Peering into the Future of China

Outline notes for a talk on China I gave a week ago...

Peering into the Future of China

J. Bradford DeLong
U.C. Berkeley
(925) 708-0467 delong@econ.berkeley.edu

March 2005

The Setting

• China's historical advantages

  • Literacy
  • Unity
  • Trade (reached in 1100s levels not reached in Europe until 1700s)
  • But: office-land-corruption complex

• Mao Zedong

  • Leveller (land redistribution)
  • Soviet tutelage (communes; heavy industry)
    • Fortunately it didn't really take
  • Mao goes insane
    • Great Leap Forward
    • Famine
    • Cultural Revolution

• Deng Xiaoping

  • "We cannot find him"
  • "To get rich is glorious"

China Today

• 1.3 billion people: population growing at 0.6% per year, 1.12 male/female newborn ratio
  • All in a space the size of U.S. east of the Mississippi
• Economic growth: up to 10% per year
  • Investment: 43% of GDP
  • Industrial production growth: 30% per year
• Economy size: $2 trillion GDP ($1,500 per person per year)
  • $6 trillion PPP GDP ($4,500 per person per year) (cf. U.S.: $40,000)
• Economy sectors: agriculture 15%, mfg mining 52%, services 33%
  • But: labor: agriculture 50%
• Economy distribution:
  • Top 10%: 33% of income
  • Bottom 10%: 2% of income
• Exports: $500 billion a year and growing...
  • Coasts disconnecting from the interior...

China's Problems

• 400 million people on the coasts
  • 800 million people in the interior
• 400 million people in the cities
  • 800 million people in the interior
• People doing well:
  • Beijing
  • Coastal cities
  • Party bosses
  • Peasants near coastal cities
  • Migrant workers
• People doing badly:
  • Heavy industry
  • Rural peasants without migrants in their families
• The Communist Party's task
  • Move 10 million people a year into the coastal cities
  • Find them jobs
  • Make them happy

The Communist Party's Strategy

• Export at all costs...
• Redistribute income to the interior...
• Hope that nobody remembers they're supposed to be Communists...
• Keep the economy growing...
• Avoid the financial crisis...
• Someday, somehow, grow a middle class big enough to serve as a source of demand...

How long can China keep growing?

• 400 million peasant workers whose productivity is 1/3 the average
• 100 million manufacturing workers whose productivity is 4 times the average
• Do the math:
  • Basic mechanization of agriculture plus transfer of 250 million peasants will triple the size of China's economy and its desired manufacturing exports...

Dangers to Business-as-Usual

• The bond market
• The next U.S. recession
• China's interior
• Lack of a legitimate politics
• Taiwan
• North Korea

Comments

[Eric]

If it was available then I would very much like to hear an audio recording (podcast) of this talk.

[Jim S]

The issue of Taiwan seems to be underestimated by a lot of people in my opinion. These people look at China as being completely rational on the subject. OTOH, I think that they have pushed the idea of controlling Taiwan so hard internally as a matter of national pride that they might very well be creating something that will spiral out of their control.

[Jim S]

I think I spotted another potential problem for China. Given what I've heard about their medical infrastructure outside of the coastal cities and Beijing if an avian flu outbreak does occur and originates in Asia....

[Jonathan King]

The problem that North Korea poses to the Chinese "business as usual" plan is only a bullet point in this outline, but I have been seriously wondering for weeks now why on earth China doesn't just solve the problem once and for all. Can they really not project enough influence (or a raw bribe) to bring down the North Korean state? The process of reunifying the two Koreas is probably going to be a long distraction for them, which should be an added bonus to China as well.

I'm really not seeing any benefit to China of having North Korea around, and I don't see any credible powers acting against China for performing this service. Unless, I guess, it poses a re-unification threat to Taiwan or something.

[Movie Guy]

"People doing badly: Heavy industry"

Could you clarify this?

[adb]

Reasons China might not want Kim Jung-il to lose control:

If North Korea falls, there could be massive instability on the border (there's no guarantee the end of Kim's government would go smoothly); millions of refugees would likely stream into China; and there would presumably no longer be a buffer between China and South Korea (and American troops).

[Delicious Pundit]

Wasn't it Mao who said that political power came from the barrel of a bullet point?

More seriously, I wonder if a missing bullet point (because unknown, I guess) is: fossil-fuel related climate change. Were the rest of the world to decide that it is a serious problem that must be dealt with seriously, it might complicate China's development.

[Tom Carl]

There would presumably no longer be a buffer between China and South Korea (and American troops).

Exactly, strategically, China wants the US out of the West Pacific.

Why? I'm not exactly sure. But the US is spending a lot of money to have a presence there - is the US just being irrational?

China would rather that it be China that has the biggest stick in the region. Is that irrational?

What exactly is the payoff? I'm not sure.

Anyway, there certainly will not be a US allied unified Korea if China has anything to say about it. If the US offers to leave, China will pressure the North to incorporate itself into South Korea in exchange.

That would improve life a lot for the North Koreans. It would make life a lot worse for the South Koreans. When it becomes a serious possibility, a lot of planning and thought will have to be done. This will be much harder than East into West Germany.

[trevelyan]

Jonathan,

North Korea is an enormous economic opportunity to China. Liberalization will link its northern provinces much closer to South Korea, one of the only countries whose citizens are learning enough mandarin to engage with the mainland. Endgame is a regional production base in the north to rival what is happening down south in the Yangtze. Why ship through Tianjin or Shanghai?

It is already happening. Quite a number of small-scale manufactures have already set up on the Chinese side of the border to take advantage of cheap North Korean labour. And North Korea is experimenting with exactly the kind of contained export-oriented production zones (along its northern border) that Deng Xiaoping initiated in China the late 1970s.

Call it a regional growth strategy, the socialist road to capitalism, or whatever one likes, but status quo gradualism is a relatively sure growth strategy for both sides. And why would China want to destabilize that?

[Tom Carl]

Trevelyan:

North Korea following the Chinese path to development - what an interesting idea.

This is my first time coming across the idea.

Can anyone point me to any online resources describing production zones and or North Korean labor in Chinese firms?

Is the plan for North Korea to export to the US and Europe at some point?

Will China be able to fill North Korea's capital needs?

[Gwailo]

What are the limits to China's growth? A rolling environmental disaster, a rapidly aging population, a latent crisis of political legitimacy? It's not easy to hold on to the Mandate of Heaven.

[anne]

The level of domestic saving and domestic and international investment by China is astonishing, 40% to 50% of GDP. This is setting the stage for development and international income generation for decades. The saving and investment of America from 1945 to 1960 assured us a wonderful international income flow and growth, even through times of turmoil, for decades.

[MTC]

anne -

As always you are most sanguine. I am not sure that the capital flows coming out of China are comparable to U.S. FDI circa 1945-60. From my seat here in Tokyo ("Fifteen Years of Asset Deflation and Still No Sign of a Bottom"), the Chinese investment boom looks more like a potential festival of moral hazard than a sure harbinger of prosperity.

[trevelyan]

Tom,

Do a search for Sinuiju on Google you'll come across news of probably the most high profile SEZ. The initiative ran into trouble after its manager fell into difficulties with the Chinese authorities. Recently there have been efforts to build an export-zone down south near Kaesong. There are others in places like Najin, Chongjin, and Sonbong.

I'm not sure the extent of what is happening up near Damdung myself, save that it is small scale. There's an interesting survey of some other market-oriented reforms North Korea is flirting with here:

http://hir.harvard.edu/articles/index.html?id=1093&page=1

Whether it will succeed is anyone's guess, but the general direction seems clear....

[anne]

MTC

Japan worries me. The pattern continues and repeats and continues. I read and speak with others, and have no sense of the absence of experiment to resolve the problem. There was a time I was sure Paul Krugman offered the proper solution, but there was no interest in Japan. But, is there an analogy with China. Later this day I will continue. As you suggest, we should worry some :)

[hyh]

Gwailo said it: add environmental degredation to the list of significant challenges.

But on the plus side, unmentioned factor is Chinese diaspora. Also, might be useful to think of "China" as a region, not just a country. Lots of history to suggest an economically integrated east-souteast asia region.

Does anyone else remember a Kurt Vonnegut story where the Chinese had genetically engineered themselves to be 1-inch tall and used their technology to dominate the world?

[Monte Davis]

It's fascinating to see how the population bomb has morphed into the prosperity bomb.

30-40 years ago, the feared future was a world population of 20 billion or more, most living in direst poverty. Now most population projections level off around 10 billion. Much of East and South Asia is embracing the market just as we always said they should. The results are a massively Good Thing -- but none of us will ever see $30/barrel again.

The prospect of 3 billion people with lots of purchasing power may in fact be more unsettling from a G7 perspective than that of 15 billion living on the edge.

[anne]

Right you all are, economic development is problematic and troublesome, but the savings of China are being invested in ways that should add to national income and sustain growth for decades. There will be foolisness in investing, for is there so much; there will be excess beyond reasonable experiment. But, China is developing and the development of a country of 1.4 billion people will have profound economic impacts. Think of buying an apple product in America. Think of seeing apple orchards everywhere about as you grew. Then realize that China is the world's largest exporter of apple products. I like apples :)

[anne]

http://www.nytimes.com/2005/03/29/business/worldbusiness/29joust.html?pagewanted=all&position=

Drawing the Line on Energy
By JAMES BROOKE

NAHA, Japan - Midway between Okinawa and China, the Ramform Victory, a Norwegian seismic ship, is performing routine survey work, trawling with long seismic cables and using sound waves to create three-dimensional images of oil and gas deposits. But nothing is routine when Japan commissions a survey of what is hidden below the contested waters of the East China Sea.

Chinese coast guard ships treat the surveyors as spies, radioing warnings to leave and shadowing the ship for days on end. On one occasion, the Chinese ships nearly collided with the vessel. Japan's trade minister, flying in a Japan coast guard plane, conducted an ostentatious survey, circling over the bright yellow gas production platform that China is building a mile west of waters claimed by Japan.

Confronting the Chinese face to face, the trade minister, Shoichi Nakagawa, later sat in front of a Chinese negotiator, dropped two straws in a glass of orange juice, and, forgoing customary Japanese politeness, complained that China was about to "suck out Japan's resources with a straw." The seismic ship, he said, according to ministry officials, found that two deposits under development by China extend into Japanese economic waters.

In days of sharply higher energy prices, long-dormant border disputes have suddenly come alive for Japan, the world's second-largest energy-consuming nation after the United States. Galling Japan is a realization that large deposits of oil and gas lie on the nation's watery fringes. Long cocooned by these water buffers, Japan is suddenly bumping shoulders over undersea oil and gas resources with China, South Korea and Russia....

[anne]

The Lobster Quadrille

"Will you walk a little faster?"
said a whiting to a snail.
"There's a porpoise close behind us,
and he's treading on my tail.
See how eagerly the lobsters and the turtles all advance!
They are waiting on the shingle--
will you come and join the dance?

Will you, won't you, will you, won't you,
will you join the dance?

Will you, won't you, will you, won't you,
won't you join the dance?

"You can really have no notion
how delightful it will be
When they take us up and throw us,
with the lobsters, out to sea!"

But the snail replied "Too far, too far!"
and gave a look askance--
Said he thanked the whiting kindly,
but he would not join the dance.

Would not, could not, would not, could not,
would not join the dance.
Would not, could not, would not, could not,
could not join the dance.

[Dave]

While Professors Sachs and Easterly's discussion of how to end poverty and privation gets a bit personal.....We are faced with a China which is 5 times richer than it was 25 years ago. Presumably we'd all like that kind of progress to spread into the poorer areas of China and then other poor areas as well, but we see darn little discussion of how it happened, or what is necessary for this wave of economic liberation to continue further inland.

In the last 3 years transportation times to the larger inland cities have been halved, so access to workers and engineers who cost half the rates of Canton or Shanghai are now much more available. But on the other end of the pipeline, the big box retailers who are the primary outlets for the Chinese products that sustain this growth are under increasing attack by liberals in every community across our land. If Walmart and Target stop growing, and stop pushing so hard for their suppliers to give more product and lower prices... the alleviation of extreme poverty will come much later for many poor families. Bob Geldof and Bono are seriously committed to helping the poor, but it is the minions of Sam Walton who are actually liberating them by the millions.

Interestingly, PBS's Frontline ran a story on Walmart which spent an hour bemoaning this whole process and decrying Walmart's fiercely cost-squeezing buyers. Frontline's producers presume their viewers would much rather buy a TV made in Tennessee by someone making $30,000 than by someone in China who just doubled their salary and is now making $1,000 a year. And they may be right.

[anne]

Sorry sorry about the lobster quadrille which should have appeared only in the appropriate lunacy driven thread thread.

[anne]

Dave

An interesting and useful comment. The topic should be of signal importance and there will hopefully be far more ample discussion of the development pattern in China and its applicability elsewhere, along with discussion of aiding trade induced work transition beyond China. Increasingly infrastructure development in China is expressly meant to extend development benefits inland. Step by step there are changes to this end, even in the ending of school fees for a child's parents.

[anne]

http://www.nytimes.com/2005/03/29/arts/music/29cond.html?pagewanted=all&position=

A Cultural Ambassador Bred in Cultural Revolution
By RICHARD BERNSTEIN

BERLIN - Wang Jin, the chief guest conductor of the Komische Oper, or Comic Opera, here remembers how he started violin lessons in his Beijing roughly 30 years ago.

"We had to put a mute on the violin," he said, "and we drew heavy curtains over the windows, so nobody could see or hear from outside. My mother was a pianist at the Central Philharmonic Orchestra and we lived in the orchestra's dormitory, so it wasn't hard to find somebody to teach me.

"But even practicing scales was forbidden," he said, recalling that at that moment in China there was a major propaganda campaign against Western classical music. "There was hardly any sheet music. It had all been confiscated by the Red Guards." When a friend furnished a clandestinely preserved book of violin scores for two days, Mr. Wang's mother spent an entire night copying it by hand.

Mr. Wang is now one of a handful of Chinese conductors working in European opera houses and symphony halls, proving, along with Chinese singers and instrumentalists, that China can export Western goods other than children's Christmas toys.

Still, Mr. Wang represents something pretty new - a Chinese conductor telling Europeans how to play European music - and like most things new, there is some fairly rough adjusting taking place. Mr. Wang, who has won nine major European conducting competitions and conducted some 500 concerts in the past decade or so, is clearly having a real career here.

And yet, he has the conviction that he is being held back by a certain doubt: the sense that, because he is Chinese, he can't really, fully, deeply get it.

He said: "When I tell an orchestra, 'With Mozart, you should use a certain kind of bow,' they say: 'We are Austrians; you are Chinese. How can you tell us how to play Mozart?' "

These days, Mr. Wang is conducting a new Comic Opera production, Benjamin Britten's "Albert Herring," a strange kind of hybrid. It began as a story by Guy de Maupassant, was converted by Britten into a parody of small-town English manners, and is being presented in German in Berlin with a Chinese conductor.

"Many people wanted me to give up, even my friends," Mr. Wang said in a recent conversation. "They never really thought I could become a conductor here, but I always believed I could do it." ...

[wkwillis]

The obvious win-win-win-win-win solution is for China to buy Siberia.
The Russians get the money that China is spending buying tbills to upgrade their country, Chinese investors get huge resources they can invest huge amounts of money in developing, South East Asia gets the Chinese moving in another direction and away from the South China Sea, Japan/Korea/Taiwan get less competition for Australian ore and coal, the US military industrial complex gets a new threat to Alaska to replace the Russians, and China's consumers get cheaper oil that we can no longer buy because the Chinese aren't giving us free money any more.

[shah8]

I have been really reading on this subject for awhile now...One thing before I comment, is there any way I can rent more academic books or somehow purchase access to a university library without sneaking in?

First thing. I concur with other statements above that the environment is a fairly serious issue and and a truly economically limiting issue at that, unlike the experience in the US and Great Britain. To make a point brutally clear, quality of life issues are a major driver of economies. If whether a place is gay friendly or race friendly can heavily impact a local economy here, then more basic things like clean air is going to become a driver of decisions there. The air in many places in china is of very poor quality and I have wondered a bit how much athletes and fans may object to playing in and watching through smog. I'm not sure the traditional solution of forcing plants to shut down for the duration is a viable solution by the time 2008 rolls around. This also not just an issue about air pollution. This is an issue with land and water use as well, and as any economist knows, land and clean water are major factors for many activities, but China is very weak on protecting rivers and general dumping. However, you simply cannot grow beyond a point without being able to supply clean water, and the chinese authorities must address this forcefully.

Next, I think this is filed under political legitimacy, but China, as of the printing of the last in depth book I read (2000) is fundamentally lawless. There is no real criminal court system as by western standards. The members of the communist party are exempt from the laws so long as they have the guanxi, and avoid the east asian specialty of periodic crackdowns for show. Moreover, the tyranny of local officials have been crucial to major missteps like the guandong officials hiding the data of the SARS epidemic and allowing it to spread as it had. It took Beijing people playing flanking politics before the central administration even really began cooking up a response. Those local officials were punished, but they did what they did because they are usually not punished.

Thirdly, another problem that should be on that list is income inequality. This might moot the advantages of large savings. The quality of savings, I think, matters as well. I mean, what if it was an Albanian scenario, before the ponzi schemes fell apart? One of the reasons countries with large middle classes do well is because large numbers of people with savings can support a larger and greater diversity of economic activities, as opposed to a place where concentrated wealth has a reduced need for advance services and thus requiring high prices and few workers. China is having a rapidly growing income inequality that indicates that the necessary domestic market may take more time to accomplish than many people might think.

In the end, I really and truly believe that the idea that this China will become a superpower is just the same fearmongering that happened with Japan in the 80s. The Western states have outcompeted China in the 16th century to now mainly because of one thing: governance.

I really think many people underestimate to the degree how much China was like an African failed state during the days of Mao. They have bottlenecks everywhere, mostly because of the communist party activities of yesteryear and of today as well. Bottlenecks like teachers and academics, because so many died in the fifties and sixties during the Anti-Rightist campaign and the Cultural Revolution. Let's not even talk about economically useless factories built during the SinoSoviet crisis. China, even now, trying to heal from the worst days of truly bitter eating fundamentally cannot compete with the West like Taiwan, Japan, Singapore, Austrailia can as soon as some envision, even with the resources that state has until the healing has finished. Yes, china has been eating up marketshare, but all of that is on the low end where cost of labor is the predominant issue, and the local businesses have serious issues with increasing quality and scaling up production of high quality items because they don't have the systems (of various types like legal, finance, transportation, etc, etc) and enough educated people to reliably make large numbers of high margin quality items at a profit.

The governance is so faulty that it cannot even reliably distribute money (or privatize assets profitably) for the necessary services and paystubs in many areas of the country because local officials will simply take most if not all of the money, and the peasants/workers aren't really allowed to contest the Party. Huge and destructive ego projects like the three gorges dam in the southwest exists because it was Li Peng's dream (he is a hydroelectric engineer), so he could get to be a savior by dealing with China's energy needs. However, dissent isn't really allowed to derail anything, so bad ideas like the dam continue on.

No transparency, lack of official interaction with country and outside of the zhonganhai (when the massive earthquake in the Shaanxi province occured, it was days before the people who could really do anything knew that an entire city was leveled and they heard it from foreigners), local malfeaseance and opaqueness (in order to fix major issues, chinese politicians like one of Mao's cabinet had to work around the system to know that the great leap forward had caused a major famine...and he got removed from power for doing the right thing...and even now, if a central politician wanted the truth, he has to send subordinates undercover to the region to get that truth out of the local cadre office), and no courts that reliably administers a standard law...these problems existed in the west at not so bedeviling levels.

One thing people must realize about China is that it is fundamentally dependent on the West's legal and governing systems in alot of legal and illegal senses, like GATT and swiss banks and World Banks. It's hard to believe that a country that still cries poverty, and which has legit reasons to cry poverty, can be considered a superpower in the near future. How can a country that is dependent on international foreign aid, a striking inability to pay their own state workers, and dealing with considerable cash flight be so readily considered as superpower material?

[battlepanda]

Shah 8,

I don't understand your argument. Yes, the way China is being governed is far from ideal, and yes, down the road it could lead to serious trouble. But by sheer force of numbers, it's hard not to admit that they are a superpower in the making. Remember, the soviets were a superpower for a long time, and they had an even more inefficient and closed off government than the Chinese do now, by light years. Superpower status does not necessarily come with a thriving middle class and open political system, just the raw ability to project their will in international arenas.

[arlie]

From FT Comment & Analysis today, is an article on Chinese domestic capital market: "Unfair shares: a mishandled market structure raises the prospect that China 'will get old before it gets rich.'" by Geoff Dyer and Francesco Guerrera. http://news.ft.com/cms/s/cd31dcf6-9fee-11d9-b355-00000e2511c8.html

[shah8]

First of all, because Russia was an emerging superpower since BEFORE the communist takeover. Operation Barborossa was ALL about preempting superpower status for slavs.

Next, Russia had many more times vaster quantities of natural resources that it could export and use internally as it was growing to superpower status. China has nowhere near the arable land and access to water that Russia had, and most of the natural resource bounty China does have are in distant inland areas.

Next, shear force of numbers has always been a suspect concept. The US was not a particularly powerful country for a long time despite the huge number of people and growth of local economy, because of many things that China suffers from and other things that china does not suffer from. More to the point, the great continental powers have always depended on numbers as per the Stalin quote numbers have a quality all of its own. That quote is not particularly true. Napoleon may have won for a time because he had the biggest armies in Europe, but most groups of people can cope with a numerous adversary so long as they enjoy quality*numbers advantage. The Prussian multiple victories over France and Russia prove that out, even if they lost in part due to anglo alliances. France was never to see the heights of Pax Britannica. Neither did Soviet Russia. Both collapsed pretty badly at the end of it as well.

30 years for the Soviets is not all that long a time, when you think about it. Dar Al Islam, for example, lasted, what...300-400 years? Romans and Persians had at least 100 years at the very top. Chinese had something like 400 years as the master of all they knew. The brits had something like 150 years at the top. None of these guys were at the top because of numbers. If that was true, then Germanicae in the 400s was a surefire rising superpower, rising with increasing standards of living and more people than other groups including the current superpower. Guess what, they took over allright, but they didn't actually have any real power as the byzantines kept whupping them because the ostrogoths were rabble in a decaying roman world, not truly rising.

What matters, what has *always* mattered is organization and control. Whether that be an emperor being certain that his commands be carried out, and that he has the trained people to do his whim, or whether there is a democracy having people vote on each issue and everyone respecting the consensus and people selecting the right people to carry out the will of the many, there is an organization to get a coherent action out of a body of people with capable people doing the tasks. Napoleonic Continental system crashed, I bet in large part due to administrative issues as well as Napoleon being an overweaning megalomaniac. They killed all the smart people and experienced civil service nobility during the terror.

China has way too many independent actors within its own government to assure that commands, legit or otherwise would be obeyed within a reasonable bounds of understanding throughout the country.

Take a look at *all* the true historical superpowers of the world. Almost ALL of the true superpowers had good control, large segment of more educated people, more sophisticated legal systems, and larger middle class than their neighbors BEFORE they became true superpowers. In other words if China was *really* rising, we should see more evidence in progressive changes in governance and economics than we really have.

[wkwillis]

What Shah said, but not what he concluded.
You don't have to have free markets everywhere if you have free markets somewhere. America in 1860 is a case in point. Sure, the southern states were corrupt, inefficient, antidemocratic slaveowners. Didn't do them any good. All the smart southerners just left for the north or the west. The south fell to the north despite all the British could do to subsidise and support them.
China, ditto. If you are smart and hardworking you can leave the corruption behind and go someplace where they are not so corrupt. Just threaten to leave. No rendition because you can pay off the local government and the federal government won't interfere. Free markets in movement tend to reduce corruption. And if you are smart and hardworking in China, you can move to the less corrupt industrial areas.
China may attack too soon, like Germany in the first and second world wars. The government of China wants to attack Taiwan and it may grow afraid that as the younger generation takes over the Chinese government will lose it's desire to conquer Taiwan.
For that matter, as China grows richer and more powerful and more free, Taiwan may lose it's desire for independence. China may become a democracy as the old corrupt leadership retires and wants the rule of law to protect it's ill gotten gains from the next generation of corrupt leaders.
Then again, that kind of removes the problem of hegemony, doesn't it? A rich China that can't be bothered to conquer the world when it can just own it?

[cloquet]

I agree with Jim S. regarding China's medical infrastructure. Here are some thoughts I had on that subject, and economics in general, a couple years ago. I was wondering if any changes had been made since then.

May 14, 2003

Get those health care clowns out of China. Tell China that it must not develop any more manufacturing because with the amount of people that are in this earth today it is an absolute necessity that health care be developed because well- check in biology. If you do not isolate quickly with the population today-very very bad things can happen in a very big hurry. Normally when a bug is in a population and is very very virulent it will wipe out the local population and not spread but once populations are as dense as they are today THE DESELECTIVE ADVANTAGE OF A VIRULENT BUG is no longer there. I would have liked to see some MAJOR MAJOR human rights issues take a BACK SEAT at that particular time as you can see the THIRD WORLD country of North Vietnam performed MUCH MUCH BETTER than Canada. That is a time for the HEALTH POLICE to move very quickly because it is much better to have a TEMPORARY LOCKDOWN OF TRAVEL than to have the whole world die just because some city did not want to ruin its travel industry temporarily. In this country we have the people socialized to the values of PRIVATE HUMAN RIGHTS and PRIVATE PROPERTY RIGHTS and you see where that has gotten us. Once you get rid of the BAD SOCIALIST LEADERS I think you will agree the the SOCIALIST group thinking strategy will be much more successful, and SPEAKING AS A KNOWLEDGE WORKER I do not think this country has the leading edge anymore. The right wingers are just SUCKING THE MONEY UP until everything goes to hell. Think about it the SPACE PROGRAM RAN JUST FINE BY ITSELF IN THE 60'S until we had to START SAVING MONEY and now we have been MAJORLY MAJORLY DISRESPECTED IN THE KNOWLEDGE WORLD by the 2 space shuttle disasters, which I have a hard time understanding why they keep because it seems 'OLD WORLD" and what our knowledge worker guys REALLY REALLY GET A KICK OUT OF is more the astronomy stuff. I guess that's what makes me so mad when I realized that WHY DO THEY BUDGET CUT US AND CALL US WASTE if they just get almost ALL OF THE TAX MONEY BACK THE NEXT YEAR AND ALL THEY HAVE TO DO IS PAY US DECENT WAGES???

Check out Cuba- have Bush SWALLOW HIS PRIDE and check with Castro I can't remember the name of the woman but Cuba HAS A VERY VERY GOOD HISTORY OF RESEARCH ON THIRD WORLD DISEASES and its research workers are mostly women who DO IT BECAUSE THEY LOVE US and not for the money. I know Castro is an asshole but the socialist women devoted to caring are the people I would trust WAY WAY MORE than someone who wants to GET PAID BIG TIME to save the world.

I think if you GOT THE HEALTH CARE CLOWNS THAT ARE IN CHINA out of there and mobilized quickly you could get Sweden, India and North Vietnam to help out, you could have that done very quickly, BUT DON'T YOU THINK IN RETROSPECT THAT IF THE WORLD WOULD HAVE BETTER IF WE WOULD HAVE ISOLATED ALL THE AIDS PEOPLE ON AN ISLAND OR SOMETHING??? I don't know if people would go for that yet.

And as a biologist I don't particularly care for the CLONING trend. I think it just gives me creepy feelings, sort of the extreme right wingers version of biology. It is a VERY VERY BAD TREND IN SCIENCE for KNOWLEDGE TO BE PRIVATIZED. I feel that the large salaries in biotech are to blame for loss of spirit in what used to be more of a collective enterprise. And I really don't buy the idea that if THE COMPANY DEVELOPED THE WHATEVER SO THEY COULD KEEP THE PROFITS is the way to go because OUR WHOLE SOCIETY'S TAX EDUCATION MONEY has helped pay for the knowledge that they have. THINK SPACE PROGRAM. Why not have a REALLY REALLY FUN SPACE PROGRAM pay people decent enough to collect taxes- GO TO A REAL MATHEMETICIAN AND FIGURE THE EXACT AVERAGE exchange rate in an economy of mostly service workers, although our economy is a little more complicated because there are so many levels of government, and that is why localities SEEM TO HAVE BUDGET PROBLEMS, but in fact I think the INCOME GENERATING EFFECT is averaged out over the economy, so that states and localities that do no tax their citizens are subsidized by tax states and localities that do and I think that is something that if you guys did not segregate out is REALLY REALLY STUPID, since manufactured products are a MAJOR SINKHOLE on the income generating function. I think that you are coming to see that EXCESS PRODUCTIVITY has a negative effect because you are racing to the bottom on profits and do not have any money to develop new products. HIGH TECH is not the leading edge any more and you guys are really really dumb to not check with us knowledge workers to see what LEADING EDGE really is because the that is just a fact that once the LEADING EDGE is incorporated into the manufacturing side, it is by definition, NO LONGER HIGH TECH, but is a sign that the country should have been developing something possibly energy related, and they started to do that but then THE RIGHT WINGERS MUST HAVE FORCED COUNTRIES to do something or else there is some MAJOR HIDDEN GUV'T subsidization because I can't figure out why the price of gas is this cheap when you look into average price per gallon to the price of a barrel from before the energy crisis to now. Germany was very very smart not to be pushed by the US because they kept their people that work on making a special product and would rather pay to keep that knowledge than race to the bottom and lose it. I think they have it figured out big time that once the third world countries rapidly socialize the third world women into their traditional service type duties in the high tech hospital care field, and the US has lost its edge, and has generated so much negative publicity with its bullying that we will have a VERY VERY HARD TIME recovering our leadership position.

Plus we are VERY VERY SOON going to lose our edge in the HEALTH CARE INDUSTRY, and that is a VERY VERY BAD THING because we were the leaders, and in research and biology ONCE YOU ARE NOT PERCEIVED AS THE LEADER it has a negative spiraling effect on us KNOWLEDGE WORKERS who are not motivated by money but want to go WHERE THE MOST INTERESTING KIND OF STUFF IS HAPPENING. Check out APOLLO on the internet an Swedish-India group that could SMACK OUR HEALTH CARE UPSIDE THE HEAD any day now and WILL PROBABLY BE HAPPENING VERY VERY SOON because it is a REALLY REALLY BAD THING FOR PEOPLE to have to DIE to send their kids to college, which is what some people would do if they lost my job with health care benefits and could not afford an expensive treatment. Isn't it just really really INTERESTING how WONDERFUL the motivating power of money really is. IF THE NEXT ROUND OF CUTS went through I think the economy would have TANKED TO ZERO VERY QUICKLY because of all the uncollected TAX REVENUE on the high PERSON TO PERSON EXCHANGE VALUE that would have been lost. GO OVER AND HAVE SOME BIOLOGIST STATISTICIAN DO YOUR NUMBERS. Guys that barely know the difference between MEAN AND MEDIAN are a SERIOUS EMBARRASSMENT the knowledge worker field.

WHAT'S THE MATTER WITH YOU GUYS? YOU HAVE MAJOR MAJOR DISRESPECTED THE KNOWLEDGE PROFESSION !!!!

[Ari]

The above comment is trolling.

[chris]

I don't know whether Cloquet's comments are trolling. What is "trolling" or who is a "troll"? I'm guessing at what it means.

Those comments from Cloquet are something, the blogging equivalent of outside art, yet I thought blogging was supposed to be an outsider communications tool?

As for the rate of change in Chinese domestic society, some areas, some parts of the population are chainging rapidly. And the numbers add up, more Chinese entering a middle class level of income that is several times larger than the population of Taiwan.

[DOR]

I think the major missing link in the China outline is the pending financial sector crisis. As far as I know, not one rapidly developing economy has escaped a major financial crisis, at some point.

China has had ponzi schemes aplenty, and the ITICs (international trust and investment companies) were a sort of controlled experiment (what happens if we break this part of the system? Oops!). In the end, China is ripe for a bank run, but my guess is that it will be closer to 2010 than 2006.

On the Taiwan issue, capability is everything. China has no offensive military capability, short of nuclear weapons. The PLA has no history of successfully projecting its military power across its own borders. The Taiwan Strait isn't a cakewalk like, say, the British Channel. This one belongs in the realm of rhetoric, not policy.

Delicious Pundit make a very good point about environmental damage. There isn’t enough water to go around in 2020.

I also note some misinformation in posts above above. For example, the notion that the urban areas are where the prosperity is concentrated (“5 times richer than 25 years ago”). The economic revolution began in the countryside, with the end of communes and relaxation of restrictions on private plots and selling produce in the cities. The farmers of the late 1970s had it so good that people were actually leaving the cities to work on the farms.

In real terms, rural household incomes rose 4.61 times between 1978 and 2003, while urban incomes rose 4.64 times. From the data, it would appear there is a widening rich-poor gap, but when your income goes up nearly 5 times in a generation, such gaps are trivial.

One of the keys to keeping this going (aside from avoiding a seriously damaging financial crisis) is infrastructure. The current rail system is almost entirely north-south, making it unsuitable for developing the western areas.

The legal system: the rule of law is at the best stage it has been in a century. That may not be up to Western standards (or those of Hong Kong), but it is good and improving. If investors want safe, stable legal environments they have the Swiss option readily available.

Final point: immediately disregard any analysis of China that includes the word “investment” within three pages of the phrase “stock market”. China has one stock market (Hong Kong) and three casinos (Shanghai, Shenzhen and Macau).

David O'Rear,
Cal 1978-83
Hong Kong 1984-

[chickensoup]

"In real terms, rural household incomes rose 4.61 times between 1978 and 2003, while urban incomes rose 4.64 times."

I think you have to take into account the separation between agricultural and non-agricultural income, especially because migrant worker wages are counted as rural income, and not urban income. Agricultural income as a percentage of net rural income was ~85% in 1978, but it fell to ~58% by 2003. This would imply an increase in agricultural income by a factor of around 2, and not 4.6 over that same period. It would also imply an increase in non-agricultural wages by a factor of 12. In other words, agricultural income averaged an annual growth of 4.7% while non-agricultural income averaged an annual growth 10.8%.

4.7% growth is not bad, but it's hardly phenomenal given the low starting value. Plus, it's devastating when you look at income growth for the other sectors. Between 1993 to 2003, the fasting growing industries in terms of income were education and government. So, given that government salaries grew at an annual pace of 11% and teacher & admin salaries grew at 14%, you can imagine that the 4.7% means very little for people who rely solely on farming for income. But you know, these are welfare questions and not growing into a superpower questions. It's just incredibly ironic given that China is a communist country.

[Michael Robinson]

"The legal system: the rule of law is at the best stage it has been in a century." --David O'Rear

Hilarious. I've never met anyone who held "the rule of law" under the late Qing in such high regard.

The rule of law in China is at the best stage it has been, ever, because for two millenia China was governed under a Confucian socio-political system which explicitly excluded "the rule of law" as a matter of principle.

[DOR]

chickensoup,

The drop in agricultural income as a percent of total rural income was largely due to township and village enterprises (TVEs: xiangzhen qiye) absorbing local labor. Since such work was more attractive than farming (otherwise people would have stayed in the paddies), it shouldn’t be surprising that non-agriculture’s share of income rose. Perhaps I’m not sure why the source of income – farming vs. TVEs – should be of great concern.

Dwight Perkins [http://post.economics.harvard.edu/faculty/perkins/papers/farmoutput.pdf, p. 29] shows urban and rural food consumption rising at near-mirror rates between 1978 and 2003. Granted, he also shows the break between rural incomes and TVE employment after 1994, but the 15 years before that was where the foundations were laid, and the post-1994 period was when the rural-urban migration really hit home.

Of course, we shouldn’t assume that all this data is 100% accurate!

Michael Robinson,

If you think the rule of law was better in 1915, or 1925 than it was in 1905 then we have a fundamental disagreement on what “rule of law” means. I take it to mean that there are laws that exist and are enforced with a degree of uniformity. Certainly, the Qing mandarin class had advantages, but so does the CCP mandarin class.

[chickensoup]

Like i said, this is mostly a welfare question and not a growing into superpower question. It matters because the lower growth applies a large portion of the populace. I don't have the number of people/families dependent solely on farming income, but I'd bet it's not a small number. In addition, farming is still the primary source of employment for the majority of the populace. Manufacturing income, while high, is not a stable source of income. So, what you have is a large number of people who aren't starving, that's true, but increasingly find it difficult to afford education and medicine, and anything else. It's a matter of inequality and instability.

Of course, it's much better than before. Like you mentioned, the end of the commune system improved things a lot. But, the commune system itself was unnecessary and a contrived bit of policy dictated by the government. So, I'm not sure that's much cause for applause.

[DOR]

chickensoup,

Farming is the primary source of employment for the majority of the populace? Um, no.

The primary third of the economy employs 49% of those with recognizable jobs (365.5 mn of 744.3mn), but that’s only 29% of the population ... and it includes forestry, fishing and mining in addition to just farming. Largest source, yes; majority, no.

I reserve my applause for the reversal of the commune policy. Maybe it shouldn’t have been tried in the first place (although, it did feed the people in the 1950s and 1960s at an unprecedented rate), but the removal was critical to everything that came since 1978.
.

[chickensoup]

When I say populace, I mean the working populace. If I include the entire population, then I'd still assume a proportionate dependency since I'd assume it's children, spouses who don't work, and old people in this category. So, it would still end up being close to 50%. You have a point that maybe it's not over 50%. But, I'd also assume that if all children, spouses and old people were forced to work, then more than half of them would end up farming, so I'd err on the side of 50%+ and not 50%-. Any way you look at it though, my point still holds, even if you want to go with your 29%.

Yes, the communes did help feed the people in the 50's and 60's. But, China always had the option to import food.

[Michael Robinson]

"If you think the rule of law was better in 1915, or 1925 than it was in 1905 then we have a fundamental disagreement on what “rule of law” means." --David O'Rear

That was not my point. You claimed "the rule of law is at the best stage it has been in a century". This phrasing, while strictly true, suggests that China at some point prior to 1905 had achieved a better stage of "rule of law" than is now the case. Which is absurd.

[DOR]

chickensoup,

China didn’t have the import option until well past the point when communes were established. Late 1950s (GLF), at best.

Michael Robinson,

I don’t understand why you think it absurd that China’s rule of law was never any better in the past than it is today. Replace mandarins (good and bad) with cadres and the differences are not that important.
.

[joe stein]

what will save china and improve the world will not be either the ccp or some so-called visionary "leader" The True Revolution of our time will be the:

semiconductor revoution
electronics revolution
digital revolution
internet revolution

Moore'w law has given the world one billion computers and two billion cell phones. Everyone know the Truth, all the time, anywhere.

Truth, Truth, Truth about the evil of the ccp will set china free.

Revoution are made by "rising expectations". (true) People demand change once they know the Truth, all facts about the world.
Real-time facts, Real-time truth will make china a better place.

Real-time truths will end the ccp in our lifetime. Truth will set china Free.

[anne]

http://www.nytimes.com/2006/11/03/world/asia/03china.html?ex=1320210000&en=3d89e6708b2f413d&ei=5090&partner=rssuserland&emc=rss

November 3, 2006

China Courts Africa, Angling for Strategic Gains
By JOSEPH KAHN

BEIJING — Billboards here show elephants and giraffes roaming the savanna. Traffic has been curtailed, construction sites shut down and even the sky has been tantalizingly, if temporarily, blue.

Beijing has put on its best face to court Africa, "the land of myth and miracles," as official posters call it. Political leaders of 48 of the 53 African countries, including 40 heads of state, are to arrive this weekend for a huge diplomatic event, the China-Africa forum.

The official purposes of the three-day event are to expand trade, to allow China to secure the oil and ore it needs for its booming economy and to offer aid to help African nations improve roads, railways and schools.

The unofficial purpose is to redraw the world's strategic map by forming tighter political ties between China, which has the world's fastest-growing major economy, and Africa, a continent whose leaders often complain about being neglected by the United States and Europe.

"African leaders see China as a new kind of global partner that has lots of money but treats them as equals," said Wenran Jiang, a political scientist at the University of Alberta who has studied Chinese-African ties. "Chinese leaders see Africa, in a strategic sense, as up for grabs."

China's enthusiasm for Africa has raised concerns among many in the West while the United States is distracted by its efforts to curb terrorism, and France, Britain and other former colonial powers exert less influence in Africa than they once did....

[anne]

Imagine, then, we are busily tragically crazily occupying Iraq while China is cultivating relations and increasing assistance to Africa. There is irony.

"China's enthusiasm for Africa has raised concerns among many in the West...."

Where then is our enthusiasm?

[anne]

Imagine, China has the vision to have an African summit in Beijing and double aid to Africa. We are busily finding academic reasons why aid supposedly does not work so we can give less while all the time affording a $2 trillion war in and occupation of Iraq. Say what?