It's a testimony to something--I dunno, PR, fear, political distaste--that we pay so much attention to China. After 20 years of near double digit growth, their stated GDP is about $2.7 trillion U.S. dollars, compared to the U.S. figure of over $13 trillion. They produce about as many patents as the Netherlands, 19% of their population lives on less than $1 per day, and the average adult has 6.4 years of schooling. (These stats are from Nationmaster.)
China has a lot of what they call 'mass incidents,' which in other countries would be called demonstrations or riots. 87,000 last year. 20 years of double digit growth and 87,000 mass incidents per year. That's not a sign of a governmental system with widespread legitimacy amongst the governed.
Now, no developed country that I know of achieved that status without a hiccup--most countries had several long periods of economic stagnation or decline. Someone will have to explain to me why China should be the exception to this pattern. One such hiccup has arrived for China, and my 5-year prediction is that they will suffer through a depression that makes Western recession look mild. Remember one thing from this post, if no other: Hard times are harder for the poor. China is poor.
Their economy is export driven. People aren't importing their products. Their own consumers have a strong tradition of saving. They are not going to start spending when times get bad. Their economy is not free. There is no band of young entrepreneurs in garages plotting an internet boom. Their country is savagely corrupt. Companies that have invested heavily there will soon find out what that means in times of trouble. This will deter new waves of investment after Western economies start to recover.
Now, however, their economic problems are also ours. They own a lot of our debt. The US has depended on it in its economic calculations. They will not be able to continue purchasing Treasuries. In another post I will look at the effects on Western politics and economics.
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