy, is insane. China's growth needs lots of minerals and gas, which causes a boom in WA.
So where will this lead? Let's do some simple calculations. China's real GDP is about (roughly, because Chinese figures are notoriously fuzzy) $2 trillion a year. It's growing at between %9 and %10, which mean its economy doubles roughly every seven years. Say it was $2 trillion in 2005... that means it's heading to $4 trillion in 2012. If it keeps it up, it'll be $8 trillion in 2019, and $16 trillion in 2026. The USA, for comparison, is about $12.5 trillion today.
Now of course it's doubtful that China can maintain that pace, because it's easier to grow an immature economy fast than a mature one. The more mature the economy gets, the harder it is to grow fast... which is why western economies are delighted at any growth above %3 per year. Also, China's growth is more dependant on foreign investment, currently running at a ridiculous $60 billion a year. To a $2 trillion economy, $60 billion has a lot of impact. For an $8 trillion dollar economy, less so. There won't be as much money to go around, relatively speaking.
But it's still not unreasonable to assume that that growth could be maintained between 2012 and 2019, and if so, those years will see China add $4 trillion to its economy. Beyond that, even if it slows a little, maybe $6 or $7 trillion. This is going to gobble up a ridiculous quantity of global resources. Mining stocks will soar, metals prices will do crazy things, anyone anywhere in the world living in a resource-rich region, and owning real estate, is going to become wealthy. There's no reason it can't go on a lot longer than that, too. China has 1.3 billion people. If every one of them made as much money as every American, China would be a $50 trillion economy. Instead, today, it's just $2 trillion. This thing has a long way to go yet.
Just China, major hiccups aside, would have a profound impact on the world. But then there's India, which I (and increasingly many others) believe will grow faster and more strongly than China, despite having given up a ten year headstart. India's population will overtake China's at some point before levelling off, so basically, you're looking at China's impact on the global economy, and doubling it. I foresee the years 2020 and beyond seeing China and India between them adding more than $2 trillion (in today's terms) to the global economy each year. For the rest of us who trade with them, it'll be a white knuckle roller coaster ride, with the very real prospect of a great crash, or a series of smaller ones, along the way.
Better yet (or worse, depending on your outlook) that kind of growth is mutually reinforcing. SE Asia is already benefitting from China's rise, and amazingly, India is already a greater net outward investor than inward investor -- it invests more money overseas than overseas invests on it. As they both grow richer, they'll buy global companies, properties, entertainment, and their tourists will flood destinations in their hundreds of millions. SE Asia is best poised to prosper, so that's another 600 million people transitioning from third to first world within a generation (although to be fair, Malaysia and Thailand are already partway there, and Singapore entirely so).
Lots of other developing nations could also benefit. The shift in global economic and political power will be immense, and for some, traumatising. But in particular, that period of 2020-to-2030, should be a crazy ride.
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