Chinas economy has experienced three cycles since the Reform and Opening up policy was implemented.
The peak years were 1978, 1984, 1992 and 2007, when the GDP growth rates stood at 11.7 percent, 15.2 percent, 14.2 percent and 14.2 percent, respectively. The bottom years were 1981, 1990, 1999 and 2009, with the GDP growth rates at 5.2 percent, 3.8 percent, 7.6 percent and 9.2 percent, respectively.
Every cycle lasts between nine and 10 years on average. In the current economic cycle, 2007 was the peak year, and 2008 and 2009 were the declining years. In the last cycle, economic expansion lasted from 2000 to 2007, and the decline lasted only two years from 2008 to 2009. In 2010, Chinas economy entered a new expansion period and the economic growth rate was 10.4 percent. Therefore, we can predict the new round of economic expansion will also last between seven or eight years.
The world economy has walked out of the shadow of depression and entered a new round of expansion in view of either the law of economic cycle or practice. The United States is the largest economy in the world, accounting for 23.6 percent of total world economy. Therefore, its economic growth situation has a significant impact on the world economic operation.
In fact, the cyclical fluctuations of the world economy are basically synchronous with those of the U.S. economy. Since 1978, the trough years of U.S. economic cycle were also 1982, 1991, 2001 and 2009, the GDP growth rate of the United States in these years were also -1.9 percent, -0.2 percent, 1.1 percent and -3.5 percent, and the average length of U.S. economic cycle was also nine years. In 2010, the US economy achieved a positive growth of 3 percent, which indicated that the United States had entered a new economic expansion cycle.
Generally speaking, the world economy will continue to expand in the next few years and will not experience a second recession unless major unexpected events occur. Therefore, the world economy impact will have a positive influence on Chinas economic growth.
It can be concluded that Chinas economy will show a positive trend in the next few years regarding either its own operation law or the external economic environment. It is noteworthy that with the advent of a new economic expansion cycle, a new cycle of inflation has also arisen. As a result, price increases will become frequent in the next few years. But serious inflation will be unlikely unless a large positive output gap emerges in the economy, that is, resources are over-exploited.