Why I’m skeptical about China
I was at a dinner party a couple of weeks ago where people much more knowledgeable than myself were talking very bullishly about the future of the People’s Republican of China.
They praised the education system, which rewards and re-enforces ambition and accomplishment; they lauded China’s leaders for moving quickly to modernize and embrace new technology.
The next generation of Chinese executives, engineers and innovators are more ambitious, better educated, and far, far more numerous.
It sounds like a no-brainer that a country of 1.3 billion people with that kind of zeal would eventually surpass and even eclipse the United States, a society with just 300 million muddled and overconfident citizens.
Here’s why I’m still skeptical that the Chinese Miracle is all that it’s cracked up to be.
1. The baby bust. China has a huge population bubble right now of middle-aged and elderly people. But because of the long-standing “one child” policy, that bubble is going to pop. Experts worry about the country’s “4-2-1” problem, in which one worker will be forced to support two parents and four grandparents.
Thirty years from now, China’s population is expected to be roughly as geriatric as that of Japan. You think our Social Security program is troubled?
2. The environment bust. Yes, China has taken the lead on developing alternative and renewable energy; and yes, the country has developed a nascent environmental movement. But China’s rush to modernize makes the Soviet Union’s despoilation of their landscape look tame by comparison.
Here’s how the World Bank describes China’s future:
“The country’s environmental problems include land degradation, deteriorating water quality and water scarcity, severe air pollution and declining natural forest cover.
These problems threaten the health and prospects of current and future generations and are undermining the sustainability of long-term growth.”
Whether or not China creates and enforces more environmental laws, their competitive advantage will shrink — either because their ecosystems are collapsing or because the cost of doing business will rise.
3. Poverty is rampant. China has fought a remarkable battle against the direst form of poverty, but tens of millions of people in that society live on less than a few dollars per day. What’s more, the economic revolution has benefited some sectors of the society far more than others.
Rising quality of life has mostly pacified this “left behind” population. But it’s unclear how poor Chinese — especially in rural areas — will react if the booming economy sags, or crop failures occur, and they’re tipped back into deep poverty.
4. The Chinese are making the same mistakes we made. They are still pouring billions of dollars into their overheated housing market. This bubble is viewed by the Chinese government as unsustainable, but so far their efforts to temper the speculation have been unsuccessful.
Their bubble is bigger and scarier than ours ever was.
5. They rely to much on us. China’s economy has diversified, but it is still built on an export model that is unsustainable.
It’s predicated on two ephemeral fictions. First, the idea that China can continue to artificially fix its currency at a low value, giving its manufacturers huge advantages.
Second, the idea that consumers in the United States can continue to borrow and max out their credit cards in order to buy Chinese goods. Those days are coming to and end.
Both of these factors leave the Chinese deeply vulnerable. How vulnerable?
Here’s a shocking statistic: During the US economic downturn of the last few years, 41 million Chinese workers lost their jobs.
7. There’s no rule of law. This is a problem for civil liberties buffs, who don’t like people imprisoned for their ideas.
But it’s also a problem for entrepreneurs and innovators. Under the current system in China, there are few patent or copywrite protections.
That’s an acceptable situation for an upstart country, building its prosperity in large part on stolen ideas. But to be a big player, China will have to reward thinking as much as they now reward manufacturing.
8. China is brittle politically. Yes, dictatorships can do somethings very well, perhaps better than dithering democracies. But they’re also fragile in ways that democracies aren’t.
What does China do when their economy hiccups? How do all those hundreds of millions of disenfranchised people debate and argue and vent their steam?
Right now, those political mechanisms are missing or undeveloped.
It’s also fair to ask what happens when the Chinese dictatorship makes a big mistake. The weakness of centralized power is that the relative handful of people who wield it goof up sometimes.
Since 1980, the Chinese leadership has been making some great decisions. But the long-term track record is far more troubling.
No doubt China will play a much bigger role on the world stage over time. And there are plenty of things we can and should learn from them.
But over the long haul, I’ll take the American model — with all its bickering and dickering — any day.
Tags: economy
Hmm…China, 5,000 years; US, 250 years. I wouldn’t write off China just yet.
This is actually a fairly common argument, that China has an incredibly long history of mercantile and technological success.
It’s true, so far as it goes. But China also has an incredibly long history of isolationism, traditionalism, and rapid expansion-contraction cycles.
–Brian, NCPR
Add to that the lopsided male to female ratio.
Since I suspect most Americans will never learn to speak even one of the two major Chinese languages, my main hope is for all the Chinese to learn English.
If that happens and China moderates toward a more liberal and freer society, as I expect it will, I really don’t care too much about this “Who’s number one” stuff.
No plans on moving to China or even visiting it. But I do wish it and all other countries well. I have known and worked for the Chinese (Taiwan version) and enjoyed working for him. Especially liked going out to diner with him where he would order the food in Chinese. Great food!
Forgot to add that my best employer was a Jewish fellow. He considered me an honorary Jew because of my last name. But that’s New York for you and what I love about New York.
Ted Koppel did a great series on Chinese manufacturing. They don’t create, they copy. In order to create the reservoir for the three gorges dam, they moved an entire population. I’m going to be very conservative and say 1 million people, but I think it was closer to 100 million.
Sorry I found it. 1.3 million people had to move. This is how rumors start. My bad.
Ellen, although China may have been successful for 5,000 years (off and on, mind you), the US wasn’t even born yet, and has been far more successful than China ever has (and any other country in the history of the world). It’s important to note the US hasn’t suffered economic stagnation going back well over 100 years, its unlikely the US economy will suddenly fall to it. Someone, somewhere, will come up with a solution to the problems we currently face.
Clearly China has big problems, the government will likely try to hold them off as long as possible…until they get even bigger. All you have to do is take hints from the Soviet Union and Japan to see where China’s economy is headed.
Also we are talking about the People’s Republic of China, they have been in existence for 60 years. The various dynasties, and different nations that have existed within what we call China have been varied.
I think it would actually be very bad for the world in general if this totalitarian, brutal regime became the major world power. They have no regard for human rights, human life, democracy or individual liberty.
It is insane that we won’t trade with Cuba while massively trading with this country. Even with the political prisoners and torture; Cuba is a paradise of liberty when compared to how the PRC has treated its people over the past 60 years and continues today.
I think we see the world from an extraordinarily US/Europe-centric perspective. Perhaps this is true of many, if not all, national/ethnic groups. (The Chinese name for China literally translates as “center country.”) Our way of doing things is always the best. For just a moment, try a different peephole on the world, say, one located in Beijing, or Tokyo, or, for that matter, Iran.
How does the US or EU look outside our own boundaries? Are those perspectives necessarily wrong or any more flawed than our own? I’m not arguing here in favor of dictatorship or repressive governing of any kind, I just think we tend to emphasize our good points, and, like so many adolescents (we’re barely out of our teens in terms of life-span of a country), we think a) we’re indestructible, and, b) we’re the best ever.
I thought I posted this earlier, wonder if it got removed?
5000 years of famine, slavery, torture, starvation, murder, pillaging, etc. What’s so freakin’ wonderful about that?
I agree that we do look at things from our own perspective. This is why we should apply our own ideals to ourselves.
For me I totally differentiate the PRC from cultural and historical China.
The PRC like most totalitarian states I don’t think will last for 250 years as our Democracy has, China of course will continue.
I do think we can and should set objective standards for human rights, regardless of culture.
Sandwich, you might read James Fallows on Chinese manufacturing. That “don’t-create-just-copy” sentiment is a little dated.
Have to disagree with the last comment don’t-create-just-copy” sentiment is a little dated Said oa. But it’s bloomin true they don’t have any engineering creativity and when you go there you’ll see the Chinese made cars look very similar to western models. They don’t have and Chinese made / designed cars in the uk for example as they failed all the crash tests.