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China
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| Shakka |
An interesting article about China. More economic than political, but there are certainly political undertones.
| quote: | The Chinese dragon -- blowing smoke and manufacturing mirrors
Lawrence Solomon, Urban Renaissance Institute
Financial Post
September 26, 2005
CREDIT: Associated Press, Vancouver Sun files
Rubble marks the site of the town of Wushan on the Yangtze River, demolished before the water of the Three Gorges Dam reservoir rose over it. The town's citizens were among a million displaced by the vast hydro project.
China is a Third World country -- poor, backward apart from the odd showcase city, and, all told, an economic failure.
Those who see in this tyranny of 1.3 billion as an economic powerhouse that may soon overtake the West don't realize that this dragon has been blowing smoke and manufacturing mirrors.
Over the course of a month-long visit to China's interior this summer, travelling by train, bus and boat, I saw a land little changed over the centuries. Back-breaking agriculture dominates in the countryside -- almost no draft animals, let alone tractors or other mechanized farm vehicles, were in evidence. Even in cities, the reliance on human labour was startling. In Chongqing, a mountainous municipality of 32 million, some 200,000 porters with strong backs carry the bulk of the municipalities' goods on foot, at the end of bamboo poles.
Yes, China does have awe-inspiring cities and yes, Chinese manufactured goods do flood world markets. China's GDP, depending on the measurement used, now places the country's economy as the world's seventh- or even second-largest.
But focusing on the few gleaming cities that command and control the nation's wealth, and on the cheap-labour goods that leave the country's shores, blinds us to the dumb dragon that is China.
This is not a newly industrialized country with immense technological prowess, but a country of peasants and manual urban labourers such as the bamboo-pole porters.
China's per-capita income of $1,269 US places it 110th in the world, according to the International Monetary Fund, just below Angola and the Republic of the Congo. The economy of Kazakhstan produces, on average, more than twice as much per person as does that of China; the economy of Belize more than three times as much; the economy of Gabon more than four times as much.
Those who are in thrall of China's economic success -- the OECD last week joined the ranks with an upbeat assessment -- should first pay obeisance to that of the Belizian and Gabonian. Those governed by the People's Republic of China cannot be characterized as businesspeople, or entrepreneurial, or innovators. Only as numerous.
Much is made of China's sustained economic growth since Mao's death, and in this there is much truth -- the country has climbed a great deal, out of a deep hole. Mao had sunk the Chinese economy to a historic low, a mere 4.5 per cent of the world's GDP in the early 1970s, down from 12 per cent or so in 1900 and as much as 33 per cent in 1820, according to a 2003 OECD study.
A dictatorship less destructive than Mao's reign of anarchy could take the country far, and it did. Today, after 25 years of relative order during which millions became factory workers rather than mere political pawns, China's share of world GDP has climbed to its 1880-90 levels.
China's share of world GDP may continue to climb, but the country is unlikely under dictatorship to become an economic powerhouse in our information age. This is a country of hard-working but ignorant souls, isolated from the world, kept in the dark about their own history, frightened because there is no rule of law, and insecure because there are no property rights.
Financial markets cannot function inside China because information cannot flow freely. Neither can businesses invest without securing political protection. Neither can researchers in universities and elsewhere perform useful R&D.
In this business environment, China can only pump out more product from factories copying developed-country creations, invest the outsized share of its savings abroad, and hope that foreign investors will keep coming in large enough numbers to maintain growth and job creation, and keep the country from imploding.
That will be no easy task. To keep a lid on its unemployed -- estimated at 20 per cent of its work force -- China tries to keep its population put by punishing migration to the cities. Peasants who leave their land without permission to relocate have it seized without compensation. In the cities, they lose rights to health care and education. Nevertheless, the peasants come in search of work, and in large numbers.
The estimates of those who left the rural areas and who now roam the nation looking for work range between 100 million and 200 million people.
Many migrants did not leave their homes voluntarily, but were driven off, with little or no compensation, to make way for hydro dams (the Three Gorges dam alone has displaced more than one million people to date), golf courses (some displace tens of thousands of residents), and other development schemes cooked up between government officials and their friends.
To maintain order, China regularly parades its military through the downtowns of cities, along with other police-state reminders for the populace. Even university students must pass through security checkpoints to gain entrance to their campus.
Despite the authoritarianism, disorder pervades. On two occasions, I saw civilians being taken away in handcuffs. On two other occasions, I saw what appeared to be corpses on the street.
Outside railroad stations in major cities, seas of migrants camp out. Beijing alone has a government-estimated "floating population" of four million migrants, many of whom sleep out in the open.
The government's security minister acknowledges 74,000 demonstrations and riots in 2004, up 27 per cent from 2003 and 700 per cent from 10 years ago. Some are by those who were evicted from their lands; some are by victims of corruption; some are by secessionists in Muslim regions; some are by urban workers fired by employers capitalizing on the cheap pool of illegal migrants.
China's Communist party is unlikely to risk a Russian-style perestroika, which led to the collapse of the Soviet empire. China's leaders cracked down hard when students demonstrated in Tiananmen Square in 1989.
The fall of the Berlin Wall later that year, followed by Ceausescu's grisly overthrow in Romania, confirmed for the Chinese government the need to ruthlessly quash dissent, lest its leaders meet the same fate.
China's leaders will not meaningfully liberalize the economy to keep popular unrest at bay. Yet without an opening up, the dragon economy that many dread will live in an imagined, not a real, world.
Lawrence Solomon is executive director of Urban Renaissance Institute in Toronto.
© The Vancouver Sun 2005 |
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| St_Andrew |
Sounds like someone who went to china and thought it would be like north america, just a litle bit poorer. Obviously China has some huge problems, not only with poor ppl but with human rights issues.
However, I read somewhere that china very soon will have more middle classers than the US or EU.
Also, "China's per-capita income of $1,269 US places it 110th in the world, according to the International Monetary Fund, just below Angola and the Republic of the Congo. " is missleading since it is the nominal GDP, not the puchasing power. GDP per capita (PPP) is $5,642 for mainland China. |
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| Shakka |
| quote: | Originally posted by St_Andrew
Sounds like someone who went to china and thought it would be like north america, just a litle bit poorer. Obviously China has some huge problems, not only with poor ppl but with human rights issues.
However, I read somewhere that china very soon will have more middle classers than the US or EU.
Also, "China's per-capita income of $1,269 US places it 110th in the world, according to the International Monetary Fund, just below Angola and the Republic of the Congo. " is missleading since it is the nominal GDP, not the puchasing power. GDP per capita (PPP) is $5,642 for mainland China. |
Thanks for clarifying. I just posted it b/c I thought it was interesting. ;) |
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| MrSquirrel |
Kinda reminds me of an interesting interview I saw on Charlie Rose last week with the Finance Minister of India.
He was amazingly honest about the problems his country faces, as well as commenting on their economic growth, especially in comparison to China.
MrS |
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| Yoepus |
interesting article. I disagreed with most the author's premise, but a good read none the less. Stimulates the mind.
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I beleive the author is primarily wrong because he doesn't consider the effect western business and governments will have on China as its economy is forced to be more intertwined globalization. |
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| rupert |
The article while correct in reporting facts falls over dead when it comes to making assumptions and implying conclusions about what China represents.
An article in a similar vein was written a few years ago in Foreign Affairs called Does China Matter? which implied that China is far from being 'a player' which can be read at:
http://www.dushkin.com/text-data/ar.../25573/body.pdf
Many of its assumptions were dismantled in this working paper:
http://rspas.anu.edu.au/ir/working%20papers/03-1.pdf
The West is seriously complacent about the economic threat that comes from countries like China. They have lower costs of labour and lower costs of capital and they have critical mass behind them. The days of the West or Japan shifting out of 'sunset industries' to move into new industries IS OVER. The days of productivity and innovation saving the Wests bacon are finished, Indians and Chinese use the same technology, can read the same journals and can produce at a fraction of the cost. Which is why the big Western firms want to locate their.
The article compares the GDP per capita of China with the USA implying there is no real comparison BUT that is why China is such a deadly danger to the living standards of the middle and lower classes in the West. Every year they churn out hundreds of thousands of university graduates who will not be content with working on the assembly line and Western corporations will oblige them with work to take advantage of the fact they are cheap. Competition is such that their is no threat of wage inflation. Many people in China still live on $2.00 per day and have a contingent workforce of about 100 Million so China and India can compete in both the low cost stuff and the high tech stuff.
Put simply the West is overpriced, overpaid and uncompetitive.
For a very good assessment of how China's growth will affect American business see:
http://www.businessweek.com/magazin...49/b3911401.htm
Goldman Sachs did an assessment of what the global economy could look like at 2050. It makes for interesting reading about China's economic future as well as that of India, Russia and Brazil:
http://www.gs.com/insight/research/reports/99.pdf
Already at this very point in time, China a country with a vast mass of desperately poor people is paying for US consumption by buying the treasury bills which pay for the US budget deficit. The US consumer cant afford the crap they buy or the mortgages they take out so the Chinese recycle the money they get from the sale of the crap to allow the US consumer to buy more crap. All the while the US becomes more uncompetitive and more into debt and the dollar comes ever closer to complete collapse. Eventually the debt bubble is going to burst.
For an excellent and influential article written on the sustainability of the current arrangements see the article by Roubini and Setser:
http://pages.stern.nyu.edu/~nroubin...-Imbalances.pdf |
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