This item is welcome and a reminder that
also has a long ways to go. It is also about good news. This China is following the path of the Oriental tigers and has another generation to complete the economic maturation process. China
The issues so apparent today yet abating in their own way will be well resolved in twenty years. It will be a stable middle class country with a thriving economy and western style social services taken for granted.
The political system will sort itself out and become progressively more inclusive.
Taiwan’s progress is a great example in which founding parties have been voted in and out of office, yet looked just like today thirty years ago. China
Political and social progress is accepted by the population and is been patiently pressed. Recall the Chinese leadership is proud of their millennia of progress and believe they understand patience. The Chinese people themselves think the same way. They also know that they are part of their country’s greatest generation. They have set out to become fully modernized and this will mean a reshaped political system while assiduously avoiding revolutionary nastiness.
They have also shown the rest of the world that it is possible and are themselves helping make changes were obvious in other countries.
should coast into the top of the S curve in about twenty years. China will need an additional decade. The rest of the undeveloped world has fully begun the process and is on the move and will fully emerge over the next twenty years. I expect few stragglers India
Five myths about
's economy China
By Arthur Kroeber
Sunday, April 11, 2010
China will quickly overtake the as the world's most powerful economy. United States
According to a November poll by the
Pew Research Center, 44 percent of Americans believe that China is already the world's top economic power, while 27 percent put the in that position. That perception is completely at odds with the facts. This year, United States 's economy is expected to produce about $5 trillion in goods and services. That would put it ahead of China Japan as the world's second-biggest national economy, but it would still be barely one-third the size of the $14 trillion economy and well behind the European Union, if taken as a whole. U.S.
's economy is so big is simply that it has 1.3 billion people. But China China's per capita gross domestic product is only one-seventh the level. And in household living standards, U.S. lags even further. Each year, an average Chinese household consumes one-fourteenth the value of goods and services purchased by an average American household. China
And despite its chronic losses in manufacturing jobs, the United States is still the world leader in that arena because its manufacturers excel at high-value products such as airplanes and high-tech equipment, while China still mainly produces low-cost clothing and consumer electronics. In terms of the value of goods, the
United States produces more than 20 percent of global manufacturing, or about double 's share. China
China's vast holdings of U.S. Treasury bonds mean it can hold hostage in economic negotiations. Washington
's Treasury holdings are not like regular loans that a bank extends to a company. They are more like deposits: safe, liquid and carrying a very low interest rate. Like a depositor, China has little ability to tell its bank how to run its business. It can only vote with its feet, by taking its deposits elsewhere -- but its deposits are so huge, there is no other "bank" in the world that can take them. The European and Japanese bond markets are not big enough to absorb that much Chinese cash, nor can China buy enough oil fields, ore mines or real estate to soak up its money. And it can't simply invest all its dollars at home, because doing so could lead to rampant inflation. So like it or not, China Washington and are stuck with each other -- and neither has the power to hold the other hostage. Beijing
3. Letting its currency grow in value is the most important thing
can do to reduce its trade surplus. China
Some American companies, unions and politicians complain that by keeping a fixed exchange rate between the yuan and the dollar,
is unfairly making its goods cheaper on the world market, thus driving its trade surplus at the expense of its trading partners. Certainly, the exchange rate is important, but it's a mistake to think that letting the yuan rise in value would magically make China 's trade surplus disappear. In the late 1980s, China allowed the yen to double in value, but its trade surplus didn't budge. Conversely, in 2009 Japan kept the value of the yuan fixed against the dollar, and its trade surplus fell by a third. China
Secretary Treasury Timothy Geithner was in Beijing on Thursday and discussed the currency issue with Chinese economic officials. Most observers -- including
's top economic policymakers -- agree that the yuan should rise in value. But for that move to offer any benefits, it must be accompanied by other policy shifts. By far the most important thing China can do to reduce its trade surplus is to stimulate domestic demand (including demand for imports), something it has started to do through a massive infrastructure spending program. There's some evidence that Chinese households are also beginning to spend more freely as wages rise and people feel optimistic about the future. China
's hunger for resources is sucking the world dry and making major contributions to global warming. China
It's true that
is now the biggest producer of carbon dioxide and other greenhouse gases that contribute to global warming. And it's true that China China uses more energy to produce a dollar of its GDP than most other countries, including the . But on a per-person basis, United States 's use of resources is still modest compared with that of rich countries. For instance, despite its rapid increase in car use, China consumes about 8 million barrels of oil a day. The China consumes about 20 million barrels a day. Put another way, United States , with nearly a quarter of the world's population, accounts for less than one-tenth of the world's oil consumption. The China , with only 5 percent of world population, accounts for nearly a quarter of global oil consumption. Whose appetite is really the bigger problem? United States
Moreover, unlike the
United States, has recognized that it cannot let its fossil-fuel appetite grow forever and is working hard to improve efficiency. Chinese fuel-economy standards for new cars are higher than China America's, for instance, and on average, coal-fired power plants are more efficient in China than in the . United States
's economy has grown mainly through the cruel exploitation of cheap labor. China
Every time a developing economy starts growing fast, richer countries accuse it of "cheating" by keeping its wages and exchange rate artificially low. But this isn't cheating; it's a natural stage of development that comes to an end in every country, as it will in
. China has grown in much the same way as other economies we now view as mature and responsible success stories -- including Japan, China South Korea and . Those nations invested heavily in infrastructure and education, and quickly moved their workers from low-productivity jobs in rural areas to more productive jobs in cities. When rural labor was abundant, wages were low, but they rose rapidly after those surplus workers joined the urban labor force. Taiwan
China still has plenty of workers moving from the countryside to the cities, but the age of ultra-cheap Chinese labor will soon be gone.
Arthur Kroeber is the managing director of GaveKal-Dragonomics, an economic research firm in
From the archives: For recent Outlook coverage of
China, see Steven Mufson and John Pomfret's "The New Red Scare" (Feb. 28) and Yasheng Huang's "Why Google should stay in China" (March 28).