Jul 18
Carnegie Endowment calls for rethink on rising China
Written by Buxi on Friday, July 18th, 2008 at 9:20 pm
Filed under:-mini-posts, Analysis | Tags:american policy, carnegie, china's future
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Filed under:-mini-posts, Analysis | Tags:american policy, carnegie, china's future
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A report titled China’s Economic Rise—Fact and Fiction published earlier this month takes an optimistic view of China’s future prospects: “Beijing now seems likely to overcome potential stumbling blocks such as economic instability, pollution, inequality, corruption, and a slow pace of political reform.”
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The full report, from Albert Keidel at the highly respected Carnegie Endowment for International Peace, is available for download in .pdf format at the above link. The Carnegie Endowment is a think-tank with close links to the United States Department of State.
The report’s four primary bullet points are:
- China’s domestically driven economic expansion is not limited by export markets and can sustain high single-digit growth rates for decades.
- Beijing now seems likely to overcome potential stumbling blocks such as economic instability, pollution, inequality, corruption, and a slow pace of political reform.
- China’s economic size will match America’s by 2035, and double it by midcentury, with unclear but potentially wrenching strategic implications that demand U.S. economic and military reassessment.
- American policy makers should take this opportunity to enact wide-ranging domestic reforms and rethink their inherited concepts of global order.
I appreciate any such report which treats China’s “rise” as being inevitable. Not because it strokes my ego, but more importantly… if American policy makers begin to think in these terms today, it will dramatically reduce the chance of conflict between the US and China over the next 3 decades.
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July 18th, 2008 at 9:37 pm
Nothing new to this, and there’s no mention of the environment. Saying that China’s growth is ‘no flash in he pan’ is pretty silly – China has been growing at an average of 8-9% for 30+ years. I would describe the predictions in this report as ‘optimal’ – they assume that nothing else is going to intervene. In reality if you had tried to make similar predictions about various economies thirty years ago you would have been way off – I just finished reading a book on the future of the superpowers that was written back in 1987 and it was over-optimistic about China by quite a way, and under-optimistic about the west by a bit as well, and its predictions about the Soviet Union are now purely of academic interest. These kinds of predictions do help give people a frame of reference though, and I suppose that is useful
July 18th, 2008 at 9:55 pm
I’m curious.. what was the book, and what were its specific predictions about China?
July 18th, 2008 at 10:00 pm
By the way, FOARP, he does talk about environment. See page 10/11 of the .pdf. A brief summary:
July 18th, 2008 at 10:27 pm
I tend to think there are as many oppionions as analysts. The purpose of this type of publications is not necessarily to seek truth, rather it’s often to promote some kind of policy objectives. Basically, it is not to find what the facts are but to shape the views of people.
July 18th, 2008 at 10:35 pm
@FOARP,
The tone of it changed significantly in the following statement :
• China’s financial system, rather than a shortcoming that compromises growth potential, is one of the strengths of what the report calls “China’s money-making machine,”
Notice that it didnt mention the political system. so this “financial system” is more like the combination of political system and economic system in China. West used to believe that the economy growth in China wouldnt sustain cuz of the political system.
July 18th, 2008 at 11:06 pm
@Buxi – Practically turned my place upside down looking for it, but I’ve finally found it – it was “The Rise And Fall Of The Great Powers: Economic Change And Military Conflict From 1500 To 2000” by Paul Kennedy and was published in 1988. Re-reading I see that it predicted that the Chinese economy would reach a size of two trillion USD in 1980 dollars (or five trillion dollars in today’s prices) by now, which I guess is not so far off today’s figure of 3.3 trillion dollars given all the uncertainty involved. Obviously Kennedy (along with everyone else) didn’t see Japan’s ‘wasted decade’ coming, or the break-up of the Soviet Union, as was overly pessimistic about the US and western Europe. Here’s a decent quote from the section on China in the 21st century:
I guess what gave me the impression of being over-optimistic about China was this:
(author’s emphasis)
Even though it was published in 1988 it is still definitely worth reading, I still see this book in print in the UK so you should be able to get hold of it fairly easily on Amazon if you want to have a read. I myself read a lot of this kind of book as I am a sucker for grand, sweeping predictions backed up by theories and statistics. I guess this is one of the reasons I am interested in China.
July 18th, 2008 at 11:22 pm
@Wahaha – I’m certainly no expert when it comes to finance, but I presume by ‘financial system’ they mean the banks, which at least have cut back on handing out low cost loans like they used to, but still have a lot of bad debt on their books, but I guess they’re not the only ones . . .
@Buxi – I’d missed that part, I guess what worries most is that China’s size and continental geography will allow pollution to become much worse than in the case of Japan, Taiwan and Korea – every town on the banks of the Yangzi add their own quota of water pollution, and air pollution also can be cumulative. However, I am not an ecologist.
July 18th, 2008 at 11:23 pm
@FOARP,
That passage about the comparison with Europe doesn’t seem over-optimistic to me… in fact, unless I’m misunderstanding something here, it seems to have under-estimated China’s economic growth.
Wasn’t China’s economy far, far larger than British and Italian economies (certainly in PPP terms) before 2000? And instead of waiting until 2020, didn’t China’s economy already pass Germany in size last year?
In PPP terms, China’s GDP is already $7 trillion+, higher than the estimate given in that book.
July 18th, 2008 at 11:28 pm
Read Keidel’s report quickly. It is a postive analysis but it seems to be based on a linear projection.
I agree with his conclusion from my own understanding of China’s conditions and progress. If we look at this year’s difficulties China has faced: a record snowstorm, tibetan riots and torch relay protests, Sichuan earthquake, large floods, a world credit crunch. China has gone from strength to strength.
July 18th, 2008 at 11:33 pm
@Buxi – PPP is such a unpredictable way of measuring an economy that I really think it should be avoided as a way of comparing countries – I’m sure you remember the way in which the Chinese economy was so-called ‘slashed in size’ by 30% the year before last when they finally re-adjusted the Chinese CPI. The newspapers suddenly all ran columns written by know-nothing journalists about how China was not nearly the giant that everybody had thought it was, when in actuality nothing had changed. Anyway, the stats that were given in the book were in nominal terms, a nominal GDP of that size would give a PPP GDP of more than eleven trillion US dollars using the current Chinese price index – in as much as any GDP/inflation/pricing figures for any country can be trusted that is.
July 18th, 2008 at 11:56 pm
@Buxi – One thing I’m kind of confused by (not really having much in the way of a finance/economics background) is the degree to which inflation cuts into growth. If there was 10.4% economic growth in China last year, but 7.9% inflation, what does that make economic growth in real terms? Surely it isn’t just a case of subtracting the inflation figure from the growth figure – or is it?
July 19th, 2008 at 12:49 am
@FOARP,10.4% economic growth is the real growth rate after considering the inflation figure.
July 19th, 2008 at 3:05 am
It is a an optimistic report but good to see that it raises the question of the political system as “the greatest barrier to economic success”. If China is able to overcome the limitations of its political system, its long-term success would seem assured. That’s quite reasonable.
“Is the Communist Party at all interested in pursuing a gradual devolution of its authority?” is therefore the key question. The reference to the “far from mainstream” book on democratic reform would seem to offer a glimmer of optimism, even if the objective is mid-21st century (I presume the suggestion is not to delay reforms until then, but to start now and achieve them by mid-century).
The concepts should be more broadly considered and discussed within China. Reform of China’s political system, including democratization, is an old topic which has had at least 100 years to germinate, with unfortunately limited effect. Until those reforms truly take root, China’s “rise” will still be some future, uncertain event.
July 19th, 2008 at 8:21 am
One should never believe everything one reads.
The futurologist (whatever that is) Herman Kahn wrote The 21st century; The Century of Japan, in the early 1970s.
For a while, his prophesy was almost fulfilled but of course endaka created an economic bubble that sent Japan down the tubes, and in 1978 the average income in China was also 78 yuan, so who could have envisaged a giant in the making.
Harrison Salisbury of NYT also wrote a book The Coming War Between Russia & China, which seemed highly likely given the tensions of the 60s/70s.
Conflict between the Communist titans of course would have created a unipolar world to American advantage, so who could have predicted that Russia would have collapsed without a whimper and China seen as the sole challenger to American neo-imperialist hegemony.
There is also a book somewhere (can’t remember) that quotes the WSJ circa mid-80s, sniffing that China’s economic reforms would, at best, throw up only a few pockets of coastal prosperity.
But by 2000, the coastal provinces had become sufficiently rich to create economic imbalances and the government implemented policies to develop the interior regions (T*b*t included?)
Forecast of any kind, from weather to stock markets, has never been an exact science, so one should never set too much store by these authors, learned as they may be.
One might as well put faith in the quatrains of Nostradamus.
As the Chinese saying goes, better the calculation of heaven than of man.
July 19th, 2008 at 11:08 am
@Mainlander – I guessed it had to be, but there is no mention of them taking inflation into account or saying that the growth is in ‘real terms’ in the press release:
July 19th, 2008 at 11:30 am
@FOARP- 经济增长率指的就是不变价国内生产总值增长率（简称国内生产总值增长率）。the definition of economic growth rate is GDP growth rate computed with the fixed prices,so usually we dont mention it is computed with fixed prices.
July 19th, 2008 at 3:05 pm
@FOARP,
You’re asking a good question. There is such a thing as nominal GDP growth (top-line growth ignoring inflation), and real GDP growth (growth with inflation + other factors subtracted)…
China’s National Bureau of Statistics publish current nominal GDP value, and real GDP growth.
July 19th, 2008 at 3:37 pm
@JD,
This is almost without doubt referring to “Storming the Fortress”, which we talked about here. I actually found a link to (part) of the Chinese original.
I think the book is significant, but not quite earth-shattering. This sort of discussion has been standard at the Party school + throughout Chinese academic for many years. The fact that it’s being summarized and put together here in such a clear roadmap is what makes it striking.
Anyone think we should try to translate the book? It’s a long effort, and maybe not useful to anyone but academics.
July 19th, 2008 at 10:40 pm
@Buxi – Phillip K. Bobbitt’s “Shield of Achilles” was particularly good example of the kind of book I am talking about , not because of the predictions in it (these were scant), but because of the methods it suggested for understanding the future development of national power. The book was a 2002 example of the neo-conservative strain of politics. Not the modern meaning attached to ‘neo-conservative’, which Bush/Cheney/Blair have given a meaning identical with ‘fascist’, but the original meaning of the phrase, in which democracies were expected to support democracy through essentially non-violent means and not simply use democracy as an excuse to invade other countries. I’m going to get dissed even for writing this, but I would have called myself a neo-conservative until the name was attached to things (torture, imprisonment without due process) that I think entirely beyond the pale.
July 20th, 2008 at 8:00 am
1.Phillipine is a American style democracy but it’s a dirt poor and the most corrupted nation in Asia.
2.let’s look what democracy did to USA; Citi chief Chuck Prince got paid $60m to leave after lost $10b during a quarter of the year. If you folks understand a little about China today; if a Bank chief in China lost $10m the best of his fate might be spedning the rest of his life in jail.
3. USA is so young with 200yrs history; China survived more than 3000yrs; so how much the 200yr old should teach the 3000yr old?
4. You folks lost more than a $1T this time around? what kind of democracy is that!!!!!
July 20th, 2008 at 8:21 am
A $1Thrillion loss democracy!
July 20th, 2008 at 5:34 pm
@Peter Xie – Wow, really on point comments which are totally connected to the subject at hand, fortunately for you everyone who reads this blog is American, otherwise you would look a bit stupid . . .
July 20th, 2008 at 5:39 pm
@FOARP,
Sarcasm doesn’t translate well, and is also rude.
@Peter,
Welcome! We have had numerous discussions on democracy. You will find that most non-Chinese posters here are pretty sophisticated, so they usually understand the problems with democracy. But you might be interested in these discussions:
http://blog.foolsmountain.com/tag/democracy/
July 20th, 2008 at 6:36 pm
Peter – I share with you the admiration of Chinese history – but it could be argued that the “downfall” of China – or at least the falling behind of China over the last 3-4 centuries – may be traced to xenophobic imperial governments. But if China’s downfall can really be traced to wrong decision made by authoritarians in Beijing, we need to carefully consider what type of authoritarianism we want for China for the long term – even if authoritarianism might now work for China.
July 20th, 2008 at 7:22 pm
@Buxi – Your place, your rules.
July 20th, 2008 at 8:23 pm
@FOARP – it’s not just Buxi’s place – it’s ours. If it were just Buxi’s place, it’d be terribly boring! 😉
July 20th, 2008 at 10:43 pm
Karma, thank you for your comments regarding Chinese history . Yes you are right China did left way behind after 18th century in terms of economic development; however we Chinese understand that ‘if you like to succeed you must fall’. So we did during that 3000 year history if you care to spend 30min reading a bit of Chinese history! Only people like Bush and Cheney are trying to advocate’ we must win; never fail’. To me this extreme view is not only silly but also against human nature as we learn much more when we fail.
Anyway this time USA did fall a big way; at least financially. My perspective; this more than $1thillion loss is not because some bankers made a few mistakes, rather it is the direct result of the last 20 years mismanagement of the USA government. To me I really do not care a governement with democracy or not; as long as the end result is ordinary people can improve their living standard and the economy does not suddenly loose more than a $1thrillion by a few bankers then IT IS REASONABLLY A GOOD GOVERNMENT!
and thank you Buxi; I really enjoy this space you created for us all!
July 21st, 2008 at 8:29 am
let’s judge any government by its deeds instead of its ideaology; China still has lots of its problems today but it’s foolish to think ‘if China adopts American style democracy, China will a better China’. I mean a social system which allows $1thrillion loss by a few banking institutions seems to me scary and corrupted; China lived more than 3000 yrs; so I feel the chance for Chinese to even consider the USA style social system is very slim. I mean Chinese as a race are not smarter than other race; but at least we are not intellectually retarded!
July 21st, 2008 at 9:03 am
@Peter Xie – A trillion dollars might have been wiped off the value of certain assets, this is not the same as a trillion dollars going missing. And why is this germane to the subject at hand?
July 21st, 2008 at 9:22 am
@FOARP please explain to us what is your definition of ‘ wiped off’ ? I do not like to play word game with you, but at least tell us who are the wipers? Having said that though I feel this creidt crisis will last much longer than people expected; the reason is exactly what FOARP said regarding ‘wiped off ‘ ,there is no way to find out who the wiper is so we never will recover the money’ . that is 10% of USA 2007 GDP.
July 21st, 2008 at 9:31 am
If we are to argue for or against a political system, perhaps we shouldn’t just use one example from one country? Inflation in Zimbabwe is _officially_ 2,200,000%, and it has an authoritarian government, but this doesn’t invalidate authoritarian governments just like that.
July 21st, 2008 at 9:31 am
@FOARP A $thrillion dollars might not sound a big figure for you; but please do not forget about the struggling middle class American paying $4.50 gallon; all those FED rescure money can at least cut the gas bill by 30%!
July 21st, 2008 at 9:36 am
@Wukailong what is your points? I am a bit confused. Anyway I prefer judge any system by its end result; do not try to promote a system to me if thrillion dollars can be lost during a few months under that system, this is an insult to my intelligence!!!
July 21st, 2008 at 9:39 am
My point is that if you want to argue against democracy as such, an example of something like losing a trillion dollars isn’t very convincing. If you want to argue against the particular system in the US, fine.
Judging a system by its end result is fine. I’m not trying to promote any system to you (I have enough of my own to deal with).
July 21st, 2008 at 10:12 am
@Peter Xie – ‘Wiped off’ means that the assets had been over-valued, and have now been re-valued to a value less than the previous one. In simple words: the money was never there. This is not a result of a ‘social system’ but of a financial one, unless you are arguing against capitalism as a whole that is.
I am unaware of any statements by Bush/Cheney that China should adopt ‘American-style democracy’. This may be what they think, but I have never heard them actually say it.
As for the American economy, I live in the UK, where unleaded petrol has now reached £ 1.20 a litre (about $9.60 for a US gallon), where the credit crunch has already led to what amounts to the nationalisation of a major bank – I need no lectures on the current economic climate. What I don’t see is that this is a result of Britain being a democratic society, high oil prices and the US sub-prime mortgage scandal did not even have their roots in this country.
Finally, what has what you are saying to do with the subject of this post, that being the growth of the Chinese economy? There are other threads on which the effect democratic reforms might have on the economy on this website, here’s one:
http://blog.foolsmountain.com/2008/06/28/the-chinese-debate-part-2-democracy-and-the-economy/
July 21st, 2008 at 10:21 am
@FOARP” high oil prices and the US sub-prime mortgage scandal did not even have their roots in this country.” what about Northern Rock? waka up to your reality! Even you argue about this credit crisis is only financial problem but it is taking place under the watch of your government and its political institutions. Fix your mess before you are trying to tell me your system is better otherwise I am wasting my time here to talk to you.
July 21st, 2008 at 10:24 am
@peter xie: The point isn’t whether 1, 10 or 100 trillion is a convincing number or not. I asked for a more comprehensive discussion, not this “the US is like this, why would we want democracy” kind of argument. There are many democratic countries, just as there are many authoritarian. Why just choose the US, and one example at that, to use as the basis for discussion?
July 21st, 2008 at 10:39 am
@Peter Xie – I believe I mentioned the Northern Rock, and the fact that it was money lost on US sub-prime mortgages. The fact that a trillion US dollars in ‘paper money’ can be wiped out by a re-valuation of a particular class of assets does not say anything about the system of government under which this happened – it could just as easily have happened under a different system of government. As for ‘fixing my mess’ and ‘telling me your system is better’ – can you find anything anywhere in this thread where I have touted the adoption of democracy as a way of speeding growth?
And once again, what does any of this have to do with China’s growth? Or are you just criticising the west for the sake of it?
July 21st, 2008 at 10:42 am
I’m not sure it’s reasonable to credit or blame democracy for specific gains or losses, but it’s clear that the world’s richest, most advanced governments have democratic political systems. Democracy is certainly an important and integral part of an advanced, wealthy, efficient economy.
Assuming peter xie is right and democracy caused $1 trillion loss, then democracy must also be given the credit for making the US one of the world’s richest nations. As the US is 25 times richer per capita than China, peter’s argument suggests that democracy is 25 times better than China’s political system for the economy. I guess the 200 year old nation does have some pretty good tricks.
I’m not sure I agree with the reasoning, but the end result is correct. Developing countries who wish to become rich and relatively well run should emulate advanced democracies. China should as well, if it wishes to be a richer, more advanced nation, with a greater say in world affairs and a prosperous middle class.
July 21st, 2008 at 11:20 am
@JD who lent you money to be rich? China holding $1.8thrillion your governement bond !!! How shameful you sound! pay off your debt before you are show off your richness!!!
July 21st, 2008 at 11:33 am
@FOARP sorry I am of the track so far; sure let’s talk about growth in China. China is growing and will not stop grow for a long time because Chinese knows being rich is paying your debt off instead of uploading more debt.
July 21st, 2008 at 11:43 am
JD: How shameful you sound. 🙂
July 21st, 2008 at 12:17 pm
@JD =A borrower is claiming that his lender is so poor!
July 21st, 2008 at 2:05 pm
peter xie, take a look at China’s GDP per capita and that of the US, and tell me whose citizens are better off. It’s the US by a factor of 25 and that’s not an opinion. It’s fact.
If you’re arguing that democracy caused a $1 trillion dollar loss, then you’re also arguing that democracy made US citizens 25 times richer than their Chinese counterparts. You’re actually arguing for democracy, not against it. Good for you, you’re on to something important though your reasoning is a bit off.
Still, concentrating the wealth of a nation in to the hands of a few isn’t a great plan and it doesn’t make China rich. High FX reserves aren’t really a sign of success.
By the way, China holds $500 billion US government debt. Japan holds more, $578 billion. Japan holds 10 times more per capita than China. Wow. Is that because of democracy too?
Shameful Wukailong? Sorry if I’m taking advantage of poor peter. Just pointing out how much better off China would be by emulating the most advanced developed nations. I’d like to see China up with the world’s leading nations, not stuck with the lower middle crowd.
July 21st, 2008 at 3:17 pm
@peter xie,
The point of this blog is not to scream and insult each other (or each other’s country). If you want to do that, there are many other websites you can go to. I hope you understand that no one is forced to be here, and your posts will have zero meaning or impact if you keep writing them in this style.
Do you really think JD, FOARP, or anyone else here is being convinced or informed by some of the things that you write? And if they aren’t, what’s the point of writing it?
I do not appreciate or like your recent series of posts, at all. I’ve deleted most of them. You are more than welcome to stay and promote China, or criticize those who think democracy in the United States is the right solution for China right now; other posters, including myself, here have done the same thing and more, and we can use all the help we can get.
But you must do it politely and intelligently.
July 21st, 2008 at 3:20 pm
peter, I’m on your side. Democracy is a good thing: good for the economy, good for development, good for the people. Authoritarianism is a very poor substitute, intellectually bankrupt I would say. Even my mother says its shameful and she doesn’t listen to anyone.
July 21st, 2008 at 3:31 pm
I will follow your rule Buxi. @JD what can I say? it’s a free world if you still feel your democracy is the best; I am looking forward to see how USA under your democracy is going forward; good luck and good night!
July 21st, 2008 at 3:40 pm
@peter,
Thank you in advance for respecting the community.
For a good discussion with doubts about democracy, you might be interested in looking at this thread:
http://blog.foolsmountain.com/2008/06/28/the-chinese-debate-part-2-democracy-and-the-economy/
I think you bring up an interesting point though. The person often credited with running US bank policy, chairman of the Federal Reserve, isn’t democratically elected. Bernanke is probably out soon, but Greenspan was in his position through.. 5, 6 presidential terms?
I think that’s a solution that usually works out best: leave the technical issues to the professionals, away from voters. Imagine if Chairman for the Federal Reserve also campaigned to the public for the position… “Vote for me, I’ll raise interest rates!”
July 21st, 2008 at 5:18 pm
Buxi, I agree with you as well. No need for a democracy to elect every senior government position. As long as the overall system is representative and accountable and politics is left to fairly elected politicians then democratic governance seems to work better than the alternatives.
peter, the long term outlook for the US remains bright. The credit crisis may bring a strong cyclical downturn but business cycles are nothing new, and no economy has been able to eliminate them. I also share the view that China’s future is bright, if it can meet the major challenge of broad political reform. Looking at how democracy could contribute to that future is a useful exercise, and it should be open to broad debate, discussion, and consideration.
July 21st, 2008 at 7:37 pm
@Buxi – On that subject, how independent is the People’s Bank of China from political influence? Here in the UK the independence of the Bank of England is definitely a live issue, since 1997 they’ve been charged with setting monetary policy (before that they were nationalised and acted as a branch of government). However, the governor of the bank is still appointed by the government and they still have to meet the governments inflation target of 2%.
July 22nd, 2008 at 12:35 am
@JD,
As of the 1H08, it’s more like 14 times in difference of per capita nominal GDP. You number is a few years old — the speed of the change kind of corroborates the point I am about to make. If there are any lessons to be learned by China, it should be how the US has arrived at this point, not how it is exactly doing at this point.
Freedom Tower, the tall building to replace the collapse WTC, is currently slated to be erected before 9/11/2011, and that schedule is likely slipping. On the other hand, the rebuilding in China’s earthquake-wrecked zone, will take only 3 years. From an engineering standpoint, the latter should take a lot more efforts, needs a lot more money, and involves a lot more people than the former. It’s not the efforts, money or people that are lacking, it’s simply that the American system doesn’t work any more and the new Chinese system is easily the best in the world today.
If we rewind the clock, passing the Great Society and the welfare state that take personal responsibility and accountability away, the social security system that is bankrupting America, and even the beginning of women suffrage at which the US truly became somewhat a “democracy”, back to 1904…
That was the time when New York City started its first subway line. It signified another great milestone of the ascendant of the US, and NYC. In China, Russo-Japanese war was fought on Chinese land. It was the time Lu Xun famously abandoned his medical study and became a writer.
Almost every single moment in time up to 1979, you can see the comparisons between the US and China that are much like year 1904, sadly to this young Chinese heart years ago I might add. Cumulatively they are the reason why today per capita GDP of China is 14 times smaller than its American counterpart.
Back in 1931, the Empire State Building was built in 11 months. Only very recently China has caught up that speed and efficiency, which the US has long lost, sadly to future Americans I might add.
July 22nd, 2008 at 12:41 am
@FOARP,
The PBoC has zero independency. Its governor is a ministerial post under the State Council. In a way the whole Chinese State Council is like the US Fed or BoE, i.e. they are mostly technocrats not politicians.
July 22nd, 2008 at 2:02 am
@FOARP independence is not the issue; the end result is!
July 22nd, 2008 at 2:11 am
West mind: Good System must bring out good results
Chinese Mind: Good results derives from Good System
So we must agree to disagree with each other.
July 23rd, 2008 at 12:28 am
JXie,
Yes, my number was a bit out of date. For the latest available full year 2007 GDP per cap is about 20 times more for the US than in China. In 1950, US GDP per cap was only about 15 times more than China’s. That’s right, China was relatively richer 60 years ago and has since gone backwards! Chinese minds would say bad results derive from a bad system (thanks peter x) thus the necessity for ongoing reform to a good system. Advanced democracies should be emulated for best overall results.
Currently, China is in catch-up mode as it continues to integrate with the global economy. Of course, with rapidly rising income inequality in China, many of those gains are going to the richest in Chinese society, which is recognized as a major problem by a vast majority of urban Chinese citizens (along with corruption and inflation).
Catching up to advanced economies will become more challenging as the “easy” gains from integration with global markets subsides. China must address the major barriers to growth, including political barriers, if it wishes to continue to catch up to more advanced economies.
(2007 GDP data http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf)
July 23rd, 2008 at 4:21 am
1.Desperate Borrowers are complaiming his Lenders are too poor; why? because the borrwoers are trying to borrow more.
2.JD I have no problem you saying China is still a poor country compared to American; however it is embarrasing that you refuse to accept USA are borrowing hundreds of billions from China.
3.By logics, you are rich; then you should be able to lend others money instead of uploading more debts.
4. Is your American Styled wealth based on hundreds of thrillion debt the real weath? NO, House of Cards!
July 23rd, 2008 at 4:46 am
JD, the world bank numbers use what’s called “atlas methodology”. For currency exchange, it uses 3-year running average. On the other hand, I used the latest currency exchange rate, and the latest data (20% nominal GDP growth in 1H08). China’s running annual GDP now is a bit north of $4 trillion.
The 1950 numbers are as useless as they can get since the exchange rate of RMB that year was a make-believe number. But regardless, the Cultural Revolution certainly set China back. If nothing else, China definitely lost ground to Korea and Japan.
You don’t get the gist of my writing. There are a whole lot China can learn from others especially the US, for both successes and failures, past and present. From my vantage point, I simply don’t believe today’s American system is what China should emulate. Many virtues that propelled the US to the top, often exist in China but not in the US nowadays.
July 23rd, 2008 at 1:07 pm
JXie, I’ll take the World Bank methodology as valid and more suitable for international comparison, particularly when it contradicts a home-made guess. Sure, 1950s exchange rates were approximations but it’s the best available data. Also, don’t forget that China’s exchange rate is still made up today. It certainly it would be much better for China if the RMB were to float and let the market determine the real value.
I agree, however, that details aren’t the big picture. The big picture is China can pick a wide selection of the world’s richest most advanced nations and will consistently find that democracy is an integral part of the most effective, efficient economic systems. If China aspires to be an advanced nation befitting its place as an advanced civilization, it should try to eliminate anything that is comparable with, say, North Korea. The US is simply an example of an advanced economy. Pick EU states if you prefer. The outlook is clear: political reform is key to economic advance, not to mention long-term stability.
peter xie, let me acknowledge that you did an admirable job counting to four. The rest was valuable for comic relief.
July 23rd, 2008 at 11:14 pm
@JD Read my lips
1. Your American wealth financed by Mountain of debts are nothing but HOUSE OF CARDS.
2. Your Political system which resulted more than $1thrillion loss by a few bankers is a corrupted and self destruction system; it’s an insult to the Chinsee intelligence if you think we like to learn from you system.
July 23rd, 2008 at 11:21 pm
@JD, JXie:
I’d suggest you guys re-run your numbers using 1978 as a base. The “post-Opening Up and Reform” China is the China that many of us are supporting and enthusastic about today.
July 24th, 2008 at 12:33 am
@JD, Peter Xie:
While you both are obviously very enthusiastic about your views … sometimes – at least to a third observer – you guys seem to be lecturing at each other. It may be worth the while to change your tone a little more – and aim to discuss more with each other – rather than “lecture” at each other…?
Just my 2 cents.
July 24th, 2008 at 6:11 am
@karma
what woud you do if you are the borrower?
Would you like to show off your wealth before your lender?
July 24th, 2008 at 6:20 am
@Peter Xie
Well … I’d counter with this question: who has the upper hand – the banker or the debtor.
People often jumps to say the banker. But think again… If the debor holds a large part of the Bank’s assets – the debor has tremendous leverage. If the debtor goes bankrupt – so does the banker…
July 24th, 2008 at 6:27 am
@karma
Great answer! Let’s all become the debtors; a nation of debtors; a nation of House of Cards. However; you are are even smarter because you know how to bankrupt your lenders. Good luck good night.
July 24th, 2008 at 6:45 am
My point is: the economies of the U.S. and China are very closely linked – on several levels… If one suffers too much, the other will also…
July 24th, 2008 at 8:09 am
@karma
‘People often jumps to say the banker. But think again… If the debor holds a large part of the Bank’s assets – the debor has tremendous leverage. If the debtor goes bankrupt – so does the banker…’
Mr Karma; are you working for Wall St ? Chcuk Prince will love you….
November 30th, 2008 at 9:01 pm
I am trying to find information on a buddist monestary on a mountian china… my brother was there… all financial records are held there… fu may be the name but my brother said he goes by many names… i need to talk with him… can anyone help me?