[Op-ed] China will rule the world in 30 years!

[Blayne]

Everyone remember that the growth rates that state that China will reach superpower status on par or excess of the US all rely on that the growth rates can be kept up, obviously any major war or sudden recession or domestic strife will have adverse effects on this, though there are arguments to be made that even this might not slow down China for long (the historical precedent being the US Civil War not slowing down US growth by very much) and that the reason for positive assumptions for China's growth rates is because the problems that China has, is, will face are not insurmountable and the same issues that other developing nations will also face.

The best then that can generally be said is that "as long as this continues things may be interesting" essentially.

So essentially what needs studying is "what issues might actually be insurmountable?"

[K. A. Pital]

Everyone remember that the growth rates that state that China will reach superpower status on par or excess of the US all rely on that the growth rates can be kept up, obviously any major war or sudden recession or domestic strife will have adverse effects on this, though there are arguments to be made that even this might not slow down China for long (the historical precedent being the US Civil War not slowing down US growth by very much) and that the reason for positive assumptions for China's growth rates is because the problems that China has, is, will face are not insurmountable and the same issues that other developing nations will also face.

Everyone here relies on the assumption that major war or sudden economic collapse of enormous magnitude does not happen. Major war will lead to bad effects on the economies of many nations.

In reality, actually, a collapse in global economy does not mean China will somehow end up worse than others. It's economy now occupies the unique position of being able to produce both high-tech, high-cost and low-tech, low-cost products.

For example, the economic collapse of the USSR led to the immediate collapse of the Soviet and Warsaw Pact light industry - clothes, sewing, etc. China then swamped the market with cheap clothes and used this as a growth opportunity. In case global demand shifts for cheaper goods (which is rational in a condition of recession), this can actually benefit China.

Domestic industries of other nations can suffer malaise or collapse due to an economic crisis, which is also, surpirisngly, beneficial for China the exporter of goods based on the logic above.

Of course, to a certain extent this depends on China's ability to swiftly re-orient investment from goods that will lose demand (steel, etc.) back to the cheap light industry (clothes, etc.), but to say China does not have such an advantage due to it's mix of export goods that is highly diversified, from computers to raw steel and industrial components to light industry like clothes, etc. is being blind. China is not a one-item exporter, which makes it's exports do surprisingly well even in an atmosphere of global downturn.

[Blayne]

Wasn't the Deng Xiaping reforms already in full swing by the time the USSR collapsed? Ya Tianamin Square was in 1989, the reforms began about a decade before in 1977 between the two dates Chinese GDP had already quad rippled (Paul Kennedy Rise&Fall published 1986ish) I don't think the actual collapse of the Soviet industry actually did much to encourage an already booming Chinese export industry since afterall China was trading with the West already, something that I don't believe the Warsaw pact did very much of except for the traditional grain for hightech stuff trading.

[K. A. Pital]

Wasn't the Deng Xiaping reforms already in full swing by the time the USSR collapsed? Ya Tianamin Square was in 1989, the reforms began about a decade before in 1977 between the two dates Chinese GDP had already quad rippled (Paul Kennedy Rise&Fall published 1986ish) I don't think the actual collapse of the Soviet industry actually did much to encourage an already booming Chinese export industry since afterall China was trading with the West already, something that I don't believe the Warsaw pact did very much of except for the traditional grain for hightech stuff trading.

I am explaining that China's export sector benefitted from an economic collapse so massive that it cut the GDPs of nations involved (WARPAC) by 10-50% in a few years. What is your point?

I don't think the actual collapse of the Soviet industry actually did much to encourage an already booming Chinese export industry since afterall China was trading with the West already

Dynamics of China's trade with Russia post 1989.

In ten years, the foreign trade volume doubled, as did the volume of Chinese exports to Russia; primarly through clothes and other light industry products. After that, China started dominating other collapsed sectors - wood processing, plastics processing (tables, office appliances, et cetera) and now China also came to expand it's export of high-tech goods to Russia.

So quite certainly the economic collapse of the light, heavy and all other forms of industry in Russia boosted the Chinese industry.

[Blayne]

Geez don't be so hostile.

I was saying that the collapse of other nations economies weren't the only reason for China's booming export industry, as i was sourcing that it was already booming by that time.

Also I could say that the Chinese swamping of WSP countries economies with their own produce may not nessasarily because of collapse per se but because the switch to market economies allowed for Chinese products to be imported which due to lower costs & higher quality displaced the domestic market which was inefficient due to its previous command economy.

In short I don't think your quite correct about collapse == chinese increase in exports so much as it was a switch to market economies that finally allowed Chinese exports to compete since trade prior to that I assume was minimal.

Ergo, if China had already been tradign heavily with a nation for a number of years with high trade amount and that trading partner suddenly collapses then the Chinese economy would hurt as exports would drop off as the importee can nolonger import as much.

Thus, if the current world economy collapses that which China is currently maintaining most of its GDP from trade with was to 'collapse' enter a depression etc then their imports from China would probably decrease rather then increase hurting the Chinese economy.

The Soviet-Sino example after 89' is probably one fo those weird exceptions that is only repeatable in nations with high protectionist policies and inefficient GDP intensive manufacturing centers (ie the European Union (based on 20 year old out of date data)).

I'm not trying to contradict you, I'm just contributing to the discussion, we seem to have gotten off on the wrong foot.

[mr friendly guy]

Wasn't the Deng Xiaping reforms already in full swing by the time the USSR collapsed? Ya Tianamin Square was in 1989, the reforms began about a decade before in 1977 between the two dates Chinese GDP had already quad rippled (Paul Kennedy Rise&Fall published 1986ish) I don't think the actual collapse of the Soviet industry actually did much to encourage an already booming Chinese export industry since afterall China was trading with the West already, something that I don't believe the Warsaw pact did very much of except for the traditional grain for hightech stuff trading.

Its a bit more complicated than that. IIRC the student protests in 1989 actually led to weakening of Deng Xiapoing's power as it was the conservative elements which effectively ended it. The next ruler Jiang Zheming was actually listening to the conservatives who threaten to take reforms backwards to what they were used to. For the next few years reform stalled while Deng made moves to put China back on track. He finally succeeded through a few things including visiting his old military buddies who emphatically made a public statement that the reforms must go on. Fortunately most people in the CCP got the message and continued with Deng's reforms.

[Blayne]

When I said Tianamen in 89' was more of a freudian slip, I meant 89' as the date for when the Soviet Union gegan going downhill. The precise political climate doesn't matter in this context that China's economy had already grew 4x in those ten years between the beginning of reforms, and the end of the cold war, the point is that i was just poinitng out that attributing China's growth, or continued growth as a result of the collapse of the WSP and thus that any collapse of any nation could lead to China's benefit I felt was rather slippery.

So to put it in perspective:

1. China's economy was already growing at a fast pace before, during and after, so the collapse of the WSP isn't that much of a factor, it just bandwagoned onto a rising trend.

2. WSP Economies wer very inefficient, so sudden availiablility of cheaper and better Chinese goods was preferable to domestic supply thus the increase in WSP imports from China.

3. If say the US was to collapse which is already doing heavy importing, I do not think that this would help China and thus it is more accurate to say that the economic collapse of nations would only benefit china if they were similar to the USSR.

Protectionist and Inefficient and that said collapse would lead to free trade and openness.

[K. A. Pital]

In short I don't think your quite correct about collapse == chinese increase in exports so much as it was a switch to market economies that finally allowed Chinese exports to compete since trade prior to that I assume was minimal

You see, if there was a competitive domestic production of the goods, the Chinese would not be able to swamp the nation with exports.

But then you go on and say that somehow "inefficiency" is to blame. Do you even understand what efficiency means in context of economics? It's lower costs and greater benefits. In case two simple, low-tech and low-cost products are identical (a shirt sewn by an American, Russian, no matter whom - and a shirt sewn by a Chinese) the shirt sewn by a Chinese will win ALL THE TIME. It's just cheaper - more efficient, then.

This is why Guangzhou is the heart of the world's light industry. This is why Chinese clothes enjoy export to almost any nation in the world and even production itself moves into China. And this is why a clothes factory from another nation can hardly compete - the price of labour, especially in light industry, in China is much, much lower.

Hence my comment about China enjoying a competitive advantage in light industry, which will NOT be negated if some nation gets poorer, because poorer nations tend to look for cost-cutting measures. Even if it harms domestic industry. American light industry is not competitive versus China; neither is European - this is why the outsourcing took it's large toll on this industry, and this is why in case of a crisis, the chinese light industry will be hurt along with all other nation's light industries, but it will DO BETTER because it's more cost-effective, which is especially important during a crisis.

I can't believe you can't wrap your head around this very simple thesis.

You went to compose you own fucking strawman, which was that China's entire growth was due to the collapse of the Warsaw Pact economies; that is WRONG, and you fucking know that I was nowhere near saying that. However, the rise of Russo-Chinese trade from 2+ billion to 8 billion certainly BENEFITED China, while Russian industry collapsed.

[Blayne]

Seriously, thats not what I said and not what I'm trying to say.

What I am saying is that Chinese exports will drop during a world wide recession because demand for those goods will probably drop thus decreasing exports and thus hurting the Chinese export driven coastal economies.

There is absolutely no situation where 'regardless' of the state of the world economy the Chinese economy will automatically keep going at its current rate of change. If the world experiances a recession then the Chinese rate of growth in relation to its export economy will thus slow down.

In relative terms.

Chinese competitive advantages are not universally applicable to 'all' nations that may hypothetically experiance a recession.

Then there's the fact that economies are very complex and tied to various different parts like say banking, slowdowns in worldwide sectors could hurt the Chinese economy in otherways as well.

I of course agree that their advantages does put them in a signfiicant position to be theoretically hurt the 'least' as far as their manufacturing is concerned but there's other factors like global finances and bulk volumn trade.

[Ma Deuce]

You see, if there was a competitive domestic production of the goods, the Chinese would not be able to swamp the nation with exports.

The Chinese wouldn't have been able to swamp those nations with cheap exports if the governments of those nations actually cared about protecting their own light industries rather than the profits of investors and imposed tarrifs of Chinese goods sufficient to eliminate their natural cost advantage. I will not shed any tears if the recent US/EU-China trade spats erupt into a full-blown trade war. Who knows, maybe that will also slay the scourge of globalization once and for all.

[ray245]

You see, if there was a competitive domestic production of the goods, the Chinese would not be able to swamp the nation with exports.

The Chinese wouldn't have been able to swamp those nations with cheap exports if the governments of those nations actually cared about protecting their own light industries rather than the profits of investors and imposed tarrifs of Chinese goods sufficient to eliminate their natural cost advantage. I will not shed any tears if the recent US/EU-China trade spats erupt into a full-blown trade war. Who knows, maybe that will also slay the scourge of globalization once and for all.

Yeah, but at this stage, the light industry in the US and Europe has been reduced to such a extend that they will not be able to gain anything useful out of a trade war.

[Ma Deuce]

Yeah, but at this stage, the light industry in the US and Europe has been reduced to such a extend that they will not be able to gain anything useful out of a trade war.

Except getting our light industry back . Not saying there won't be shortages in the interim, but once we get our own production up and running again, it will have been worth it. An added benefit of forcing people to pay more for domestically (or at least first-world) made consumer goods will be to cut down on rampant consumerism and waste, and therefore CO2 emissions. Sufficient application of nationalist propaganda will also be useful in making people more willing to endure the "hardships" of the transition.

Eventually this is going to happen on it's own anyway. Sooner or later oil prices will inevitably rise again, making international shipping vastly more expensive and gradually eliminating the cost advantages of Chinese labor. We already saw this happen with the oil spike in '08, though that didn't last long enough to achieve any lasting impact. Frankly I'd rather deal with restoring our own light industry at a time when we're not also dealing with energy shortages

[mr friendly guy]

You see, if there was a competitive domestic production of the goods, the Chinese would not be able to swamp the nation with exports.

The Chinese wouldn't have been able to swamp those nations with cheap exports if the governments of those nations actually cared about protecting their own light industries rather than the profits of investors and imposed tarrifs of Chinese goods sufficient to eliminate their natural cost advantage. I will not shed any tears if the recent US/EU-China trade spats erupt into a full-blown trade war. Who knows, maybe that will also slay the scourge of globalization once and for all.

Hang on a minute. In the past you have slammed China for uncompetitive practices like under valueing their currency yet here you advocate one yourself. Seems contradictory. If you are going to say I believe its in the national interest then the same logic can be used by any one else to justify anything including for China to undervalue the RMB.

[Ma Deuce]

Hang on a minute. In the past you have slammed China for uncompetitive practices like under valueing their currency yet here you advocate one yourself. Seems contradictory. If you are going to say I believe its in the national interest then the same logic can be used by any one else to justify anything including for China to undervalue the RMB.

I never slammed their "uncompetitive practices" in and of themselves: They're obviously in China's best interest so it behooves them to have them. What I do condemn is their insistence on "having their cake and eating it too", that is keeping these measures in place while at the same time expecting us to grant them completely unfettered access to our markets (which we currently do for the most part). Every time a first-world country erects some barrier to Chinese goods they scream bloody murder and either retaliate or run to the WTO, even though these barriers are often temporary and less severe than the ones the Chinese already have in place. Fuck, they even have an army of Washington lobbyists on their payroll to pressure the US government to retain trade agreements favorable to China (think Israel is the only country who does this?). The double standard you just accused me of is in fact the one by which China is guilty.

Even so, I admit it may still be necessary to have some tariffs in place in light of China's natural cost advantages which are impossible to offset any other way, even if China did not have any direct barriers in return. Even in that scenario I don't see why it's unreasonable for a national government to level the playing field in favor of it's own producers if the alternative is watching them be exterminated by cheap imports in their home market. If the Chinese can't accept that rationale, then that's their problem and they can do whatever they want about it.

[Blayne]

Tarrifs are a nice source of income (at least according to the Paradox game I play) but are very bad for making businesses competitive, you take away some of the incentive for making a better produce.

Some tarrifs are generally alright as they make money but to raise them to the point to shield your markets from competition I am certain is a recipe for long term disaster.

Next, I'm certain the Chinese would love to import stuff, but I'm pretty sure the things they would buy are on the not allowed to export list.

[Guardsman Bass]

Except getting our light industry back . Not saying there won't be shortages in the interim, but once we get our own production up and running again, it will have been worth it. An added benefit of forcing people to pay more for domestically (or at least first-world) made consumer goods will be to cut down on rampant consumerism and waste, and therefore CO2 emissions. Sufficient application of nationalist propaganda will also be useful in making people more willing to endure the "hardships" of the transition.

Assuming you ever get to that point - and I question whether "sufficient application of nationalist propaganda" will be useful in making people more willing to buy over-priced goods just because you don't like comparative advantage when it comes to international trade. There have been "buy American" campaigns before - remember any of them? I thought so.

What I do condemn is their insistence on "having their cake and eating it too", that is keeping these measures in place while at the same time expecting us to grant them completely unfettered access to our markets (which we currently do for the most part).

That mostly applies to tariffs. The US has plenty of Non-Tariff Barriers, and not coincidently, those started showing up in real force as tariffs were declining.

Even so, I admit it may still be necessary to have some tariffs in place in light of China's natural cost advantages which are impossible to offset any other way, even if China did not have any direct barriers in return.

"Natural cost advantages" (or to be more specific, "comparative advantage" in China's case) are the whole reason we engage in trade in the first place. Since I believe trade actually does have a beneficial role, I don't see trading with a country where it's more efficient to locate certain industries due to cheap labor costs as a disadvantage.

Even in that scenario I don't see why it's unreasonable for a national government to level the playing field in favor of it's own producers if the alternative is watching them be exterminated by cheap imports in their home market.

Because at some point, it's often just much more wasteful and inefficient to keep propping up a series of legacy industries than to actually allow trade to happen. Why don't you ask PRI-Mexico how well propping up various industries and using extensive trade protectionism worked out for them? Or pre-1982 Latin America in general?

[Blayne]

Exactly, another good example (although obscure) is Italian industry in the north in the late 1890's when they entered a tarrif war with France, neither benefited.

[K. A. Pital]

Because at some point, it's often just much more wasteful and inefficient to keep propping up a series of legacy industries than to actually allow trade to happen.

The problem is that unless you happen to have some really good other source of trade than your industrial goods, whatever be they, destroying or downsizing your industries in favour of imports will adversely affect the economy and people's well-being. It will result, essentially, in liquidating the capital for the sake of consumption; not exactly a good practice.

Each nation can either find an internal equilibrium for it's industrial goods, or just sumbit to free trade. In the latter case, there can be no complaints about getting fucked over - because that's what will happen unless you have really, really good items to trade in exchange for the consumer goods that were previously produced inside the nation.

It's the Ricardian paradox all over again - modern industry needs to grow and economy needs to be diverse, not one-sided; if the industrial structure and goods spectrum in domestic production is reduced, that can lead to adverse consequences such as lagging growth or negative growth, in the worst case, economic collapse or partial collapse.

China actually does a pretty good job of diversifying it's industrial production. In the last 20 years they moved from consumer goods to heavy industry, high-tech and various other sectors. This is critical for survivability. On the other hand, nations that primitivized their industrial diversity (like Russia) are doing fuck-badly.

[Blayne]

Well its a case of pro's vs con's, Liberal Free trade vs neomercantalists, free trade would argue that low to no tarrifs, free trade and migratory industries will deepen trade and reduce war by increasing everyones absolute level of wealth, neomercantalists feel the opposite trade should only work to increase your relative wealth in a way that translates to relative economic power which means maintaining and keeping autarkic policies to keep alive your manufacturing base which you need to produce economic hard power.

Under Free trade increased trade and trends to increase globalism are attractive because they represent a global net positive and reduce war and encourage peace, tarrifs will only increase tensions.

China is currently on a neomercantelist trade paradigm their trade is for China's benefit only, it just happens to be the case that free trade paradigm when used in practice greatly benefits them in a neomercantalist way.

If we assume that it is better for the world for the worlds nations to adopt free trade then America acting in a neomercantalist fashion can be considered selfish and threateningly and they adopting mercantalist principles and applying tarrifs would only serve to undermine their ability to act as an example to the world to show free trades suporiority thus reducing China's incentice to play by the rules.

Currently China sees American politizing trade as very threatening and is frustrating to them because objectively they have done a huge effort into investing into playing by the world rules and worlds norms so doing things like vetoing China buying American companies despite offering more money reduces their incentive to continue playing by the very rules America helped to set up.

Hurray for International Relations class

[Guardsman Bass]

Because at some point, it's often just much more wasteful and inefficient to keep propping up a series of legacy industries than to actually allow trade to happen.

The problem is that unless you happen to have some really good other source of trade than your industrial goods, whatever be they, destroying or downsizing your industries in favour of imports will adversely affect the economy and people's well-being. It will result, essentially, in liquidating the capital for the sake of consumption; not exactly a good practice.

That's assuming the replacement jobs that grow in your economy pay less than the old industrial sector jobs. It's true, to some extent, in the US (largely because US industrial jobs tended to have a great deal of unionization and "union threat" driving up average wages there), but is not a universal rule.

There is some concern in terms of trade balance since, unless you're the United States, you can only trade as long as you have the currency reserves to pay for imports (or the ability to borrow to cover them - that screwed Mexico over in the early 1980s after they'd borrowed heavily against their oil reserves and the price collapsed). I could see a situation where a country becomes wholly dependent on imports of a certain good then gets in trouble when it runs out of reserves to pay for the imports, but for most countries it's a trade-off - do you want to spend the money trying to protect certain industries, or put it somewhere more efficient while importing?

As is, in the US's case, I'm not too worried. We have a pretty diverse set of potential export products ranging from manufactured goods to raw materials to agricultural products assuming the dollar loses its current position (where we can actually pay for exports with dollars).

[Blayne]

Well I don't think that Russia is doing that badly sure they're put alot of investment into being an "energy superpower" but it disguises the fact that they have rapidly growing software and electronics industry, a growing technologically advanced industry and then there's heavy manufacturing that you inherited from the Soviets that is renown for technological advanced but world infamous for durability and reliability in the worse climates and regions ever. And agricultural all things that are being dragged along with the growth in the energy and resource production economies.

Russia's position I think is pretty good as long as you can fix your demographic population problems and maybe annex Ukraine or something you have Europes highest rate of engineering and sciences graduates and a highly literate and educated society and I've seen a taste of how hardcore Russian philosophy is on learning the sciences and in every other field of endeavor the standards I've heard are extremely high.

[Guardsman Bass]

I should clarify- I do not think this means the US needs to accept uneven trade bargains ("uneven" in the sense that one party is applying more in terms of tariffs, subsidies, and the like). I just think it is a good thing to trade when you can negotiate away those barriers on a tit-for-tat basis.

[Blayne]

That does beg the question though how uneven actually IS the US-Sino trade relationship? And to what extand can we allow verifable domestic facts about the relative economies allow for some of the factors that make it uneven?

Example Chinese banking is pretty unsteady and is part of the reason why they devaluated the Yuan and are holding onto a massive cash reserve, and even then they ARE allowing it to adjust gradually but then again it is only a minor part of the trade imbalance.

[K. A. Pital]

Well I don't think that Russia is doing that badly

Have you actually examined what happened to the structure of Russia's labour force and industry, which have largely primitivized and centered around the energy and raw resource sectors (that nowadays constitute a far greater portion of Russia's industry than they did in 1991)? You see, Blayne, "I don't think so" is not a valid argument.

That's assuming the replacement jobs that grow in your economy pay less than the old industrial sector jobs. It's true, to some extent, in the US (largely because US industrial jobs tended to have a great deal of unionization and "union threat" driving up average wages there), but is not a universal rule.

It does apply to certain other cases of de-industrialization, however.

As is, in the US's case, I'm not too worried. We have a pretty diverse set of potential export products ranging from manufactured goods to raw materials to agricultural products assuming the dollar loses its current position (where we can actually pay for exports with dollars).

Yeah, I don't think the US industry can just wither overnight, it's very diverse, like any advanced large First World economy. I was just looking at the possible downsides.

[Blayne]

Have you actually examined what happened to the structure of Russia's labour force and industry, which have largely primitivized and centered around the energy and raw resource sectors (that nowadays constitute a far greater portion of Russia's industry than they did in 1991)? You see, Blayne, "I don't think so" is not a valid argument.

Can I honestly ask what I did to upset you? You seem to be taken my posts a little personally, and to answer you I am stating my informed opinion based off of information that I have read, it is obviously not to academic standards and obviously I don't have all the info and thus I am stating it as opinion thus the "I don't think so" which was intended to classify it as opinion.