| |
 Until recently presentations on China at international conferences followed a standard pattern. One Western speaker enthuses about the expected "El Dorado" when all the busy-busy Chinese get around to spending their savings instead of lending them to Americans to spend on Chinese imports, a second Western speaker warns of the looming catastrophe when various competing elements within China set about settling their differences, using their surplus males as cannon fodder, while a Chinese speaker informs us all of the wonderful workings of the Chinese Communist Party (CCP) . This “Alice in Chinese Wonderland” approach to international relations continues to confuse public debate and hypnotise commentators.
With no disrespect to the people of China, I would like to put matters into context.
- The Big Mistake. Asia is the New America, with China limbering up to emerge as the new United States. The analogy is totally false, Asia is not a blank slate for colonials to bend to their will. Significant racial and territorial tensions exist in Asia , with many nations very fearful of China. Significant interstate tensions exist, some of which are manifested in the growing strategic relationships between Japan, India and the US. These developing relationships are directed at balancing China.
- The significance of China’s lopsided population profile is never understood. It is falling long-term, not rising, largely because of the one-child birth control policy. In traditional families sons are breadwinners , female embryos are often aborted, and the male/female ratio peaked at 118 males to 100 females. The last time such a demographic profile arose in China, it led to a significant increase in criminality, regional violence, and eventually the Nien Revolution. China is already a volatile and violent society, as we have seen last year on China’s western flank but much of it goes unreported.
- China has another problem, courtesy of the one-child birth control policy. The phrase “four, two one” describes it. Four grandparents, two parents depending for an income on (frequently) one male grandchild in an upside-down pyramid. On the macro-economic scene, China’s recent burst of growth puts it on target to become the first developing society to become old before it gets rich. Peasant China could - after a fashion - support its population. Will developed China be able to do the same, without the skilled pool of workers it has chosen to forego?
- The path of development depends on growing a pool of educated flexible workers. China won’t get away with its choice of shrinking its pool of productive workers. The one-child policy is a latterday version of Mao’s decision to put university professors to work in the fields. China will not have the workforce and infrastructure in the short to medium term to match the US lead in economic and military power.
- The “rose tinted specacles” assumption that the Chinese communist leadership is allowing some kind of velvet revolution linking market reforms with lighter touch rule from the centre does not stand up either. As an article in the journal Foreign Affairs explained " The Communist party leadership no longer sees the pursuit of further market -oriented reform as being in its interest. ... growth today is explicitly led by the state, fuelled by investment by state-owned entities, and accompanied by powerful regulatory steps meant to ensure the state's dominance of the economy - all measures that contrast sharply with prior reforms... “ Something much worse than Tianamen Square could happen tomorrow if a serious threat to communist rule emerged.
- China is making itself more “overseas investor-friendly” according to the rose-tinted spectacles school of thought. Not recently, it isn’t. In simple terms doing business as a private company in China is becoming more difficult as the Communist leadership attempts to maintain its power, promoting growth through state intervention and control, and minimising real market reforms. Anyone who doubts that such policies (and particularly the control of the CCP) are likely to continue should read Prisoner of the State The Secret Journal of Chinese Premier Zhao Ziyang, reviewed in The Irish Times by Clifford Coonan on June 4, 2009.
- Increased Chinese consumption will replace American consumption returning some measure of growth to global economic activity. Nominally this seems to make sense particularly if China's rise is seen as inexorable. It's savings ratio is clearly very high and its level of consumption is clearly very low, when compared to other countries in Asia and to the West. However a high savings ratio (and a low consumption ratio) occurs when people are focused on saving for old age. In simple terms, until China has put in place significant state resources in health care and other age related issues, the Chinese will continue to maintain a high savings ratio, and therefore the expectation of them consuming more to help China's economic development (and that of the world) is incorrect.
Time to put away the funny glasses. A more nuanced view of Chinese consumption, and particularly of where recent economic growth (after the onset of the Great Recession) is coming from, reinforces the concerns in this area. The current recovery in China is being almost fully driven by investment, a huge amount of which is going into areas with excess capacity already, and expanded credit creation. As the Economist has put it: "China's recent efforts to boost domestic spending have helped to maintain robust growth and reduce its trade surplus. But excessive levels of investment are not a recipe for sustained rapid growth. Unless it is prepared to embrace difficult structural reforms and to allow the yuan (the Chinese currency) to decline, China's commitment to rebalancing will remain half- hearted. In the long run that would be bad news for China itself as well as for the rest of the world." [ Rebalancing the world economy: China The spend is nigh, The Economist, 1 August 2009.]
Therefore focusing on only three of the major issues facing China (weak demographics, continued CCP control with an absence of real reforms, and difficulties in generating increased demand) leads me to the conclusion that the inexorable rise of Asia in general, and China in particular, is anything but guaranteed.
I am not alone in this view.
A review Future Imperfect in Survival the bimonthly Journal of the international Institute for Strategic Studies reviewed three books looking into our likely future in the 21st century : The Next 100 Years: a Forecast for the 21st Century, by George Friedman .New York: Doubleday, 2008; Global Catastrophes and Trends: the Next 50 Years, by Vaclav Smil, Cambridge, MA: the MIT press, 2008; What Next? Surviving the 21st Century, by Chris Patten, London: Allen Lane, 2008.
The reviewer, Sara Robinson (an American social futurist) after highlighting their major differences, observed that they all agreed in one area: " all three authors share serious reservations about China . Friedman, taking a long view, points out that there has always been a sharp political divide between the coast, where the country's population and economic life are concentrated, and the rural inland areas, where its food is grown. For a variety of reasons related to the current economic expansion (which all three agree is unsustainable for more than another decade or so) and the burden the one-child policy is putting on rural men (who must care for ageing parents alone, often without a wife), this historical split may be due to open once again.
Smil , who has lived in China and has written several books on it, elaborates much further on China's demographic anomalies, which leave it dangerously overstocked with young men and the elderly. He also describes the country's growing deficits in water, arable land and ‘ the power of ideas’ (the innovative capacity that will help the Chinese solve these problems). Patten, who also has extensive knowledge of the country, agrees with Smil, pointing out that the post-Mao Chinese leadership is operating without any kind of coherent ideology to guide either foreign or domestic policy ... At the same time, the Chinese are tolerating levels of inequality at home that are unsustainable in an industrialised country, which could in time lead to the kind of unrest Friedman forecasts."(Patten, the last British governor of Hong Kong, is also the author of the reforms of the RUC which resulted in the formation of the PSNI. He also served as a minister at the Northern Ireland office in the run up to the Anglo-Irish agreement in 1985.)
China is a great country, with a glorious history and a very attractive culture. However that does not necessarily mean that it is destined to take over the world any time soon. We need to look closer to home for answers to the current economic problems.
See also:
Richard Whelan is a commentator on international affairs. His website is www. richardwhelan.com.
|
|
