China’s Growth Slows, and Its Political Model Shows Limits

Signs of a slowing economy and recent political upheavals in China add urgency to questions of how much control the state should exert, in business and in the lives of citizens.

Comments: 61

  1. The dirty little secret of the Chinese economy is that manufacturing costs on a per manufactured unit is no lower than most other countries.

    They have achieved growth in employment by NOT automating, instead using more and more workers to do the same jobs that have been relegated to machinery in modern plants.

    But the only way to continue this is to pay each worker less...each worker must make significantly less because most of these workers would lose their jobs to automation in more modern facilities. They get 10 employees making $2 per hour versus 1 employee making $20 per hour in America.

    And huge companies have collaborated with the Chinese authorities in making this model work. But now (and in the future) payback time is approaching. The large multinational companies will soon begin automating in China and this will cause a massive sea change as huge numbers of employees will find themselves without jobs.

    The backlash will be incalculable. It is almost too frightening to imagine with social displacement in China leading to massive social unrest as the model falls apart.

    Their only hope is to continue their social, state-owned projects to take up huge amounts of workers and if their reserves are adequate, will likely lead to a rebirth of their economy;

    And from this, the US could learn much. This is what we should be doing here as our employment has been displaced to lower wage economies overseas.

  2. The reason why market economies function better than command economies is that they reflect the myriad preferences of humanity better than any group of individuals, however smart. China has managed to grow exponentially due to its embrace of certain aspects of capitalism and sound economic choices at the national level. Yet can the latter persist ad infinitum?

    Even during its best years, economists agree that China's growth was partially constrained by uneconomic investments in state owned industries. And it is far harder to maintain stratospheric rates of growth in a larger economy than it is in one as unnaturally suppressed as that of Maoist China. It is probable that China, without a growing West to absorb its exports, has reached the end of the golden era of its current economic model.

    Yet the legitimacy of the communist regime depends upon its delivering economic success to its people. If comfortable economically, most people will endure political repression without too much trouble, But, should its achievements be unable to meet the growing expectations of its people (and remember much of rural China with hundreds of millions of people has yet to participate much in the economic boom), the regime may face a crisis.

    The question is whether it can make that difficult transition to greater public openness and participation without destroying itself.

  3. Add to their slowing economy and the political legitimacy questions that triggers, the demographic bottleneck caused by the One Child policy and the economic dislocation of Chinese labor pricing itself out of the Asian-bottom-feeder manufacturing business, and you have the makings of a challenging situation for the Princelings generation of leaders.

    Perhaps the old guard will come to wish they'd chosen to build more of a meritocracy than what's turning out to be a hereditary dynasty.

    Let's hope they don't resort to uniting their disgruntled subjects' attention and intentions with a few border wars in the South China Sea!

  4. One Child policy is what keeps China from becoming like India, over populated with much more poor lower class. The major problem is going to be solved with the new leaders transitioning. The old members of the elite is retiring, but they are going to make sure new members are capable people before they leave. Xi Jinpin sounds like a very humble person, from his limited interactions 27 years ago with local resident of Ohio. But look at our presidential candidate, Romney. What a dark past this guy have and yet people still want him to be president???

    Of course now that China's becoming stronger, all these border issues will be questioned. Technically some of these disputes doesn't really have a legitimate owner. It's mostly some island or land that farmers just use to go. For either nation to claim it is their property is a bit absurd. Best solution is to leave them as a sharing ground between all nations involved.

    In fact, if you want to talk about legitimacy and recognize PRC China as the successor of the last Qing Dynasty, then Mongolia, Russia, India, and numerous other neighboring nations would all have to give some land back to China. There's thousands of maps made in the 1700 to late 1800 on precisely how much land Qing had. And of course Europe and America would have to return roughly 2.1 million pieces of priceless national treasures that were ill-gotten. Until that happens, people in China aren't going to just do what the west "suggest" them to do.

  5. Interesting take on things, Ares!

    A few thoughts:

    - The legitimacy problem I'm referring to is the bargain the Chinese people have acceded to in which they give up their universal human rights and right to self-governance in exchange for economic growth under the current crony capitalist system of the Chinese communist party. If the economic side of the equation falters, well, citizens might demand democracy, something many in Asia already possess!

    - The One Child policy was successful in arresting China's population explosion...but you can't build economic stability on the backs of working-age adults caring for two parents and four grandparents, each. Especially as the economy tries to transition to being consumer-driven, especially in a society without adequate state-supported retirement schemes.

    - Your scheme of China having rights to all the territory of the Qing ignores the internationally recognized principle of self determinism. You may want to say otherwise, but the one thing that unites China's neighbors against them is their shared rejection of China laying claim to most of the territory in the South China sea. In places like Tibet, China has acted more like the occupying and ethnic cleansing WW2 Empire if Japan than an honorable and respectable member of the international community. Such behavior can only get you do far. If your neighbors hate you, you have a long term problem.

  6. Letting the Xi JinPing faction take charge of China's security is like putting Al Capone's gang in charge of the FBI. The West is making a serious mistake trusting these frauds.

  7. China makes us look like a small country. There is no turning back and we cannot defeat them in a war unless we are ready to destroy the world. Our best weapon against them is capitalism and freedom. The gradual disappearance of their repressive government will defeat them from within; not from outside military might.

    Our best weapon against China is the Chinese people. They do not want the world destroyed no more than we do. Our policies should be focused on spawning freedom by encouraging free markets and free enterprise. Our best weapon is forcing China into being a "fair trade" partner. It is not only in our economic interest to increase exports to China, but it also is our best weapon to help put the future military strength in the hands of the citizens of China and out of the hands of a centralized, controlling, political elite. More: http://www.freeourfreemarkets.org/2011/01/chinas-military-needs-control-...

  8. The author should point out that Chinese economic growth slowed from 8.9% to 8.1% from the quarter a year ago. It may be premature to say that the Chinese model is failing. If growing at "only" 8% a year is a reason to equation a political-economic system, then the US and Europe should be questioning theirs, too.

  9. The problem with your argument is that you assumed the Chinese's 8% is a statistically reliable figure.

  10. I am not surprise at all about the chinese economy and its model. China's GDP was built on bricks and walls (housing market). Once it starts curbing the booming residential housings, its GDP slowed down. From the long term point of view, it is good thing that this happens sooner rather than later. Eventually China will rebuild its GDP not on hosuing but on real productivities like cars, high tech and machines. What do you think?

  11. Mmmmmm, so China is falling apart economically, really? We could ask why the constant petty media coverage on China. The answer might just be that some financial analysts predict that China will surpass the United States as the world's largest economy in 20 years. And with economic power comes military power and world domination. I believe its less than 20 years....and that has the white house really worried. China is not a weak street thug like Sadam Hussein, Bin Ladin, Noriega, Fidel Castro, or Col. Muammar el-Qaddafi. People that believe in U.S. and Russia's anti-proliferation of nuclear weapons.....also believe in the tooth fairy. The 3 most dangerous powers in the world remain the U.S., Russia, and China. Small time Iran, North Korea, and France are mere distractors. Oil rich Arab countries remain strong in petroleum, but weak in their military. China seems to know how to become the top bully in the playground.

    The U.S. debt to China changes each month, depending on how many Treasuries the Chinese government buys or sells. As of November 2011, China owned $1.13 trillion in U.S. debt. China now owns 25% of the total of $4.6 trillion held by foreign countries. How critical is this in terms of U.S. - China relations?

  12. Mr. Aleman: I think you are on the right track, except the consensus forecast is for China to surpass U.S. GDP by 2020, sooner if purchasing power parity is utilized.

  13. China has done a far better job managing both its government and economy than has the U.S. over recent decades. They have millions of our jobs, trillions of our dollars, and and most of what otherwise would be a bright future for Americans. The only way left for most Americans to feel confident in any discussion of China is by through whining and complaining about whatever real or imagined malignancy or deficiency we can think of possibly harbored within the Middle Kingdom. Today, its still another prediction of imminent collapse. If I had a dollar for every one of these, . . ..

    Recent Pell polls found nearly 90% satisfaction with the economy in China, vs. about 20% or less in the U.S. Let's stop looking for reasons to criticize, and/or hoping they fail. Instead, let's look much more closely at China to see what we can learn.

    We cannot afford to continue blindly 'defending' and ignoring our problems - a floundering economy, paralyzed and campaign-finance compromised government, failing public schools, inadequate infrastructure, a rapacious military-industrial complex that President Eisenhower warned of, a cancerous health-care sector, rising debts from sea to sea, and steadily deteriorating hope for the future.

  14. And you believe statistics out of a country that lies to it's own citizenry and does not allow free travel or free speech?

    I've got some swampland in Florida.....

  15. Yes we have problems, but we are free to express our dissatisfaction and not censored to use the Internet like in China. Their banking system is e en more corrupt than ours. They steal intellectual property, they don't invent any reliable products and their cheap products don't last. They put lead and poison into medicines, food products, and toys shipped to the US, we're on a suicide road with China. The corruption is pervasive and hard to get rid of with their over-populated country.

  16. Leddev, the growth rate is actually lower than economists and analysts forecasted. The group also forecast the US economy.

  17. This article is riddled with Orwellian double-think. How can one believe that what China needs in order to decrease the gap between the rich and poor is with less government intervention? Or that China has a serious debt problem, as this article alleges?

    China's rapid rise owes almost entirely to its status as the cheap manufacturing labor farm for the West. Exports are drying up because the United States doesn't have the purchasing power it once did--because all the jobs have gone to China.

    It's truly fascinating that nearly a quarter of a century after "Roger and Me," an alleged "left" newspaper in America could stake the claim that a lack of government intervention is causing economic chaos.

  18. There is a single goal behind all policy in China: keeping the CCP ruling elite in power. And over the last 30 years, they have been remarkably successful at doing this by pursuing a path of economic growth that has hugely benefited their country at large. However the low hanging fruits of economic development have largely been plucked, and future growth will a lot of difficult choices. And all of these choices would upset well-connected, powerful factions within the CCP. So the CCP instead has chosen to enforce the status quo through ever more censorship and oppression.

  19. “Many economic problems that we face are actually political problems in disguise, such as the nature of the economy, the nature of the ownership system in the country and groups of vested interests,” said Zhang Ming, a political scientist at Renmin University in Beijing. “The problems are so serious that they have to be solved now and can no longer be put off.”

    Um, which superpower is he talking about?

  20. Chinese, superpower? When is the last time in history that a superpower did not dominate technological development? Don't even think about the Mongolians- they had the most advanced mobile warfare.

  21. Is it bad that I am happy for this?
    They have been so arrogant with their economy, and now it is not as strong as they thought.

  22. Loyd Eskildson,
    You forget it seems that China is a dictatorship. The media and information is completely controlled. Therefore, it would be very interesting to see who really conducted the 'poll' which bespoke a 90% approval rating among Chinese citizens.
    You can only keep people happy for so long by simply allowing them higher earnings and material accumulation. Sooner or later, they will first yearn for and then demand certain political freedoms, and then rights, to freely express themselves - such as you are using to critique the country you live in.

  23. Mr. Taylor: Pew Research did the poll; other sources report consistent findings - eg. urban Chinese are wary of granting 'free speech' to those in rural areas, believing they are 'too ignorant' and would undermine what has been accomplished.

    What good does eg. 'Free Speech' do in America? Political donations rule the roost; meanwhile, the ether is filled daily to capacity with lies and half-truths by both sides, as well as corporations and their proxy 'think tanks.' Finding truth in today's political discourse is more difficult than finding the proverbial needle in a haystack.

  24. Big is bad, bigger is evil. The only hope for civilization is some way to reduce concentration of power and money. Things have to get smaller and we need more checks and balances.
    This system may have pulled them from the 12th to the 15th centuries, but the 15th century was not a good place. That said, our system is moving us back into the 19th century, and that was a horrible place, when viewed from the 20th.

  25. History shows that no country can continue to grow
    at high rate forever. So long GDP growth is higher than
    population growth, the country will add wealth and
    create jobs. With good fiscal and monetary management
    of the economy, there should be ample opportunities
    for investments in areas that would promote further growth.
    The slowdown in Europe, China's biggest exports market,
    and USA also contributed to slowdown. China is trying to
    reorient the economy to internal consumption that probably
    would continue to spur the growth in foreseeable future.
    Eventually it will slow down further simply because its
    economic base will have grown large.
    Slowdown reflects macro conditions in global economy
    and failure of its export oriented model. With its
    investment in higher education, R&D, the thrust of its
    policies seem to be right for continuing growth in the future.

  26. I can't help but sense a bit of Schadenfreude and triumphalism in this article.

    While the Chinese system may have its faults, the American economic model for the last 30 years, one based on tax breaks for the wealthy and deregulation of finance, has utterly failed to produce broad-based prosperity and sustainable economic development for the country, instead concentrating wealth among the few and leading to the relentless outsourcing of manufacturing jobs, resulting in trade deficits and our painfully slow economic recovery.

    China needs reforms that will spur innovation and entrepreneurship, but the key difference between China's model and ours is that theirs is designed to create and sustain the middle class, while ours is designed to funnel wealth to the top, with the faulty assumption that it will trickle down to the masses — something that experience proved false long ago.

    The constant predictions of China's failure and the persistent meme of Japan's "lost decades" are not attempts at economic analysis so much as a way for Americans acutely aware of their own economic model's failure to reassure themselves.

  27. AD you nailed it. The overwhelming fear of China as the strategic competitor for the US model over the next twenty to thirty years has discombobulated many in the West. This has resulted in a wave of biased reporting and eagerness for a collapse that belies any fiction of balanced reporting and totally ignores all the good things the Chinese have accomplished for the great majority of their people. The rich may be getting richer in China but unlike the situation in the West so is everybody else and there is a real sense here given the momentum of the economy everyone is in with a chance. China has lots of problems but the government has done more for its people over the past 30 years than the US has done for its people in the same period in the US. Some examples blue collar wages have tripled in the last seven years. China has been the largest car market in the world for the last two. Hard to see how a nation of slave laborers working in fear of an oppressive government pulled that off. It is an enormous sophisticated developing economy that is constantly evolving politically and economically and if it is not moving fast enough for the West. That's too bad. The Chinese people will decide on what form of government they want and if they want to go slow to avoid the chaos and bloodshed they experienced over the last 150 years good for them. (PEW research indicates 85% support for China's government) And as regards the NYT coverage of China; you really need to take a pill.

  28. The race to the bottom in China will not be pretty. The Chinese cannot escape their fate, as they care none for the low lives, which in China there are many, and many every day that will discover that they're on that side of the equation. A precipitous fall. The Chinese government are in no position to catch that falling knife.

  29. What economic model? The Chinese copied from Taiwan and Japan- cheap home currency fuels the job market that fuels the real estate market. which means a 20 year worth of economic miracle. With respect to Chinese' development of intellectual properties- just steal them from the Westerners.

    The problems with continuing the Chinese economic miracle are: 1. their scale has become so big and wages have risen to a level where they could not no longer continue with the current model; 2. They have not fostered an environment that inventions are common and protected (e.g. New England in the 1830s); and 3. their government's legitimacy to govern is 90% tied to economic growth.

    And one more reason why the Chinese economic miracle is over- a corrupt and totalitarian government that uses all means necessary to suppress political freedom in Asia and Africa.

  30. What is interesting is what is not said. From the "Cold War" to economic super power, what happened to the "communist" economic model? While some analysts are content to mull over differences in political appearances, the real meat is in the economics-who owns what and how does the society create exchange value, surplus value, commodities, etc.

    Remember "The Great Leap Forward", the idea of small-scale rapid industrialization, and its flop, which lead to the "Cultural Revolution", and its flop, which led to "Ping-Pong" diplomacy and the overtures of international capital to the Chinese Central Committee? There are some lessons there.

    The first lesson is that "China" does not exist as an economic entity anymore than the "United States" or Bulgaria exist as discrete economic entities. The world economy primarily features mega global corporations, banks, and insurance companies. Sitting on top of the pile are the 1,000 or so mega-wealthy billionaires who exercise more or less central control through committees and ministries and ministers that loosely answer to them and follow their agendas.

    Second lesson is that the political entities that are called by their out-dated references, such as "China" and "United States" are increasingly secondary considerations regarding the international transfers of value that I'm guessing are over 50% of the economy. They are useful for social administration (labor) but not for the regulation of international capital.

    When-how?

  31. This is another China hit-piece by Edward Wong. Does he have anything positive to say about China?

    In a global climate of decline, is Edward Wong expecting China to post double digital GDP growth?

  32. In general, you will find that the Chinese who write for the Western mainstream media hate the Communist Party government of China, and their fellow Chinese who acquiesce to its rule. They do not normally hate China or the Chinese themselves, only the current government. They may have a valid complaint, but like the English who hate the EU and the euro, they've been predicting doom any day now for 10 years or more, and the one-note song gets a little boring.

  33. China may be hitting the dreaded "middle-income trap" that some development economists have posited is what led to a slow-down in growth in dozens of low-income developing countries, from Latin America to the Middle East. In a grossly simplified form, the "middle-income trap" occurs after a very poor country unleashes very fast economic growth when the government has imposed relatively easy reforms on the economy--mobility of labor, attracting foreign investment, enforcing property rights, building infrastructure--the "low-hanging fruit" of economic policy, if you will.

    This happened with Mexico in the 1960s and 1970s, Brazil during the same decades, Argentina from 1890 to 1950, most Middle Eastern countries in the 1950s and 1960s--very fast growth, and unbridled optimism. These countries were headed to riches! But then all the structural defects, the hard and intractable economic problems that a government can't fix easily--like an over-bloated state sector, rampant corruption, growing income inequality, entrenched rent-seeking parties and interests--put the breaks on economic growth and led to crisis. The "Lost Decades" of the 1980s and 1990s hit Latin America and the Middle East stagnated into zero growth rates from the 1960s until the present. China is ripe to become the next victim of the "middle-income trap." China's unfortunately not the new Japan--a sleek and confident democracy that can grow for decades. It's a new Brazil, a land stuck in the middle.

  34. "But then all the structural defects, the hard and intractable economic problems that a government can't fix easily--like an over-bloated state sector, rampant corruption, growing income inequality, entrenched rent-seeking parties and interests..."

    ---------------------

    But they CAN fix those problems. If the majority wishes it and they rise up and change the political system. As the U.S. did here between the years 1933 and 1981. Unfortunately, the monied elites have re-gamed the system here again and we have the makings of rampant corruption (thanks SCOTUS for Citizens United), income inequality, and rent-seeking. Which is why maybe we shouldn't be looking at China so much as looking at our own glaring problems.

  35. Intersting that you single out Brazil, since they finally seem to be breaking free of the "middle income trap".

  36. In response to E. Nowak-

    Yes, U.S. does have serious problem.

    But if you are complaining about the monied elites, the Chinese beat us by a mile- their monied elites not only squeeze the poor but they have actual powers.

  37. I don't think it's available in the US yet, but an excellent Chinese view is The Fat Years by Chan Koonchung.

    The book was written in 2009, and the author unfortunately predicted the complete collapse of the US and Europe in 2011, after which China emerged as the wealthiest, most advanced nation on the planet (as they were until about 1422 AD, when an emperor ordered a return to the simple, agrarian life).

    It's available from international book stores, and should be published in the US sometime this year.

  38. If a necessary condition of capitalism is free enterprise, I don't see how China's model can be called "guided capitalism" when so many things are owned and controlled by the ruling class at various levels even if we forget about the "state owned" enterprises.

    From what I know, most large hotels are joint ventures that revert to state ownership after a certain period of time; large restaurants within those hotels are also owned by the state government and even the "service charges" are pockected by them; taxis are own by city governments. Not to mention the large overses investments. What kind of capitalism is that? It is not even crony capitalism though there is that too.

  39. Other necessary conditions of capitalism are wage labor and the profit motive. State Owned Enterprises and Town and Village Enterprises are both market-oriented models: they are dependent on profitability and subject to competition.

    While you prefer to analyze China's growth model by which economic actors (businesspeople or the bureaucracy) have ownership over productive property, the distinction may be lost on the hundreds of millions of Chinese workers and peasants who toil under dangerous and deplorable conditions for wages barely sufficient to survive.

    And since independent trade unions are proscribed and the meager labor laws that exist go unenforced, you could actually argue that China has a far more 'pure' capitalist labor market than does the United States.

    But all the technocratically-minded, amoral market fundamentalists here in West should be feeling more chipper by the day. After all, since, "so many things are controlled by the ruling class at various levels," in the US as well, the concerted assault on our working class has gone from strength to strength .

    A recent study by the Brookings Institute came to the startling finding that workers' wages in the US, which are generally thought to be merely stagnant over the last 40 years, have actually dropped 28% in real terms since that time. So for workers in China and workers in America, it doesn't matter how you prefer to brand the various forms of capitalism: exploitation is exploitation!

  40. This is not a normal and dangerous if the power is concentrated in a few people. I do not think that will be the problem in China if powers of Chinese leaders have diminished with each generation. The new Chinese leaders must lie in the demonstrable ability to act and produce an effect within his or her powers.

    I do support Chinese leaders to cool down economy. It is more like that Chinese government set a lower target for its economic growth and boost income for its less wealthy citizens. Thus, Chinese government will be more room to make the development more balanced and sustainable or more bearable for its society.

    I did follow Wukan village’s accidence yet I did follow current Taiwan incidence of major land seizures which caused many disturbance of Taiwan society due to an uneven distribution of the level of an education and sophisticated legal systems. Thus, I made many comments in Taiwan Chinese media. We American has a “Eminent Domain” which the federal government and each state has the power to take private property for "public use". Under the Takings Clause of the Fifth Amendment to US constitutions, US government can “take” its citizens’ property if the general benefits a community enjoyed from economic growth qualified such redevelopment plans as a permissible “public use”. The government can not take away anyone’s private property for “public use” without giving owners of property just compensation in return under the 5th Amendment’s Eminent Domain Clause.

  41. Diversified power really can only work if there is a viable framework for how that power is shared. No such compact exists in China - the leaders there give lip service to rule of law but in practice govern by patronage and brute force. While the economy is growing, people tolerate the corruption, coercion and inequality because they think they might also eventually gain. But once economic stagnation sets in, resentment of the abuses of their rulers will grow quickly. China's leaders understand this full well, as evidenced by their rapidly expanding budget for internal security.

  42. As long as the Chinese people study and work harder than Americans,their future should be brighter than ours.

  43. China's evolution into the world's largest economy (~2016) and then its richest (~2030) will occur despite any perturbations in the political mechanisms that will also be part of its growth. State capitalism (China, India, Brazil, Russia, etc.) is having a huge impact on the globalized economy, with other emerging economies in Asia and Africa poised to take their place in global markets.

    The U.S., in the mean time, will remain mired in political and ideological gridlock and fail to recover from the financial recession sufficiently to maintain its economic and political position. The economic plight of the middle class and working class, and the huge number of working poor, are ominous signs of decline that will not be mitigated by having the top 1 percent become even wealthier. The jobs the rich create are low paying and incompatible with a strong, growing economy.

    The absence of pragmatic governance will keep the U.S; from resolving multiple critical problems, all but guaranteeing an inability to save itself from itself.

    Eclectic Pragmatist — http://eclectic-pragmatist.tumblr.com/

  44. A very thoughtful analysis, though some parts may be be a little overwrought in an an attempt to paint a grimmer picture than perhaps may be realistic. I do however agree with the author that the system is not sustainable and we are seeing cracks in the shell. How long they can hold it together remains to be seen and how willing the US and EU are willing to play along, as a collapse in China will be bad news around the world. Reading this it is easy to see why China is so adamant that western powers stay out of Syria. China will probably take the same route as Assad when the people finally do get organized and fed up - they clearly already are in certain parts of the country.

    That said, I would really like to hear the authors analysis of how the issues he addresses will raise opportunities for US economic influence and diplomacy to come into play.

    Additionally, it is clear that China is stealing America's (and probably the EU's as well) secrets as fast as possible in attempt to build a more sustainable and powerful state before the system can completely break down - a plan that by and large I believe the Chinese people wholly support. At some point western powers are going to have to confront this wholesale theft head-on (frankly I think this should be a major issue of the campaign). How will that confrontation play out I wonder given all the other challenges China faces and the western stance re Chinese morality? An economic embargo? With what consequences?

  45. My two cents on this article:

    1) Mr. Wong knows well the heavy handed repression of China's security apparutus in Uyghur land. Interestingly, he did not utter a word on that. Is it an "intentional mistake" or 'accidental negligence"?

    Standard economics textbooks have several economic growth models, all of them tell us that economic growth is the function of labor, capital, technology or education or health in one way or another. It is interesting to read that Mr. Edward Wong described China's growth model as — "a vaguely defined combination of authoritarian politics and state-driven capitalism". How about the "contribution of China's culture to the economic growth?

    I think the standard economic growth model needs to be updated-or Augmented again!

  46. I have heard people say "China is in the 1950's" economically. I never agreed. They are in the 1890s. And the lessons capitalism is about to teach them are going to be just as hard to learn as they were here-- probably harder as China is less flexible than the US was during our period of change. They have let the toothpaste out of the tube, and there is no going back to Mao now.

    Interestingly, for years the Russian shock-change to capitalism looked like the wrong road to take; but Russia may end up more stable than China in less time.
    Sure, the democratic system in Russia has been subverted by Putin and others, but Putin won't serve out his six years. Most Russian young people have no real recollection of the old Soviet system and there are already serious stirrings of dissatisfaction with Putin's authoritarian style. But even under Putin, Russia has a representative governmental structure, so transitions can be orderly, unlike in China where everything is a back room deal.

    In the end China will have to give up its state-owned enterprises because ultimately they are unsustainable. And the approach to the protests will change as well, as they cannot put the entire country in jail.

    And as far as all this "China will own America" talk, remember back in the 80s the big fear was that Japan was going to own America? Yeah, like that happened.
    China has enough challenges now and in the future to guarantee they won't have the time, resources, or desire to own the United States.

  47. This article is full of wishful data and conclusions.

    The fact about Chongqing is that : Chongqing is of the lowest government debt among all the big cities in China. And Chongqing government experienced almost zero deficit in 2011.

  48. I always viewed China's growth with skepticism. Being born and brought up in India I have experienced how a socialist state can mess up the economy. However, civil rights were at least never violated in theory. With China it has been the opposite - I don't know how happy the Chinese are about having less freedom compared to other country citizens but I guess they are happy because their economic gains have been tremendous.

    It is my personal opinion, but I would rather be poor and free than be rich and shackled. Blame the Queen for my stance, but it is in my genes to abhor aristocracy and central planning.

  49. China bashers are at it again. Perhaps this is as soothing as believing rich people are unhappy, or blondes are less intelligent, or that China's success is a leading indicator of failure.

    China has a massive economic engine and much fuel.

    What if the Chinese worker exerted himself to increase productivity by, say, $5. per person or $5 x 1.3 Billion people = X

    Now, what if we exerted ourselves to increase our productivity by $10. per person or $10. x 300 Million people = X

    Now let's move from arithmetic to history.

    Then: Chinese (then called coolie labour) workers worked to build the Trans-continental Railroad for America

    Now: Chinese workers (not called coolie labour) work to build the railroad for China.

    We have, perhaps as a palliative, chosen to approach negotiations with China the way we approach negotiations with countries in the Middle East--from our own perspective.

    The Chinese see the world from a mountaintop 6,000 years high.
    The Arabs see the world from a mountain top 4,000 years high.
    The Europeans see the world from a mountaintop 2,000 years high.
    We see the world from a mountaintop 236 years high. From The Quotations of Slim Fairview (c) 2011.

    It has been said too often that Europeans look to the past while we look to the future. For a nation that looks to the future, we don't seem to be able to see too far into it.

    "Those who forget history are doomed to repeat it." Santayana.

    "Those who never learned history are doomed period." Slim Fairview

  50. "The Chinese see the world from a mountaintop 6,000 years high.
    The Arabs see the world from a mountain top 4,000 years high.
    The Europeans see the world from a mountaintop 2,000 years high.
    We see the world from a mountaintop 236 years high. From The Quotations of Slim Fairview (c) 2011."

    Sounds like we have a much more immediate and close-up view of the world.

  51. I agree with some of your comments but the 6,000 year figure is misleading. Chinese started to record written history approximately 2,500 years. Anything before that is mostly folk tales.

    By the way, every country negotiates with other countries from its own prospective- especially the Chinese. That is why they are doing so well with the Filipinos, the Vietnamese, etc.

    I am tired of the Chinese bashers and the Chinese lovers. You, I think, have some very romantic idea about the Chinese.

  52. It is a 6000 year high mountaintop only if each year was an up-year. If there were centuries of down years, they might end up actually being in a 5000 year pit. Right?

    It is a lot easier to come out positive in a 236 year experiment than in a 6000 year one. China clearly has a loooooot of issues to sort out. I hope they do for everyone's sake. But I would not be so cocky about it. Looking at their history they have messed up (badly) more often that not, so they will have to fight their historical record to make it right this time. There are many incentives for success, but human nature is human nature. So I wish them the best and cross my fingers.

  53. China has a fundamentally unsustainable model. They are growing quickly because their cost of labor is cheap, so manufacturers take advantage of that to produce X in China, instead of X somewhere more expensive. Labor cost savings is the main "value" that China offers to the market. However, do the math. If they continue to grow solely based on labor savings, they will destroy their own labor savings. GDP Growth = Higher Wages. If GDP growth is based only on wage difference, guess what happens eventually?

    For China to grow beyond the foreseeable future, it needs an open political and economic system where entrepreneurs can invent and innovate value-added products, not just produce American and European products cheaper. That hasn't really happened. Where do the new technologies come from? Not China.

    So all these doom-sayers talking about China beating us in the global marketplace are just that. Doomsday is not coming. China's "guided capitalism" is not a sustainable practice because it creates almost all of its growth from an ever-shrinking wage spread. And it does not have a political system with the will to allow enough freedom for true innovative entrepreneurship.

  54. You say poe-TAY-toe, I say poe-TAH-toe.

    "Communist" China is a fascist-capitalist dictatorship, the kind of place where Mitt Romney, Newt Gingrich and Rick Santorum would fit right in since a tiny clic owns the entire Chinese economy, where low-paid workers who have no rights toil in sweatshops and can be fired without cause and even executed, and pollution and environmental destruction are is considered to be patriotic.

  55. "Executives of Chinese conglomerates, army generals, Politburo members, local officials and the “princeling” children of Communist Party elders have little incentive to refashion a system that fills their coffers."

    This quote is one of many examples of your smacking cultural bias. Personally, I cannot think of a better sentence (with only slight modification) to describe the U.S.A. What's it gonna take for the U.S. to wake up to the fact that we aren't 25 in math and science without reason. If this were a chess game, I would hang my head low and walk away in shame. But it's no game, and this kind of haughty arrogance will get us nowhere.

  56. Actually, the quote you're referencing is dead on. Even entirely within the Chinese economy, the government-run monopolies are amongst the least efficient for exactly this reason: their leadership is quite happy to fill their own personal coffers and have no incentive towards competitiveness.

    Instead of ill-informed outrage and indignation, perhaps you should actually study the issue. The fact that the US is 25th in secondary math scores is unfortunate. But I fail to see how it links to your point.

  57. I stand by what I said. The link you fail to see is the haughty arrogance of the author. It is common among those pundits who routinely dismiss Chinese leadership as rapacious profiteers, as if we were incapable of seeing the world from any perspective other than economic efficiency (i.e. looking in a mirror). You live in a murderous empire that is cannibalizing its own people and utterly destroying the very ground under our feet, yet you are so sure of yourself, your country, and the wrongness of China. I see no end to U.S. arrogance unless and until we finally suffer the consequences of our own ignorance.

  58. @Joe - you are the one that needs to open your eyes and get better informed as your myopic view of the US and the world seems to be sorely lacking. We need to start addressing our own financial and political shortcomings in our society, financial institutions and political system. Lets fix our own problems instead of worrying about everyone else!

  59. The political model created by the Communist Party might only work in China and nowhere else. With over 80 million members of government officials, army officiers, workers and farmers, it's also the biggest political party in the world. On top of this pyramid structure is the National People's Congress. This Soviet-style tight organisation and steely discipline keep the party going and oversees and influences many aspects of people's lives. Joining the party brings significant privileges, which explains why membership is coveted. Members get access to better information, their children get better schooling, and many jobs are only open to members. Unfortunately personal relationships are often more important than ability. Members have chances to rub shoulders with decision-makers and influence their careers, lives or businesses etc. Although economically the country is moving away from communism, yet politically it hasn't abandoned state planning and nationalisation. The party runs the country in much the same way for decades. Many had hoped that opening the country for growth might eventually lead to more political freedoms. When or whether this will happen remains to be seen.

  60. Just remove the word China from this article and insert U.S. - undue influence of financial interests on politicians, easy money to friends of the state (banks), political and social unrest, inability to govern effectively, deflating real estate, slowing economy... so what was the point of this article again? Shouldn't the title be "China Becoming More And More Like The US".

  61. I am from Beijing, and I don't really agree with this article. This is really only slightly piece of information for China as a whole, China is big country, population is more than 1.3 billion. I agree, that we have problems in Tibet, but the population in Tibet is only 3 million indigenous people, maybe a little bit more now. So do u think that is really a barrier for the growth of the nation, the problem is same as the Amerindian of U.S. It's a piece of cake. and why it is so highlighted in U.S. is because the U.S. audience like to hear bad news from China, so the local media exaggerate pretty much to attract U.S.people's eyes. The China model has limits and disadvantages and everything as U.S.media said, though the key point is undoubtedly agreed by 99% of Chinese people, that is the "SPEED", we don't have the complicated political system to make a decision and make all people happy, if the government found one policy is good for the country, they can continuously implement it for 4 years, 8 years, even 16 years, and that is possible to be changed within one night in anytime, that is impossible to happen in U.S. To be frankly, the current Chinese leaders have very high moral standard, I am 120% sure, but only because the average education of Chinese people is very low, and the local officers cannot afford the allure of money and power and the future of their son or daughter, in Chinese culture, parents care pretty much of the posterity.