China has had four distinct periods in its 4,000-year history. Until the 16th century, China ’s economy performed on par with countries elsewhere in the world and outperformed Western Europe for more than 1,000 years. Toward the end of the Ming Dynasty (1368–1644), however, and throughout the Ching dynasty (1644–1912), China stagnated, its GDP per capita rising virtually zero for more than 300 years.

      During the same period, Western Europe enjoyed rapid economic development, riding the scientific revolution that began in the 11th century. After the 18th century, growth in Western Europe skyrocketed, while China slipped into decline as it shunned progress and closed its doors. This isolationism eventually led to invasion from Western and Japanese forces, driving the nation’s GDP per capita back down to levels seen 2,000 years earlier.

      The year 1978 marks a turning point in China ’s modern history. That’s when Deng Xiaoping began to remake the economy around market principles. In 1978, China had the world’s ninth largest economy, with a GDP just one-eighth that of the United States and a third that of Japan . But by 2001, China had grown to the world’s second largest economy, with a national output over half that of the United States and 60 percent larger than Japan ’s.

      China ’s growth rate has slowed somewhat from its torrid double-digit pace of the mid-1980s and early 1990s, but still its GDP is expanding at roughly 8 percent per year. At this rate, and assuming...

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