[Marxism] Exaggerating Chinese economic power

Louis Proyect lnp3 at panix.com
Sun Jul 27 07:26:38 MDT 2008

A Long Wait at the Gate to Greatness

By John Pomfret
Sunday, July 27, 2008; B01

Nikita Khrushchev said the Soviet Union would bury us, but these 
days, everybody seems to think that China is the one wielding the 
shovel. The People's Republic is on the march -- economically, 
militarily, even ideologically. Economists expect its GDP to surpass 
America's by 2025; its submarine fleet is reportedly growing five 
times faster than Washington's; even its capitalist authoritarianism 
is called a real alternative to the West's liberal democracy. China, 
the drumbeat goes, is poised to become the 800-pound gorilla of the 
international system, ready to dominate the 21st century the way the 
United States dominated the 20th.

Except that it's not.

Ever since I returned to the United States in 2004 from my last 
posting to China, as this newspaper's Beijing bureau chief, I've been 
struck by the breathless way we talk about that country. So often, 
our perceptions of the place have more to do with how we look at 
ourselves than with what's actually happening over there. Worried 
about the U.S. education system? China's becomes a model. Fretting 
about our military readiness? China's missiles pose a threat. 
Concerned about slipping U.S. global influence? China seems ready to 
take our place.

But is China really going to be another superpower? I doubt it.

It's not that I'm a China-basher, like those who predict its collapse 
because they despise its system and assume that it will go the way of 
the Soviet Union. I first went to China in 1980 as a student, and 
I've followed its remarkable transformation over the past 28 years. I 
met my wife there and call it a second home. I'm hardly expecting 
China to implode. But its dream of dominating the century isn't going 
to become a reality anytime soon.

Too many constraints are built into the country's social, economic 
and political systems. For four big reasons -- dire demographics, an 
overrated economy, an environment under siege and an ideology that 
doesn't travel well -- China is more likely to remain the 
muscle-bound adolescent of the international system than to become 
the master of the world.

In the West, China is known as "the factory to the world," the land 
of unlimited labor where millions are eager to leave the hardscrabble 
countryside for a chance to tighten screws in microwaves or assemble 
Apple's latest gizmo. If the country is going to rise to 
superpowerdom, says conventional wisdom, it will do so on the back of 
its massive workforce.

But there's a hitch: China's demographics stink. No country is aging 
faster than the People's Republic, which is on track to become the 
first nation in the world to get old before it gets rich. Because of 
the Communist Party's notorious one-child-per-family policy, the 
average number of children born to a Chinese woman has dropped from 
5.8 in the 1970s to 1.8 today -- below the rate of 2.1 that would 
keep the population stable. Meanwhile, life expectancy has shot up, 
from just 35 in 1949 to more than 73 today. Economists worry that as 
the working-age population shrinks, labor costs will rise, 
significantly eroding one of China's key competitive advantages.

Worse, Chinese demographers such as Li Jianmin of Nankai University 
now predict a crisis in dealing with China's elderly, a group that 
will balloon from 100 million people older than 60 today to 334 
million by 2050, including a staggering 100 million age 80 or older. 
How will China care for them? With pensions? Fewer than 30 percent of 
China's urban dwellers have them, and none of the country's 700 
million farmers do. And China's state-funded pension system makes 
Social Security look like Fort Knox. Nicholas Eberstadt, a 
demographer and economist at the American Enterprise Institute, calls 
China's demographic time bomb "a slow-motion humanitarian tragedy in 
the making" that will "probably require a rewrite of the narrative of 
the rising China."

I count myself lucky to have witnessed China's economic rise 
first-hand and seen its successes etched on the bodies of my Chinese 
classmates. When I first met them in the early 1980s, my fellow 
students were hard and thin as rails; when I found them again almost 
20 years later, they proudly sported what the Chinese call the "boss 
belly." They now golfed and lolled around in swanky saunas.

But in our exuberance over these incredible economic changes, we seem 
to have forgotten that past performance doesn't guarantee future 
results. Not a month goes by without some Washington think tank 
crowing that China's economy is overtaking America's. The Carnegie 
Endowment for International Peace is the latest, predicting earlier 
this month that the Chinese economy would be twice the size of ours 
by the middle of the century.

There are two problems with predictions like these. First, in the 
universe where these reports are generated, China's graphs always go 
up, never down. Second, while the documents may include some nuance, 
it vanishes when the studies are reported to the rest of us.

One important nuance we keep forgetting is the sheer size of China's 
population: about 1.3 billion, more than four times that of the 
United States. China should have a big economy. But on a per capita 
basis, the country isn't a dragon; it's a medium-size lizard, sitting 
in 109th place on the International Monetary Fund's World Economic 
Outlook Database, squarely between Swaziland and Morocco. China's 
economy is large, but its average living standard is low, and it will 
stay that way for a very long time, even assuming that the economy 
continues to grow at impressive rates.

The big number wheeled out to prove that China is eating our economic 
lunch is the U.S. trade deficit with China, which last year hit $256 
billion. But again, where's the missing nuance? Nearly 60 percent of 
China's total exports are churned out by companies not owned by 
Chinese (including plenty of U.S. ones). When it comes to high-tech 
exports such as computers and electronic goods, 89 percent of China's 
exports come from non-Chinese-owned companies. China is part of the 
global system, but it's still the low-cost assembly and manufacturing 
part -- and foreign, not Chinese, firms are reaping the lion's share 
of the profits.

When my family and I left China in 2004, we moved to Los Angeles, the 
smog capital of the United States. No sooner had we set foot in 
southern California than my son's asthma attacks and chronic chest 
infections -- so worryingly frequent in Beijing -- stopped. When 
people asked me why we'd moved to L.A., I started joking, "For the air."

China's environmental woes are no joke. This year, China will surpass 
the United States as the world's No. 1 emitter of greenhouse gases. 
It continues to be the largest depleter of the ozone layer. And it's 
the largest polluter of the Pacific Ocean. But in the accepted China 
narrative, the country's environmental problems will merely mean a 
few breathing complications for the odd sprinter at the Beijing 
games. In fact, they could block the country's rise.

The problem is huge: Sixteen of the world's 20 most polluted cities 
are in China, 70 percent of the country's lakes and rivers are 
polluted, and half the population lacks clean drinking water. The 
constant smoggy haze over northern China diminishes crop yields. By 
2030, the nation will face a water shortage equal to the amount it 
consumes today; factories in the northwest have already been forced 
out of business because there just isn't any water. Even Chinese 
government economists estimate that environmental troubles shave 10 
percent off the country's gross domestic product each year. Somehow, 
though, the effect this calamity is having on China's rise doesn't 
quite register in the West .

And then there's "Kung Fu Panda." That Hollywood movie embodies the 
final reason why China won't be a superpower: Beijing's animating 
ideas just aren't that animating.

In recent years, we've been bombarded with articles and books about 
China's rising global ideological influence. (One typical title: 
"Charm Offensive: How China's Soft Power Is Transforming the World.") 
These works portray China's model -- a one-party state with a 
juggernaut economy -- as highly attractive to elites in many 
developing nations, although China's dreary current crop of acolytes 
(Zimbabwe, Burma and Sudan) don't amount to much of a threat.

But consider the case of the high-kicking panda who uses ancient 
Chinese teachings to turn himself into a kung fu warrior. That recent 
Hollywood smash broke Chinese box-office records -- and caused no end 
of hand-wringing among the country's glitterati. "The film's 
protagonist is China's national treasure, and all the elements are 
Chinese, but why didn't we make such a film?" Wu Jiang, president of 
the China National Peking Opera Company, told the official New China 
News Agency.

The content may be Chinese, but the irreverence and creativity of 
"Kung Fu Panda" are 100 percent American. That highlights another 
weakness in the argument about China's inevitable rise: The place 
remains an authoritarian state run by a party that limits the free 
flow of information, stifles ingenuity and doesn't understand how to 
self-correct. Blockbusters don't grow out of the barrel of a gun. 
Neither do superpowers in the age of globalization.

And yet we seem to revel in overestimating China. One recent evening, 
I was at a party where a senior aide to a Democratic senator was 
discussing the business deal earlier this year in which a Chinese 
state-owned investment company had bought a big chunk of the 
Blackstone Group, a U.S. investment firm. The Chinese company has 
lost more than $1 billion, but the aide wouldn't believe that it was 
just a bum investment. "It's got to be part of a broader plan," she 
insisted. "It's China."

I tried to convince her otherwise. I don't think I succeeded.

pomfretj at washpost.com

John Pomfret is the editor of Outlook. He is a former Beijing bureau 
chief of The Washington Post and the author of "Chinese Lessons: Five 
Classmates and the Story of the New China."

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