Will this be the Chineese Century?

[BlkbrryTheGreat]

Is this the Chineese Century?

This is the Chinese century
William Rees-Mogg
America may believe it is still at the heart of events, but the future is being shaped on the margins



THE 18TH and 19th centuries were the British centuries, in which industrial, political and imperial development in Britain shaped the world. The 20th century was the American century; the United States changed the world, providing a margin of victory in two world wars, and developing all the major new technologies: telephones, automobiles, television, jet aircraft, the internet and so on. We all assume, as Washington undoubtedly assumes, that we are still living in the era of American hegemony, though it is already clear that China may be an emerging superpower.
I think that we may be missing an idea familiar to economists, which was developed in the second half of the 19th century. That idea is “marginalism”. It is one of those concepts universally accepted by professionals, but little understood outside. All that the “marginalist revolution” really amounted to was the recognition that economic change is determined by what happens at the margin of transaction. The extra apple sets the price for all apples; if there is one apple short, all apples cost more; one surplus, and they all cost less.



The most popular explanation is Mr Micawber’s: “Annual income £20, annual expenditure £19 19s 6d, result happiness. Annual income £20, annual expenditure £20 0s 6d, result misery.” Mr Micawber was an economist of the marginalist school.

Clearly, the United States is still by far the largest and most powerful economy on earth, with the most powerful defence technology. Yet it is China, not the United States, that is changing the global economy.

As a producer, an exporter and as an importer, the growth of the Chinese economy is changing the marginal levels of global supply and demand. Over the weekend I was reading many forecasts by eminent economists of the world economy in 2005. I was also listening to similar forecasts on television, including CCTV International, the Chinese 24-hour news service. The unanimity was astonishing, as one buzzed from channel to channel, subject to subject, and economist to economist.

What is the prospect for the dollar? That depends on China. The euro? China. The oil price? China. Industrial commodities? China. Global equity markets? China. Bond prices? China. World trade? China. World growth? China. In each case, forecast was not based on the absolute size of the Chinese economy, which is still much smaller than that of the United States. The forecasters, looking at their different markets, were all convinced that marginal changes attributable to China would be the decisive factor. That and low Chinese costs.

Some of the figures I found quite unexpected. In the past two years the growth of Japanese exports to China has accounted for 80 per cent of the growth in the Japanese economy. If one measures world trade, the United States and China together account for half of the growth. That certainly makes the United States and China the engines of growth for the whole world economy; by comparison, Europe is a miserable slowcoach. Yet China’s economy is growing at twice the rate of America’s.

In the past 30 years the whole Asian economy has averaged growth which was 3 per cent higher than the rest of the world. China is outperforming the rest of Asia.

On Saturday all the quotas on textile imports were lifted by the World Trade Organisation. This will be an extraordinary opportunity for Chinese textile and clothing manufacturers. Their current share of the US market is about 17 per cent; that is expected to rise to 50 per cent. China’s share of the European Union market is expected to rise from 18 to 30 per cent. We already buy Chinese toys; we shall soon all be wearing Chinese clothes.

Yet China is not content to remain as a producer of low or middle-technology goods. As the purchase of IBM’s personal computer division shows, China is equally a competitor in areas of advanced technology. China has an educational system designed to produce scientists and technologists for the 21st century. Except at the very highest university level, Chinese scientific education has outpaced that of Britain.

China is not only a highly successful exporter, but has also become a very large-scale importer, both of oil and raw materials and of goods from other Asian countries. In Asia, China is a net importer, not only from Japan, but also from other neighbouring Asian countries. Japan also has the benefit of being a major investor in the development of Chinese industry. The big surplus in China’s trade is with the United States, and the surplus in trade with Europe is expected to grow.

In 2008 the next Olympic Games will be held in Beijing. That will be a celebration of the development of China both as an economic power and as a major power in international affairs. There is, inevitably, a long way to go. Deng Xiao Ping’s free-market reforms were initiated only in 1978.

No less than 60 per cent of the Chinese population still works on the land, at low wages and usually with peasant levels of productivity. Yet that gives an indication of the reserve of manpower that still remains to be brought into the modern economy. The Chinese economy probably still has another 25 years of high growth ahead of it. Before it reaches full maturity, the Chinese economy will be a multiple of its present size.

My own optimism is not only based on the growth of the economy, though that is the outstanding economic growth record of the past two decades. China has also understood the important of domestic and international freedom of trade and the need for the best possible relations with trading partners. With direct material and financial support, China has been one of the large contributors to the relief of the Indian Ocean countries after the tsunami disaster. The economic maturity of the new China has been accompanied by increasing political maturity. That is the best guarantee for the future of what is beginning to look like the Chinese century.

[Chmee]

The Chinese are in a race. On one side, they have strong economic growth that is creating a new elite class of the super-rich, and a middle class of affluent young professionals and industrial laborers.

On the other side, they have most of the country -- dirt poor, jobs in state-supported factories and cooperatives disappearing, social services and basic health care disappearing.

What happens when you have a small, rich elite and a large, poor, hopeless peasant class? Gee, you think China of all places would remember the answer to this one.

[BlkbrryTheGreat]

Last I heard, the Chineese middle class had risen to around 200 million.

[Chmee]

Last I heard, the Chineese middle class had risen to around 200 million.

Leaving a mere billion dirt-poor peasants with pitchforks? (Who provide the bulk of the manpower in the Red Army, I presume.)

[MKSheppard]

What happens when you have a small, rich elite and a large, poor, hopeless peasant class? Gee, you think China of all places would remember the answer to this one.

Hopefully we have a plan for when China fractures into warlordism, to
take out their ICBMs...

[BlkbrryTheGreat]

Last I heard, the Chineese middle class had risen to around 200 million.

Leaving a mere billion dirt-poor peasants with pitchforks? (Who provide the bulk of the manpower in the Red Army, I presume.)

True- however, the Chineese economy is still growing at a very rapid rate, and shows no sign of slowing in the immediate future. As long as things keep getting better, rather then worse, I see no reason for rebellion/civil war to errupt.

[BlkbrryTheGreat]

What happens when you have a small, rich elite and a large, poor, hopeless peasant class? Gee, you think China of all places would remember the answer to this one.

Hopefully we have a plan for when China fractures into warlordism, to
take out their ICBMs...

One would think so, however this does beg the question- why do you think it is inevitable that China will fracture into warlordism?

[Stormbringer]

What happens when you have a small, rich elite and a large, poor, hopeless peasant class? Gee, you think China of all places would remember the answer to this one.

Hopefully we have a plan for when China fractures into warlordism, to
take out their ICBMs...

One would think so, however this does beg the question- why do you think it is inevitable that China will fracture into warlordism?

One would presume that he believes that because China has a fair amount of regional economic disparities as well as regional cultural differences other such issues.

[brianeyci]

The real question will be whether the central government can stem corruption. I saw a CBC documentary where local officials appropriated hundred thousand (or million can't remember) dollars meant for an orphanage which was painstakingly raised on national television throughout the country because the orphanage didn't have a permit, and then themselves built an orphanage (with a permit of course) so that they could solicit donations from Westerners and tourists and get rich. The central government didn't do shit, even though they could have easily went in and arrested everybody for the scam. Who suffers? The peasents and the orphans. It broke my heart watching all those kids cry.

How can the central government reign in corruption when doing so might bring the whole system crashing down on their heads? This is the problem facing China, and I'm not sure its solvable under a communist regime.

Brian

[Chmee]

The real question will be whether the central government can stem corruption. I saw a CBC documentary where local officials appropriated hundred thousand (or million can't remember) dollars meant for an orphanage which was painstakingly raised on national television throughout the country because the orphanage didn't have a permit, and then themselves built an orphanage (with a permit of course) so that they could solicit donations from Westerners and tourists and get rich. The central government didn't do shit, even though they could have easily went in and arrested everybody for the scam. Who suffers? The peasents and the orphans. It broke my heart watching all those kids cry.

How can the central government reign in corruption when doing so might bring the whole system crashing down on their heads? This is the problem facing China, and I'm not sure its solvable under a communist regime.

Brian

That's the race I'm talking about. The economy is ready to change, but the government, corrupt at the local level and rigidly repressive at the national level, doesn't show an ability to adapt with nearly the same pace. Look at what a close thing it was for the Soviet/Russian government to give up power without a national bloodbath. Could be far worse in China when push comes to shove.

[Admiral Valdemar]

China's NBC weaponry will remain in capable hands, there wasn't any fear over Pakistan selling out to terrorists and China won't produce that mistake either. There may be warlordism, China's history is full of it. When you have a nation that big, it's hard to keep tabs on all that goes on. It's somewhat easier now with the gov't practically capitalist despite their stance as pure communists, but with the first self-made billionaires appearing (bare in mind, these guys came from farming in muck to building skyscrapers; there was no heritage factor) there is more economic interest.

That could mean a change. The nation could embrace this new level of prosperity and transform the country from a peasant land to a thriving community of first-world citizens. Or, alternatively, it could keep the wealth in the elite sector and feed the military and private industries that enjoy this newfound wealth.

China will have a big impact on society though. The recent surge in resource gathering already affects oil prices and more besides.

[Chmee]

China will have a big impact on society though. The recent surge in resource gathering already affects oil prices and more besides.

They're sucking up raw materials of every kind ... Australia is practically their private ore hopper these days ....

But they didn't go straight from farming in the muck to skyscrapers ... more like building tanks to skyscrapers, half the industrialists are retired (or not even retired) generals and party apparatchiks who converted their insider inflluence into dollars (or something more valuable these days ... Euros). I'm not sure how much bigger the actual elite is in China, it's just that the existing military-political elite is now fabulously richer than they were 20 years ago thanks to the wonders of free-market capitalism.

[Darth Wong]

That's the race I'm talking about. The economy is ready to change, but the government, corrupt at the local level and rigidly repressive at the national level, doesn't show an ability to adapt with nearly the same pace. Look at what a close thing it was for the Soviet/Russian government to give up power without a national bloodbath. Could be far worse in China when push comes to shove.

It's hard to predict, but one should keep in mind that the slow pace of change might not necessarily be a bad thing. Overly rapid change can lead to destabilization and a backlash.

[Chmee]

That's the race I'm talking about. The economy is ready to change, but the government, corrupt at the local level and rigidly repressive at the national level, doesn't show an ability to adapt with nearly the same pace. Look at what a close thing it was for the Soviet/Russian government to give up power without a national bloodbath. Could be far worse in China when push comes to shove.

It's hard to predict, but one should keep in mind that the slow pace of change might not necessarily be a bad thing. Overly rapid change can lead to destabilization and a backlash.

Agreed. I'm just saying that for 50 years they've had a billion peasants sweating & sacrificing for the glory of a future worker's paradise .... and noww those billion peasants are sweating and sacrificing for what? General Chang's summer house in Florence and his collection of Bentleys? When that becomes the general belief of those billion peasants, the moral and ideological authority of the Party vanishes, and they govern through only brute force. They either reform or get overthrown, that's the race.

[Admiral Valdemar]

The race may quicken depending on how the world stage evolves. Much of the Far East is industrialising now to the point that it's using resources and producing the waster Victorian England was years ago. The tsunami notwithstanding, there are plenty of other areas of growth out there that China obviously wants to outdo.

The biggest threats are the US, EU and Japan economically speaking, not that they can do anything without us, yet.

[Stravo]

I wonder if a future crisis out there where for instance Australia and other western powers deny China the raw materials they are devouring up right now for a variety of reasons would spur China into a more aggressive stance as a nation in order to find their energy and resource needs elsewhere.

[Chmee]

I wonder if a future crisis out there where for instance Australia and other western powers deny China the raw materials they are devouring up right now for a variety of reasons would spur China into a more aggressive stance as a nation in order to find their energy and resource needs elsewhere.

Look what happened when the U.S. put an embargo on raw materials sales to Japan during their ravenous expansionist period.

[Illuminatus Primus]

I wonder if a future crisis out there where for instance Australia and other western powers deny China the raw materials they are devouring up right now for a variety of reasons would spur China into a more aggressive stance as a nation in order to find their energy and resource needs elsewhere.

The Chinese won't do shit for awhile. They can't nab the oil thirty miles off their coast due to these little things called Carrier Vessel Battle Groups.

[Chmee]

I wonder if a future crisis out there where for instance Australia and other western powers deny China the raw materials they are devouring up right now for a variety of reasons would spur China into a more aggressive stance as a nation in order to find their energy and resource needs elsewhere.

The Chinese won't do shit for awhile. They can't nab the oil thirty miles off their coast due to these little things called Carrier Vessel Battle Groups.

I know you're exaggerating, but I doubt we're going to bring any CVBG's within thirty miles of the Chinese coast during a period of heightened tension with the cloud of Exocets and Silkworms they'd toss at us. If only one percent got through they still get a huge win on the trade-off.

[Illuminatus Primus]

I know you're exaggerating, but I doubt we're going to bring any CVBG's within thirty miles of the Chinese coast during a period of heightened tension with the cloud of Exocets and Silkworms they'd toss at us. If only one percent got through they still get a huge win on the trade-off.

Those sites get demolished by USAF's bombers and AEGIS is still highly functional, I assure you.

[Stravo]

What's to stop the Chinese from going inland, say India? They may not be able or want to tangle with the US but they don't have to. Seizing India and maybe parts of Siberia would be just as good for them in terms of getting some access to raw materials.

[SirNitram]

What's to stop the Chinese from going inland, say India? They may not be able or want to tangle with the US but they don't have to. Seizing India and maybe parts of Siberia would be just as good for them in terms of getting some access to raw materials.

Last I checked, India had nuclear deterrent.

[Illuminatus Primus]

That's easy. Nuclear-tipped ballistic missiles. And the better Russian Army and Air Force in the case of Siberia.

[Chmee]

I know you're exaggerating, but I doubt we're going to bring any CVBG's within thirty miles of the Chinese coast during a period of heightened tension with the cloud of Exocets and Silkworms they'd toss at us. If only one percent got through they still get a huge win on the trade-off.

Those sites get demolished by USAF's bombers and AEGIS is still highly functional, I assure you.

Aegis rocks out in the middle of the Gulf when you've got a few piddly Iranian launchers to worry about, no way they're parking the Lincoln that close to the Chinese coast with a nearly inexhaustible supply of antiship missiles can be brought into play, never mind the much simpler anti-carrier solution of a tactical nuke from an SLBM launched a thousand miles away. Yeah, we counterstrike the sub and it's toast, but that doesn't save the battle group.

[MKSheppard]

Aegis rocks out in the middle of the Gulf when you've got a few piddly Iranian launchers to worry about, no way they're parking the Lincoln that close to the Chinese coast with a nearly inexhaustible supply of antiship missiles can be brought into play

Moron. AEGIS was designed to deal with the SOVIET BACKFIRE SWARM,
and now that every single carrier escort has AEGIS thanks to the endless
ARLEIGH BURKE SWARM, you just switch the system to AUTO and let
it shoot them all down.

never mind the much simpler anti-carrier solution of a tactical nuke from an SLBM launched a thousand miles away. Yeah, we counterstrike the sub and it's toast, but that doesn't save the battle group.

Idiot. Try finding a CVBG in the middle of the ocean, and you don't have
an inkling of US nuclear doctrine. Look at my SIG to see what it is.

A Chinese tactical nuke would be met with the total annihilation of China.