The Shrinking Chinese Dragon
December 31st, 2007 at 01:19am Mark Noonan
Little noted in the news, but very important:
The most important story to come out of Washington recently had nothing to do with the endless presidential campaign. And although the media largely ignored it, the story changes the world.
The story’s unlikely source was the staid World Bank, which published updated statistics on the economic output of 146 countries. China’s economy, said the bank, is smaller than it thought.
About 40% smaller.
China, it turns out, isn’t a $10-trillion economy on the brink of catching up with the United States. It is a $6-trillion economy, less than half our size. For the foreseeable future, China will have far less money to spend on its military and will face much deeper social and economic problems at home than experts previously believed.
I’ve been saying for quite a long time that China’s supposed strength was mostly a mirage - for a century and a half, the western world has again and again bought the notion that China is just about to become a major factor in world economic affairs and that everyone must do whatever they can to get into the act. The problem, of course, is that China isn’t free - it isn’t free now, wasn’t free then and won’t be free any time soon; and an unfree nation is, in the end, an unfree economy, and such economies just don’t do very well. Unfree nations can have spurts of economic growth, but the sort of long-term growth we’ve seen in the United States for more than two centuries now just can’t be accomplished in anything other than a free nation. No amount of government planning and government-business partnerships can overcome people just doing what they think is best in ten thousand spur-of-the-moment daily decisions.
To be sure, China has been experiencing a period of rapid economic growth - Businesses all around the world have been taking advantage of China’s cheap (and in some cases, de-facto slave) labor. Woohoo!!!, went the multinationals - we can produce toasters at 50% of the cost of producing them in western economies, even after you factor in shipping and tarrifs…and their quarterly profits abounded, and a lot of Chinese got quite rich. Trouble is, most of those who got rich were the political elite, or those connected/subservient to them. A lot of factories were built, a lot of infrastructure created and a lot of money made - but it hasn’t been used properly because only a free nation with a free economy can really use money correctly. Instead of really doing what was needed for China, the money has just been spent on an absurd arms race with the United States, palaces for the political elite and “loans” to State-run enterprises which are bankrupt.
So, what do we have? A China which is not only not as rich as people thought, but incapable of becoming rich enough to solve the problems which were made worse by a misallocation of Chinese resources (most notably: the population inbalance between men and women due to China’s barbaric “one child” policy and China’s horrific problems of pollution - there are plenty of others, however). There will be an economic collapse in China - probably rather soon, perhaps even triggered by the credit crunch we’re having because our financial system is run by boneheads who think that lending money to someone with a 490 FICO is a good idea as long as you charge a 32% APR. This wouldn’t be that large a problem except for the fact that China’s ruling oligarchy has justified its continued power by promising unending economic growth to the Chinese people - once that promisory note comes due, the Chinese leaders will be faced with a choice of either voluntarily surrendering power, or striking out in foreign lands to divert public attention.
Which do you think they’ll choose?
Entry Filed under: Economy, Foreign Affairs
21 Comments
1. Christian Wright | December 31st, 2007 at 6:57 am
It only took me five minutes to fine these two news articles.
China on weapon technology
On January 11th, China shot it own weather satellite out of space with a ground to air missile. This is something the U.S. and Russia have yet to do.
The U.S. military is very dependant upon satellites for communication, surveillance, logistics, and even piloting drones. They are the key to modern warfare and China just proved it can shoot them out of the sky. We cannot shot China’s satellites out of the sky. Suddenly, China has a huge military advantage over the U.S. This may be the turning point of who is the only real super power. Strangely, most people are not aware of what China did and China does not publicly acknowledge they even did it. Suddenly wireless communication does not look all the secure.
China on energy and economy
Russia and China have beaten the US in forming critical energy alliances in Central Asia, in the Caucasus, in Africa and even in South America. At the recent APEC Summit, China was the 800 pound gorilla and President Bush was relegated to “also there” status. In 2007, the US now longer guides the world…at least two others (Russia and China) exercise power more effectively than the US.
China is building a sphere of influence that extends from Asia and Africa to South America. From the way it negotiates natural resource contracts to its new foreign aid strategies to its new military alliances, China is usurping power from its neighbors, the US and Europe. Global Thought believes China’s economic growth and its evolving relationships with Russia, India, Pakistan and potentially Iran, along with its quickly growing influence on non-aligned nations combined with the vacuum being created by the decline in US influence could well make it a power to match or exceed the US global political power far sooner than anyone has thought. Chinese investment may in fact resurrect oil production in Iran. Global Thought believes it is conceivable that China could end up the winner in Iraq also. Indeed, China at present is more than matching US power as is obvious by its daily GPB positioning relative to the US. Because many Global Thought leaders believe the US has no strategy to counter China’s rise, watch for China to stay to the positive side of the US icon from some time to come.
2. Eric T | December 31st, 2007 at 7:02 am
“or striking out in foreign lands to divert public attention. ”
Lets hope it is not this one. I think they’d give us a run for the money. I think alot of the leftists in this country would side with them too.
One of the imports I did like from the Chinese was their 7.62 x 39, alot of the range owners did not like it because its steel core blew threw the backstops. But it was great for outside, you couldn’t beat the price. Bill Clinton had to ruin it for everyone and put out some terrible bill that, ended it from being shipped over.
3. Retired Spook | December 31st, 2007 at 7:13 am
CW, might I be so bold as to suggest that you move to China. I think they could benefit from your progressive ideas.
4. Rana Quijotesca | December 31st, 2007 at 7:16 am
Firstly, I would like to point out a strategy that communist forces used in Korea. Basically, they would charge a horde of people at a foxhole or gun position, maybe 1 in 5 of them actually had guns. After the position being charged ran out of ammo (which tends to happen when you have a horde coming at you), they send in a fully armored group to finish them off. It was used with mixed success granted, and warfare is much different now than it was then, but it does show that sheer numbers can still cause massive headaches for a much better equipped, yet smaller, force.
5. Eric T | December 31st, 2007 at 7:23 am
Rana
One of my Grandfathers was in WW2 the other in Korea. He described exactly what you just said.
I just recently rented a foreign film with subtitles it was about the Korean War, real good movie called “Tia Guk GI”. If you like those kinda movies their is a scene like that where the whole hill comes alive with Chinese forces backing the North Koreans and the U.S and south get overran
6. AAR | December 31st, 2007 at 7:47 am
Retired Spook,
Excellent suggestion!!!
I’d even be willing to increase our national debt and pay for their move if all the “enlightened” Liberals would move to China, or to some other country, which could better use their Liberalism and “progressive” ideas!
AAR
7. neocon | December 31st, 2007 at 8:35 am
Isn’t it amazing how quickly our lefties will jump to defend China? A nation that oppresses their people and with a long list of human rights violations.
Christian rushes to his sources to assert that China will soon emerge as the great nation he wants them to be.
He’s a good little brown shirt.
8. Retired Spook | December 31st, 2007 at 9:12 am
I wonder if the Chinese government wiretaps any of its citizens without a warrant. Nah, probably not.
9. neocon | December 31st, 2007 at 9:21 am
I wonder if the Chinese would waterboard any captured combatant if they felt he had information?
I wonder if the Chinese would provide lawyers and due process to captured combatants?
I wonder if the Chinese would adhere to the Kyoto protocols?
I wonder if the Chinese would embrace gay and lesbian issues?
So much to ponder?
10. Retired Spook | December 31st, 2007 at 9:28 am
So much to ponder?
ROTFLMAO!!
11. Retired Spook | December 31st, 2007 at 9:40 am
Victor Cha had an excellent piece in “Foreign Affairs Magazine” last month about Asia in general and our relationships with China, Korea and Japan in particular. It’s a long but very interesting read about a part of the world that is going to play a pivotal role in the future of this planet.
12. neocon | December 31st, 2007 at 9:50 am
stevo, like all good liberals, projects his opinions as fact. What a shock.
Incidentally there stevo, what right does America have to tell China how to run their country?
Are you trying to impose Americas standards on China? Are you xenophobic?
I suppose next you’ll want to invade them.
13. IdiotWrangler | December 31st, 2007 at 10:11 am
This blog was featured on DailyKos–remember when you screamed that no one should negotiate with Terrorists? Look what your Manipulated Moron in Chief is doing:
http://www.dailykos.com/story/2007/12/31/23424/803/970/428214
14. neocon | December 31st, 2007 at 10:15 am
Idiot,
By the way, perfect moniker for you.
Would you rather Bush continue to kill? Because he can, and has. Or would you rather bring those fighting elements to the political process if in deed they embrace the new constitution and elected government of Afghanistan? Because that is the requirement, in case you missed it.
Why are you such a warmonger?
15. SteaM | December 31st, 2007 at 11:44 am
From WalMart’s official Chinese branch website:
http://www.wal-martchina.com/english/walmart/index.htm
I stopped going to WalMart entirely two years ago. When given the choice I will always buy products made in the USA even if they cost more.
Whether you want to believe that China is a growing world power or not. Why would you continue to purchase their products? They have child labor. They sell us toys that have lead paint. And we still buy them.
So to those of you WalMart shoppers who continue to purchase chinese imports. How do you feel about supporting the child labor, the irresponsible manufacturing procedures in regards to safety and qaulity of the products you buy for your children?
It boggles my mind really. I can sort of understand it since I think people just ignore that they are constantly buying crap from China. I think it’s become to normal that it’s out of sight out of mind.
But, anyways, I think it’s also interesting that WalMart could potentially take over their mom-and-pop markets as they begin to spread across China with WalMart stores.
16. anarchist | December 31st, 2007 at 1:22 pm
I’m a little confused, this is supposedly using 2005 data. So it’s saying that using 2005 data, calculated in yuan then converted to dollars was off about 40%. But the US economy is calculated in dollars and since 2005 the value of the dollar has fallen about 40%.
So if economic comparison using foreign exchange rates was overvaluing China’s economy, why are the foreign exchange markets continuing to skew in the wrong direction? Seems like the people that actually have money on the issue are betting against the World Bank’s report.
17. Tractatus | December 31st, 2007 at 1:28 pm
Woohoo!!!, went the multinationals - we can produce toasters at 50% of the cost of producing them in western economies, even after you factor in shipping and tarrifs…and their quarterly profits abounded
And some idiot named Mark Noonan–I think you might know him, Mark–claimed that cheap toasters and high quarterly profits are vastly important for they make gigantic discount chain stores (the owners of which just happen to be massive GOP donors) what is great about America, that only some America-hating lefty would dislike such a company, and that those cheap toasters and high quarterly profits are what make America great–except that “union bosses and varied leftists” are trying to undermine this goldmine of cheap crap from China!
Hell, that idiot Mark Noonan even went so far as to say, “To me, defending Wal Mart is defending American enterprise against a horde of leftists and protectionist union thugs…something I am proud to do.” Perhaps you, Mark Noonan, could inform that Mark Noonan that he is proud to defend the exact thing that you, Mark Noonan, are complaining about.
But I imagine you won’t.
18. Eric T | December 31st, 2007 at 3:02 pm
Mark
“we’re having because our financial system is run by boneheads who think that lending money to someone with a 490 FICO is a good idea as long as you charge a 32% APR”
This is one of the roots of the problem. 32% is an UNHOLY amount of interest. I have maxed out credit cards charging this rate. Have you ever been mugged. It is about the same.
Oil price is another issue that is much deeper
19. kjstrouble | January 1st, 2008 at 10:39 pm
Steam - I shop Wal-Mart because I cannot afford to go to other stores. I do read the made in labels - and mainly buy food/cleaning supplies. I don’t like to buy clothes or other durables because most non-national brands that I have found there are not really durable.
Eric - I have avoided that trap, no credit cards. I do have a debit card, and I monitor it very carefully. Amazing what happens when you decide to not buy on credit when possible or atleast not until you can afford to pay off the bill each month.
Spook - thanks for the link, interesting article. But then Foreign Affairs often has good articles.
20. SteaM | January 2nd, 2008 at 10:38 am
kjstrouble,
You can’t afford to shop anywhere other than WalMart?
I call BS on that. Give it a shot for a full month and see how it goes. In general people cannot afford to keep supporting WalMart’s anti-American practices.
21. Including Foreign Exchang&hellip | February 27th, 2008 at 5:50 am
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