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The Chinese “Bear” Will Be De-clawed

18 August 2010 7 Comments

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It wasn’t so long ago, during the “Cold War”, that Americans viewed China as an impoverished, Communist nation without much hope of feeding its burgeoning population, and without much export production to sell to the rest of the world. How times have changed! Over the last ten years China’s economy has surpassed those of Germany, Canada, Spain, Italy, France, and now Japan. While China has been becoming an economic powerhouse, the U.S. has been surpassed by a number of countries in areas such as consumer incomes, standard of living and health care. The net result of it all is that China has now become the world’s largest creditor nation, and the U.S. has become the world’s largest debtor nation. What went wrong?

To start off with, China has made higher education a top priority. For example, Chinese universities will graduate 500,000 engineering students this year, while U.S. universities will graduate only 150,000. In addition, China has now become the worlds largest internet market, as measured by the number of users. In terms of personal income, China has gone through the early phases of industrial development, where low cost labor has given the economy a much-need jump start. They are now entering the next phase, where workers will be allowed to form labor unions and strike for better conditions. In fact, a primary goal of China’s central planners is to continue to rapidly develop a consumer-driven, domestic economy in order to rely less heavily on the export business. There is little question that the Chinese have been “eating America’s lunch” for the last few years, but does this mean China’s meteoric rise in economic power and influence is sustainable over the long run? Is answer is probably “no”.

Chinese Communist Party officials have been quick to gloat over their country’s economic successes, and equally quick to blame the excesses of American-style capitalism for the “great recession”, ignoring the fact that the introduction of capitalistic principles into their own economy was largely responsible for the economic boom they are experiencing today. The sustainability of China’s economic boom will depend upon it’s ability to loosen the iron grip of the Communist Party, and to greatly improve its record on human rights. It’s ultimate failure to do so will cause widespread social unrest, and ultimately, an unraveling of China’s economic miracle. I suppose that when the Chinese economy finally does collapse, at least they will still have a few trillion dollars of American I.O.U. ‘s to live off.

Rich

7 Comments »

Harrison said:

The average income per person in the US is about $46,000.00. in China it is $3,700.00. I’m not worried.

# 19 August 2010 at 8:22 pm

VH said:

Even if the Chinese economy keeps growing at an average, let’s say, 7% rate, at that rate China’s GDP would double every decade, reaching parity with the U.S. (14-16 trillion) in 30 years or so. But the U.S. economy is not frozen in immobility. If the U.S. grew at a very modest 3% in 30 years its GDP would stand at $30 trillion.

Despite all the scary stories in the media lately about China moving up in the size of global economies, the country has a lot of catching up to do.

# 20 August 2010 at 12:43 am

admin (author) said:

Harrison,
The Chinese have a long, long way to go to catch up to the productive capability of the U.S.; however, they have moved up to “number 2″ in a very, very short time!

# 20 August 2010 at 9:01 am

admin (author) said:

VH,
Amen! Let’s hope that the U.S. economy can average 3% growth over the next thirty year period. Many economists are forecasting growth at around 1%, much like Japan’s growth rate during the “lost decade”.

# 20 August 2010 at 9:04 am

Harrison said:

They have 1.5 billion people! They should be #1. Doesn’t mean anything… yet.

# 20 August 2010 at 2:56 pm

Judie said:

I will GO OUT OF MY WAY to avoid buying anything made in China. I once spent 30 minutes at Kohl’s trying to find golf socks! I have my standards!

# 20 August 2010 at 9:37 pm

KAK said:

I am with you Judie, I try. There have been many problems with Chinese manufactured products, they have evicerated our labor force, there are no bargains in Chinese trade. China is a tool of the trans-national corporations who have shown that they do not care about people. Corporations exist to serve us and they have forgotten that.

The world has been knocked down, China has it’s own housing bubble, when the Chinese bubble pops, we may be in real trouble.

The severity of this “downturn” was totally unnessecary, the rewriting of introuble mortgages would have greatly reduced the speed of the dominoes falling. It would have meant the clearing out of bank back offices of traders running stock trading allogrithms in high frequency trading and replacing them with secretarial and a processing staff. Over night in 2007 investment banks were allowed to change their charters to commercial banks to qualify for bailout funds. Our fate was sealed there. For a while China and trans-national Corps will do well but in the present climate of over indebtedness their bottom line tickers will slow down too. Do we have to wait for complete destruction of the world financial system before any thought of peoples lives enters the equation?

# 21 August 2010 at 8:02 am