The Myth of Chinese Meritocracy

No doubt you have heard how the leadership of China is meritocratic and composed of technocrats with PhDs. Minxin Pei suggests that there is less than meets the eye.

…Contrary to the prevailing perception in the West (especially among business leaders), the current Chinese government is riddled with clever apparatchiks like Bo who have acquired their positions through cheating, corruption, patronage, and manipulation.

One of the most obvious signs of systemic cheating is that many Chinese officials use fake or dubiously acquired academic credentials to burnish their resumes. Because educational attainment is considered a measure of merit, officials scramble to obtain advanced degrees in order to gain an advantage in the competition for power.

The overwhelming majority of these officials end up receiving doctorates (a master’s degree won’t do anymore in this political arms race) granted through part-time programs or in the Communist Party’s training schools. Of the 250 members of provincial Communist Party standing committees, an elite group including party chiefs and governors, 60 claim to have earned PhDs.

Tellingly, only ten of them completed their doctoral studies before becoming government officials.

Simply put, Chinese institutions are not as good as those in say Mexico. Thus, China will not overtake Mexico in terms of GDP per capita any time soon, hence Chinese growth rates will fall. All we are seeing today is the logic of the Solow model in action.


"Simply put, Chinese institutions are not as good as those in say Mexico. Thus, China will not overtake Mexico in terms of GDP per capita, hence Chinese growth rates will fall."

You are confusing government and institutions. Many provinces of China have extremely low entry barriers for business, and have other institutions that are extremely important. The status seeking in their government isn't really any different than ours. We just have a better way to check if government officials are cheating. For example: the US federal government also pays largely based on educational attainment irrespective to the quality of that education.

But remember, that's largely because they're really poor. That means they accept externalities richer countries won't, such as pollution and unsafe working conditions. For instance, compare these:

China's biggest institutional problem is the lack of a free press -- without it, the other institutions tend not to improve.

America doesn't have a free press. Far from it:

China's centralization of the media is simply more explicit and formalized. America's centralization of the media is more egregious since in China control of the media is by actual members of the main Han national group.

I'd respond to this, but your comment was deleted mere seconds after being posted. And no one but government censors read it. Sprry

"Simply put, Chinese institutions are not as good as those in say Mexico. Thus, China will not overtake Mexico in terms of GDP per capita,"

Hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha (breaths) hahahahahahahahahahahahahahahahahahahahahahahaha.

Don't laugh. It means Mexico will overtake the U.S.A.
All the Mexicans with genuine US PhDs will make it happen.

Yeah, some serious tongue-in-cheek action there.

It is a laughable prediction. You what's at least as important as institutions? The people that constitute them. Where does Mexico stack up in PISA rankings? Not bad actually, around 50 countries do better. Israel, notoriously, is not much ahead. Even granted that Shanghai is not representative of the rest of the country, it's obvious that the PRC has smarter people.

If people are so important, why do you have to project decades into the future in order to get the rankings that you want?

Its..."obvious"? Where were these smarter people from the years 1790 to 1979?

North Koreans are probably highly intelligent, yet they are among the world's poorest people. If national IQ were more important than institutions, North Korea would be at least a middle-income country. For that matter, so would China. The United States would be about as wealthy as Slovakia. Of course China will get old before they get rich, so that doesn't help matters. In contrast, Mexico has an ideal, slightly above replacement birth rate.

When North Korea adopts export-led industrial capitalism, it will develop like South Korea, Taiwan, Japan, and the Eastern coast of China.

The DPRK also suffers from the weight of malnutrition on cognitive ability. North Korea is perhaps the only genetically high IQ country which still has this problem.

Having said all that, for all the bum rap North Korea gets, it's hard not to notice that Pyongyang is some respects a sturdier, more orderly, and well built (in its day) capital than most cities in Africa and even some in India.

Notice that what you are saying is, "If North Korea had better institutions, they would be much richer." Which is of course exactly my point. High native intelligence is a fine thing, but institutions matter a great deal more.

Pyongyang may (I'm not totally convinced, given how closed off most of the city is compared to typical African cities) be sturdier than typical African cities, but that means very little, since it is by far the richest city in North Korea, since it is a parasitic recipient of transfers from the rest of the country. So instead, you should compare the typical North Korean city to the typical African city. Given that there is no electricity available in much of Pyongyang, I wouldn't be surprised if life is actually better in the typical African city compared to the typical North Korean city.

you know, people usually try to hide their racism a bit better.

I wish reality would hide its "racism" a bit better.

No you don't, Cliff

Israel, notoriously, is not much ahead

Which just goes to show that it's not the average that counts but the top 5% or so.

"Even granted that Shanghai is not representative of the rest of the country, it’s obvious that the PRC has smarter people."

How is it "obvious" without a nationally representative sample?

Heh, I remember when it was laughable to think Japan would would not have surpassed the U.S. by now.

I don't think people really understand just how poor China actually is -- Mexico is nearly twice as wealthy today.

Even if China grows at 8% a year and Mexico at 3%, it would take them till 2023 to catch up. At a more reasonable rate of 5% -- still very high for this range -- it takes them till 2040.

Most likely Chinese growth will collapse within the next decade, and much of the current growth will be shown to have been illusory, malinvestment squandering the tremendous wealth that actually was created over the past few decades.

And remember folks, China is getting old fast.

Oops, I didn't mean to put that here

Are you saying you are ... "careless"?

There is a lot of incredulity in these comments about China not being able to surpass Mexico in GDP per capita. I'm not sure why that is. It certainly seems possible that China will surpass Mexico, but what reason is there to believe that it will happen?

Keep in mind that GDP per capita is limited by the percentage of the population that is working age. China's fertility rate is 1.6, compared to Mexico's 2.3. Also keep in mind that Mexico will grow while China grows, and has GDP per capita almost twice as high as China's. It seems possible that China will surpass Mexico, but there is no real reason to believe it will happen.

Even if we agree that quality of chinese institution is not as good as that of Mexican, what is empirical evidence of positive relationship between no of PhDs and per capita GDP? It seems like proving what author opines..

More PhDs means a higher value per capita. This should always be the case, unless institutions (education, business, etc) are failing. That higher value should translate into greater GDP/capita.

The point isn't the PhDs per se, it's the fraud.

That simply means that Chinese government officials know that "school isn't for learning". Education is signaling. So they spend money on the diploma rather than spend time on schooling. :P

i love the smell of desperation in the morning.

to go with my cheap chalupa!

"Simply put, Chinese institutions are not as good as those in say Mexico. Thus, China will not overtake Mexico in terms of GDP per capita any time soon, hence Chinese growth rates will fall."

This is a non-sequitur, especially if 'any time soon' is not better defined. If Alex makes his case in a more concrete manner, then I'm willing to bet with him. 2035. Real GDP PPP per capita. As reported by World Bank or IMF. Even odds.

Wow, would I ever bet on anything that far away? I mean, can you imagine someone in 1989 betting on any macro issue like this that turned out to be true?

Well it's binary - so if someone takes the opposite bet one of us would be right. So I can construct almost an infinite number of imaginary macro bets dated 1989 of which one side will turn out to be true. The question is, are they interesting bets?

The issue that Alex discusses is interesting. He is not making comparisons of widely divergent things, like Chinese GDP and Norwegian GDP, for example. He's taken two middle income emerging nations, both with systematically corrupt systems, but one which delivers 9% growth and one which delivers 4% growth. He has gone on to claim that the one with 9% growth somehow has worse institutions than the one with 4% growth (along with the implicit Acemoglu-Robinson argument of institutions cause growth). And finally, after saying all these interesting things, he has left his argument vacuous by saying 'anytime soon'.

China's GDP PPP per capita is $8000. Mexico's is $14000. If anytime soon means 2020, China needs to outdo Mexico by 7.5% per annum in growth rates. If it means 2030, only 3.5%. The timing is all-critical. 2035 is a reasonably conservative date from my side, assuming China outstripping Mexico by around 2.5% p.a. in growth rates.

Oh I understand that part. What I meant is that when you target dates so far in the future the factors around such outcomes are really impossible to predict. I mean, one could have predicted that USSR GDP would be X by 2012 and the answer would be ultimately false no matter what.

China's growth is one of those things that we should consider with a huge grain of salt. It is plausible that its growth will slow down considerably due to factors we really don't yet understand since that country is still a closed society in many ways.

I might take that bet. Mexico does have better institutions since the PRI lost virtual one-party rule. The biggest thing holding them back (and it's huge) is the drug war.

Yep, decriminalization is probably the best thing that could happen to all of Latin America.

Those 10,000% profit margins are terribly corrosive to institutions in Mexico and points south. Incentives matter!

The leader in the polls to become the next president, Enrique Peña Nieto, is widely considered to be sufficiently well-connected to make a deal with the cartels and end the narco wars. He is also considered morally flexible enough to claim to be fighting the Gringo drug war while undermining it behind the scenes to the benefit of his country.

Unfortunately this reputation comes from having run one of the most corrupt state administrations for the past six years. His claim is that it was corrupt when he was elected and he made the government deliver a mountain of quality public works projects in spite of it. Of course, it still costs three times as much to ride a private licensed bus or pay the electric or water monopoly bills compared to neighboring states due to the massive mismanagement and bribery.

If Peña Nieto can deliver on his winking implicit promise to deal with the narcos instead of fighting an all-out futile war like the incumbent, he will be considered a success. It's worth noting that the total war fought in the open by the current president coincides exactly with the rise in narco violence. Just shutting down the elevated enforcement might be enough to end the violence.

The leader in the polls to become the next president, Enrique Peña Nieto, is widely considered to be sufficiently well-connected to make a deal with the cartels and end the narco wars.

Making a deal solves very little. They really need to recognize and regulate them as legitimate businesses. The U.S. will not allow that.

In 1980 one of biology’s most persistent and eloquent spokesmen for resource issues, Paul Ehrlich, was “trapped,” in his words, into making a bet about the future price of five minerals by economist Julian Simon, a strong advocate of the power of human ingenuity and the market, and a disbeliever in any limits to growth. The price of all five went down over the next 10 years, so Ehrlich (and two colleagues) lost the bet

Ehrlich was simply unlucky. Should have waited for 5 more years and crushed Simon.

By 2000 he would be losing again.

And then he's winning again in 2010 -- but of course, he's not really winning, because Ehrlich's claim was not that prices would fluctuate or rise by a few percent over decades.

In this context, I take "any time soon" to mean "around the time one would expect if one simply extrapolated from current values and growth rates". Assuming that growth continued at 8%/year in China and 3%/year in Mexico, China would surpass Mexico in PPP GDP/capita in 11 years. So I take the assertion to be that it will take longer than that. I'm not willing to make a 23-year bet with you, but I'll make a 13-year bet: contrary to what one would expect from simple extrapolation, China will not have a higher PPP GDP/capita than Mexico in 2025. I'm in for $1000, inflation-adjusted. No on who didn't expect china to have a weird growth path would make that bet. Everyone except those most bullish few would guess longer.

"Tellingly, only ten of them completed their doctoral studies before becoming government officials."
Change that to law school and you have the same situation in the U.S. We're not ruled by lawyers, as often bemoaned on this blog, but people with law degrees. Big difference.

Why does it matter? I don't observe lawyers conducting themselves with a higher degree of integrity than politicians.

Can you document this?

Assumption 1: You appear to be assuming that having a genuine PhD makes a politician better than someone without that level of education. I realize that your view is likely biased in favor of degreed achievement, but I think you should reevaluate your assumption. Can you provide evidence that having a PhD actually translates into more effective governance? Anecdotally, I don’t see PhDs being better managers in the workplace. I also am skeptical that the very narrow focus of a PhD would provide effective tools to deal with the complexities of the Chinese high officials work.
Assumption 2: Cheating is bad. You appear to be challenging the willingness of the Chinese politicians to take the path of least resistance in gaining signaling status. Alternatively, a "good" politician is one who lies and cheats for the good of his people, and a "bad" politician is one who does so for his own benefit. Someone who figures out how to cheat earlier in life is a better politician then one who misallocates his efforts working honestly and gets "elected" later.

assumption # 1: you're right, Ph D does not assures the guy knows how to rule a country. but, if Ph D level is useless we can still blame the politicians for being so stupid and shallow by pursuing useless degrees.

assumption #2:we all know the "rules". if you want to be "good", go to school and get a degree, etc. if you consider you can get trough school in earlier life by cheating, why didn't this guy did this? If it is that easy to cheat in school, why do it later? if everybody is a liar, the difference is not in the fact, it is on how big liar you are. cheating by buying a ph d degree makes this guy a bigger liar than other liars, ergo bad politician.

and I love these lines: "Political scandals sometimes perform a valuable function in cleansing governments. They destroy the political careers of individuals of dubious character."

#1 Unless it can be empirically proven that earning a genuine PhD indicates that someone will provide better governance, nothing else matters in the Alex's statement. PhDs are being aquired for signalling purposes exclusively so buying them is rational.
#2 If someone is going to cheat, it is much easier to do so as a party offical than an aspiring politician.
Also, axa, it is naive to believe that the rules for the commoner apply to the elite. Never has, never will.

Nice strawman. If you're certain that #1 can be proven, set up a few scenarios for us.

There is no strawman in my post whatsoever, Daniel.
For Alex's comment to matter, he would need to prove #1. Alex's suggestion that the lack of legit PhDs will cause a problem for China requires the belief that having a PhD makes someone a better leader. Although there are plenty of correlation/causation traps along the way, an arguement that showed an improvement of goverance during the leadership of a cadre of PhDs would be a place to start.

Wow!!! Alex woke on the wrong side of the bed as most Austerian posts on Chinese economy tend to have a link and a Tyler wink comment. I generally hold Daniel Drenzer that China is a bubble but sort like late 19th century US in terms of historical comparison (fast growing, lots local political corruption, building lots trains...) I think of the Bo scandal as being the Chinese Huey Long, as he did a lot of good things on paper but was corrupt to the core. I hold that the Chinese is headed for a S&L 1980's bust, as the central government and large banks are going to clean the local malinvestment in the second tier cities (not Shangia or Bejing,). Also I believe China will have the military intervention (I vote Africa although they seem deadset on the Phillipines) to suck up their resources. Hopefully the US will stay out here. After another 15 years of growth with a modest slowdown in 2014, then the big financial crisis will hit.

It will India that bust in 2013 - 2014.


Meanwhile in America, people ACTUALLY jump through hoops for equally worthless degrees in exactly the same credentialling treadmill.

From Wikipedia's description of the Khmer Rouge genocide:

Khieu Samphan, considered "one of the most brilliant intellects of his generation", was born in 1931 and specialized in economics and politics during his time in Paris.[citation needed] In talent he was rivalled by Hou Yuon, born in 1930, who was described as being "of truly astounding physical and intellectual strength,"[citation needed] and who studied economics and law. Son Sen, born in 1930, studied education and literature; Hu Nim, born in 1932, studied law.

These men were perhaps the most educated leaders in the history of Asian communism. Two of them, Khieu Samphan and Hou Yuon, earned doctorates from the University of Paris; Hu Nim obtained his degree from the University of Phnom Penh in 1965. In retrospect, it seems unlikely that these talented members of the elite, sent to France on government scholarships, could launch the bloodiest and most radical revolution in modern Asian history.

Scary. But then again, anyone majoring in the Arts/Social Sciences in France in the 60s was likely to be to the left of Sartre.

The question is not how good Chinese institutions are today. The question is whether China will be able to transform its institutions in a way that allows it to grow as it did in the past. 40 years ago, Chinese institutions were much worse than those of the Soviet Union. But once the country decided that economic growth was the objective, it managed to transform its institutions to achieve this goal.

It is not clear that China will actually be able to further change its institutional setting. However, simply to argue that institutions are not good enough today does not take into account the instititutional change that China has achieved since it started its transformation from communism to capitalism.

But is their economy actually growing as stated? The functionaries have every reason to fluff their number, and to do so at each level. If the reports of empty cities are even vaguely true, then substantial amounts of the "infrastructure investment" is actually a multiple net-negative.

Setting that aside, having the US as a neighbor with functionally open borders creates a substantial long-term pressure to get things right. I heard an interesting account this morning on the radio about the panic in Mexico's Ministry of Tourism(!) over the recent spate of drug killings. The brain-drain is only the most obvious source of pressure.

Furthermore, China's closed society means that it is much, much more difficult to identify problems in the first place. If someone were offering me a bet wrt China in 2035, and did not include the chance that the government would fall or substantially devolve in the bet, I would not take them seriously.

While I agree with you in the main, I would hardly call China a closed society. They are a long way from Western style free speech, but they are also a long way from North Korea.

Let's have some perspective, folks. Back in the 1980s, everyone said Japan would overtake America and be the next big thing. Today, the predictions fall in favor of China.

AT has gone on the record predicting that China's per capita GDP won't overtake Mexico's. It's a bold prediction. I agree.

With respect to economic predictions, when was the majority view the correct view?

If you follow this guy's work, he has been predicting a collapse of the Chinese economy for the past 20 or 30 years. I wouldn't take his 'opinions' for 'facts'.

George Friedman from the private intelligence company Stratfor predicted China would disintegrate into a myriad of warring fiefdoms. He's been talking about how China's going nowhere for decades. And has been similarly wrong.

Nobody cares if someone who's predicted in a recession for 10 years is finally right. The same is true here. If someone in Florence circa 1200 said that Italy was in decline, they were not being prescient or ahead of their time.

I think we need to make a distinction between top political brass and the vast technocratic levels that exist immediately (call layer 1) and many layers below. This huge technocratic class is well trained, not with Ph.Ds, but with sound and strong technical skills (i,e. they know sufficient Math). They can run the models, etc., that provide insights into the future. Layer 1 (and perhaps even below) will try to get the fake Ph.Ds. They may make it to the very top of government and are perhaps below average when it comes to the technical sophistication of many others in the bureaucracy. They will issue silly orders. But that does not take away from the vast technical skills that will help the politburo understand the the economic consequences of those orders.

I think we pose the wrong question. The success of China will ultimately depend on political skills of the ruling class, which will likely not be related to whether they have a Ph.D. Having the Ph.D. only means they are good in one element of political skills -- how to kiss up to get one. There is more to ruling than that and the presence of absence of Ph.D. -- fake or not.

s/China/Bank of America/g

That would be true if this kind of behavior was just confined to the top layer. It isn't, however. Academic dishonesty is rampant and endemic to Chinese culture. Plagiarism (to the point of copy-pasting entire theses) is tolerated and accepted.

Everyone cheats and everyone assumes that everyone else cheats.

From what I've head from academics in China, this is true. Also, bribes influence investment in basic R&D.

But do these functionaries have incentives to do good work? Or are rewards being passed out for other reasons? That is the issue, and the degree corruptions suggests that the latter is a serious issue.

Anyone know what percentage of Mexico's current GDP stems from oil? I know they have some but have no idea if it's 2% of GDP or 25%.

If Alex is serious about institutions making the difference, he should take a bet hinging on PPP GDP/Capita with oil and other natural resources stripped out.

While the oil industry is still relevant for the government's budget, its importance in GDP and exports has steadily fallen since the 1980s. In 1980 oil exports accounted for 61.6% of total exports; by 2000 it was only 7.3%

Industry overall is 33.4% which compares to 22.1% in the U.S. -- and 46.8% in China.

…Contrary to the prevailing perception in the West (especially among business leaders), the current ChineseUS government is riddled with clever apparatchiks like BoElizabeth Warren who have acquired their positions through cheating, corruption, patronage, and manipulation.

What office has Elizabeth Warren obtained?

" chair the five-member Congressional Oversight Panel created to oversee the implementation of the Emergency Economic Stabilization Act...Warren has long advocated for the creation of a new Consumer Financial Protection Bureau, a watchdog agency designed to "make basic financial practices such as taking out a mortgage or loan more clear and transparent while ferreting out unfair lending practices," according to CNN. In an interview with the Huffington Post, Warren said "My first choice is a strong consumer agency. My second choice is no agency at all and plenty of blood and teeth left on the floor". Through Warren's efforts, the bureau was established by the Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law by Obama in July 2010. For the first year after the bill's signing, Warren worked on implementation of the bureau as a Special Assistant to the President in anticipation of the agency's formal opening.d"

Not too surprising, really, it's been reported since the 1990s that many Chinese dissertations are just photocopied.

FWIW my ex worked like hell on her dissertation at Fudan in Shanghai.

Was it Original, or would you give her a D?

Yeah, he gave her the D all right.

I'm sure that someone, somewhere thinks China is a technocratic meritocracy--or maybe a meritocratic technocracy--but can this actually be any part of the conventional wisdom? I thought it was run by corrupt stooges and cronies, lining their pockets with every Yuan they can get their hands on. Surely that is closer to common perception.

Shhhh, don't tell Thomas Friedman.

Oh, well, if Thomas Friedman says something...then put every dollar you can borrow on the opposite being true.

The original article has some interesting points to make. It's more about cultural attitudes to science and engineering than whether China is meritocratic:

"Okay, fine. We’re weird for not thinking pocket-protectors are sexy. But a country that doesn’t think science is cool raises children who don’t think science is cool."

BTW "meritocratic" is not a well-defined term, anyway.

Both China and Mexico have corruption and non-transparency in government. Indeed, China owes its prosperity to its officials ability to find corrupt ways to circumvent communist doctrine. China's government now might be compared to the way that machine politics ran American cities in the late 19th century. Mexico's government officials aren't quite so brazenly fraudulent, but have a very different problem - their corruption is not merely a matter of individuals jockeying for power within the bureaucracy. Their fundamental institutions for maintaining the authority of the state (such as the police) are corrupted by outside influences that prevent anyone from doing the jobs assigned to those institutions and lead to a loss of the state monopoly on violence. Given a choice between kleptocracy run by people with fake degrees, and regular deposits of the skulls of gang victims in public places accompanied by the existence of sernior civil service positions that nobody without a death with is willing to take on, I'd pick the former every time.

Also, China is actively embracing change and parts of China are far better of in per capita GDP than the national average reflects. Look at the richest 150 million people in China and they're probably better off than the median per capita GDP in Mexico. Mexico, in contrast, does not appear to be on a steady path towards progress at the moment and has drifted out of an inevitable and unstoppable progress mode.

Bottom line: a single anecdote does not tell the whole story or even provide much insight into it.

It's a fair bet that the top 10% of Mexican are better off than the top 10% of Chinese.

And Mexican has grown pretty nicely since one-party rule broke down:

China is about where Mexico was fifteen years ago.

I haven't looked into it recently, but around 2001, it was a running scandal / joke in Mexico that its more technocratic politicians had seldom actually graduated from all the awesome sounding American universities they had listed on the C.V.s

Mexico has the world's richest man, telecom monopolist Carlos Slim, with around $50 billion, whose inflated prices sap Mexican growth. China seldom has anybody listed in Forbes with even $10 billion. That may be just a PR stunt on the part of the Chinese government, or it may reflect that the government really is in charge rather than oligarchs.

Why do you read so much more in the New York Times about Chinese corruption than you do about Mexican corruption, when the evidence suggests that Mexico's growth rate is more damaged by oligarchical corruption than China's?

It's a complete mystery! And please don't pollute the sanctity of this comment section by proposing some wacko Conspiracy Theory about how Carlos Slim bailed out the New York Times.

In China, the oligarchs generally are the gov't.

In China billionaires have a much greater incentive to keep their billionaire-ishness a secret.

I don't think it's a foregone conclusion that China will overtake Mexico in GDP per capita, for two reasons:

1. There are a lot of things Mexico could do better, such breaking up monopolies to lower prices, fixing Pemex, and reforming the teacher's union (which is so strong that some teaching jobs are hereditary, and if your heirs don't want to be teachers, they can auction off the job to those who do).

2. For China to reach Mexico's levels of per capita consumption, especially of oil (Mexicans use about 1/4th as much vehicle fuel per capita as Americans, which is a lot by Third World standards), will put strains on world supplies, driving up prices.

In terms of institution-building, the Chinese have Overseas Chinese examples to ponder and take guidance from, such as Singapore. I'm trying to think of an example of institution building by Mexicans outside of Mexico that would be comparable, and I'm drawing a blank. Mexicans have been in what's now the U.S. for four centuries, and what do they have to show for it, institution-wise? The California mission system? The 18th Street Gang? After all these years, Southern California, for instance, is remarkably lacking in institutions, such as hospitals, schools, colleges, or even cemeteries founded by people of Mexican descent.

As opposed to all those hospitals named after Wang?

Son, why don't ya'll come down to the State they named "Friendly". That's Texas. No shortage of institutions built by former Mexicans and their descendants here...

"No doubt you have heard how the leadership of China is meritocratic and composed of technocrats with PhDs."

I had never heard that and never even would have hypothesized such a state of affairs. There is an article linked, but who else is saying this? The general flow of news out of China is that the government is corrupt and political appointees are getting rich.

Searching on Chinese meritocracy pulls up only this article and its source and others who cite it.

More like the Myth of the Myth of Chinese Meritocracy.

Steve, why didn't you mention that Mexico has a lot more Jews than China?

Actually, if you read the literature from Arvind Subramanian, TN Srinivasan and Angus Deaton, China has probably already outstripped Mexico in GDP per capita. They claim that the Chinese govt. has had an interest in showing China income levels to be lower than they are (to receive funds) and growth rates to be higher than they are (for obvious PR purposes). They manage this by overstating the prices relative to international dollars n the PPP index constructions. The last time this happened (2005) Chinese GDP was corrected downwards by 44%. If the World Bank 2011 ICP program now goes back on that correction (as expected) once the results come out, you will see a sudden jump in Chinese GDP.

All in all, it seems to me that what I'm claiming is less like 'USSR will outstrip USA by 2012', and more like 'USA will keep ahead of UK in 2012'. I'm claiming a safe-ish thing. I would even be willing to offer better than even odds.

Interesting paper from Arvind, but I think he doesn't pay enough heed to the currency manipulation and the massive state misallocation.

He has gone on to claim that the one with 9% growth somehow has worse institutions than the one with 4% growth.

Well, sure -- as Alex points out, this is just the Solow model. Countries at a lower base tend to have higher growth rates over given periods even with worse institutions -- heck, Chad achieved 50% growth a few years back.

assuming China outstripping Mexico by around 2.5% p.a. in growth rates.

Only a couple countries seem to have managed that feat over the period of time and at the PPP GDP per capita levels required, and they are all liberal democracies today. For that to happen, Chinese institutions would probably have to evolve to something approaching Japanese or S Korean levels of quality. Certainly we should all hope that happens, but it seems far more likely China will end up stuck in the typical range of fairly dysfunctional countries.

Tyler's right and many Chinese I know will say the same thing (not about growth per se but about Chinese nepotism and corruption).

David Webb, investor activist in Hong Kong, has done a lot of work on bogus degrees and titles among Hong Kong and Chinese executives of listed companies. Here is one article: . There are other examples if you peruse his If you are interested in HK / China stocks, his site is always interesting.

Saying that China can't surpass Mexico on per cap basis is based on very dubious assumptions.

Some economics abc here might help:

Nominal GDP per cap, the basis of comparison here, is not only a flawed concept but also is based on many HUGE assumptions. These idealised assumptions won't make too much differences for similar countrues such as Sweden Vs. Belgium for instance but for many others no. It makes a huge difference when dealling with China which is a very special case inits own right. By offical nominal GDP per hap China is even lower than some Sub Saraha African countries now and today, meaning China is more impoverished on per cap babsis than Sub-Sahara Africa, don't you feel wierd?

One of these stupid underlying nominal GDP assmptions is that Chinese currency is as fairly valued as Mexico Peso vís-a-vís USD in calculating GDP per cap, which is not the case at all. If assume China's Yuan appreciates in a free market by 40% tomorrow at 9am as some economists have suggested that it would be the case ( that Yuan is undervalued by as much as 40%), then China's GDP world be immediately USD 12,000 tomorrow at 9am! Sounds silly ? But it is super correct.

The second assumption under this nominal GDP concept is that these two countries are directly comparable in labour laws, infrastructure level, transportation costs, etc, etc., which again is false since they are very different. China has much tighter labour movement, yet much better infrastructure level, and lower transpotation costs, etc. Therefore, one has to adjust that assumed USD 12,000 by some PPP measures to be fair.

Then again, China's brith rate is 1.6%, far lower than Mexico's. This implies that China has more non-working age people per 1'000 as compared to Mexico, which then again has twisted this already much flawed nominal GDP per cap even further...

This is even before even taking drastically different saving rates into account. Saving rate - how to use GDP? Yes, though it tells nothing about the current GDP but a lot on that of the immediate future. One who saves more & invents more will have a much better and stable future growth than who doesn't not - common sense really.

I will skip the fundamental analysis of this hughly flawed nominal GDP at conceptual level here because it's gonna be way beyond the level of this board.

So the conclusion/suggestion of the OP is a bit absurd in my view.

In the 1950's and 60's most American economists were predicting that the Philippines rather than South Korea would become a developed nation in the future because they were so blinded by their pure focus on a few measures of governance. It is far from clear that Mexico will be able to overcome the issues that go along with being a middle-income country, where do you see signs of excellence that Mexico can pull ahead? In contrast, China can point to some real success stories. The main thing that speaks for Mexico is being so close to the US-market, if Mexico were located somewhere else it's a fair guess to assume that it's gdp/capita would be below 10k USD. Income in China will be much more unequally distributed than in most countries, think of it this way, incomes in Europe range from sky-high in some of London's parts and third-world, such as Albania. China is no different.

Actually the starting thesis is correct that China is NOT a Meritocracy. It's because almost 10 out of 10 Chinese high officials are corrupted with fake Ph.D / Master certificates along with their billions in ovearseas accounts. They've achieved so by so-called "Guan Xi".

So China is NOT a Meritocracy at he UPPER level. For that matter the US neither is but it has significantly less corruptions mainly due to free press and an independent legal system.

Nonetheless China IS a Meritocracy at grass-root level, perhaps more so than most major economies in the world. Just look at the sheer competitiveness of the Annual Chinese University Entrance Exam (Gao Kao) for instance.

The natural ( and logical) conclusion therefore ought to be that China still has a huge amount of uncovered potential. It's because whenever it gets rid of the corrupted and misleading upper layer of its current social AND economical "elites" (who are mostly sit at the left side of the bell curve, contrary to other major economies) with some kind of independent juridical system and freedom of press, China's economy should expect a real spectacular growth entering into a brandnew phase on per cap level akin to what the US did in the early/mid 20th century.

Yet with a leap of logic the OP ended by jumping to a quite absurd conclusion all of a sudden instead to argue China's GDP therefore will not surpass that of Mexico... A bit narrow vision?

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