It was significant but not astonishing news last week that China has eclipsed Japan as the world’s second-largest economy
More surprising is that the great economic strides have given rise to uncertainty about China’s prospects.
Can China hope to maintain its torrid growth, avoiding more of the social upheaval hinted at when sporadic riots broke out among furloughed factory workers during the Great Recession? Can a traditionally frugal 5,000-year-old society transform itself into a consumer economy like the U.S.? Or will continued reliance on exports culminate in the economic stagnation endured by Japan these past two decades?
And will the world, assessing a Chinese economy forecast by many experts to equal that of the U.S. by mid-century, increase pressure on China to adopt human-rights, trade and environmental policies more aligned with the community of nations?
Two rather startling things stand out in China’s remarkable progress — which, gushing reports to the contrary, has not been an overnight phenomenon but has arisen from from economic liberalization policies in place for three decades.
The first is that the two most recent economic superpowers of modern history, Britain and America, were democracies even in the earliest, most raucous points in their growth trajectories. By obvious contrast, China is an autocracy. That makes its evolution a dicey experiment in sustainably concentrating power in state planners lacking electoral legitimacy.
Arguably, only that autocratic model could enable China to so rapidly slip the bonds of centuries of deprivation, creating a middle class, of about 300 million people, equal to the entire population of the U.S. As Forbes recently said of Chinese President Hu Jintao: “Hu can divert rivers, build cities, jail dissidents and censor the Internet without meddling from pesky bureaucrats and courts.” But how long can that model hold, given the tendency in human nature for personal liberty to follow on the heels of prosperity?
The parallel with sudden radical change in the Middle East and North Africa is ominous. In the past dozen years, China has built 20 universities meant to emulate the Massachusetts Institute of Technology (MIT). Doing something similar Egypt raised expectations of prosperity and social sophistication among a new generation skilled at overturning an old order of cronyism that provided neither sufficient jobs nor enlightened governance.
The other oddity is the divergence of perspectives on China’s dramatic transformation held by Westerners and Chinese.
The West variously regards China as an emerging economic and possibly hegemonic threat. The most popular Western tome on China these days is Martin Jacques’ When China Rules The World: The End of the Western World and the Birth of a New World Order.
Even Western admirers using China as a cudgel to jolt America out of its comparative complacency make the Middle Kingdom out as a fearsome juggernaut.
“China has a national economic strategy, designed to make it, and its people, the economic powerhouse of the future,” says U.S. economist Robert Reich. The reason “China is eating our lunch” is that America lacks such a strategy “designed to create more and better jobs. We have global corporations designed to make money for shareholders.” Corporations which a progressive like Reich demonizes as off-shorers of jobs and exhibiting the patriotic impulses of a tree stump.
Yet China’s own self-regard is one of near-inferiority.
Partly this is a ruse. Beijing’s time-honoured method of ducking out of global responsibilities is to plead continued third-world status. China wants the world to know it’s still home to the world’s largest poor population, numbering about 1 billion people. And on a per-capita basis, China insists, it is far less egregious a culprit in global warming than Western nations.
It is true that per-capita income — the traditional measure of standard of living — has China on par with Albania. Its per-capita income of $3,744 (U.S.) compares with America’s $45,888 and Canada’s $47,132.
It’s also true that at a similar stage in Japan’s miracle postwar economy, brand names like Sony and Toyota had achieved global status. And by the 1980s, Western firms outclassed by Japanese rivals began emulating Japan’s “just-in-time” method of controlling inventory costs, and kaizen, or “continuous improvement,” possibly the greatest cure for corrosive complacency yet invented. No such Chinese model is copied elsewhere.
“In the 30 or more years since reform began, there’s still the undeniably awkward fact that China still has yet to produce an enterprise with truly global influence commensurate with China’s rising power,” complains Robin Li, CEO of Baidu, China’s top Internet search firm. “This is really an abnormal phenomenon.”
The likes of General Electric Co., IBM Corp., Apple Inc. and McDonald’s Corp. are exporters not just of goods but of the cultural norms of their homelands. So is Canada’s Research in Motion Ltd., whose BlackBerry smartphones are now well-received in Asian and European markets.
But so far there is no Chinese equivalent to Finland’s Nokia Corp., Germany’s Siemens AG, or Canada’s Bombardier Inc., which is building much of the 16,000 kilometres of high-speed passenger rail lines that will link even the remotest Chinese peasant villages to coastal manufacturing centres.
Beijing economic mandarins complain that Chinese industry is “big but not strong.” Meaning it remains overly reliant on technology transfers from Western joint-venture partners. And that its biggest firms have yet to achieve the global renown of a Daimler AG or Nestle S.A.
Again, non-Chinese observers are the more likely to be awestruck. Mao’s discredited “great leaps forward” have given way, says an admiring James McGregor, former head of the American Chamber of Commerce in China, to deciding “How do we build a world-class silicon chip industry in five years? How do we become a global player in car manufacturing?”
But at some point China, with its flimsiest of publicly-funded healthcare and pension systems, will have to confront the same grassroots discontent undermining regimes from Tehran to Tripoli. And nothing says China can replicate its spectacular performance of the past three decades in the next three. Not without building a genuine social safety net and purging epic corruption from its bureaucratic ranks.
Even in China Daily and other state news organs, commentators are lauding a transformative period in U.S. history that brought collective bargaining rights for labour, state-provided income for retirees, and a measure of honest dealing in capital markets.
That era is the talk of the Chinese commentariat, reports veteran China watcher Damien Ma, who writes from China for The Atlantic, even though it’s out of fashion in its birthplace. What Chinese mandarins are or should be studying with urgency, these Chinese opinion-setters now say, is FDR’s New Deal.
– David Olive