China's Economy Is a Paper Tiger

Wall Street Journal ^ | Tuesday, August 5, 2003 | HUGO RESTALL

[presidio9]

Americans seem to be fixating these days on the idea of China stealing away American jobs. The timing is puzzling because fear of China among its developing-country neighbors, who had much more plausible reasons to worry about the impact of this rising competitor in the same economic niches, has peaked and started to fade. Instead, Asians seem to have realized that not only is the China threat overrated, but the country is an engine of growth that benefits them.

[.cnI redruM]

This reminds me of what Great Britain was doing in the early and mid-70's. The British bankrupted themselves propping up delapidated industries just to keep people employed. It's part of what lead to the famous Margaret Thatcher slogan. "Labour doesn't work." China practices European Democratic socialism without the democracy.

[Lazamataz]

Americans seem to be fixating these days on the idea of China stealing away American jobs, starts the article. And then the article goes along merrily, never once refuting that concern.

In other words, Americans are right to fixate these days on China stealing away American jobs.

[ARCADIA]

The Chinese government then takes away the dollars earned by selling these products and loans them back to the U.S. at low rates so that those American consumers can keep on buying and American companies can keep investing.

Which still leaves us in deep debt, unemployed, with a reduced manufacturing base. I fail to follow the logic here. Remember back when we use to call this stuff predatory dumping?

[LibertyAndJusticeForAll]

"But the point here is that Americans should be sanguine about China's development model."
Well, I'm not sanguine about China's development model and these are just a few of the articles that logically explain why:

"China Getting Ready for Severe Blitzkrieg"
http://www.freerepublic.com/focus/f-news/957406/posts

"The Fed is in a dangerous game with China"
http://www.freerepublic.com/focus/f-news/955889/posts

"Trade With China Is Heating Up As a Business and Political Issue"
http://www.freerepublic.com/focus/f-news/955104/posts

"AMD to Help Power Supercomputer in China"
http://www.freerepublic.com/focus/f-news/953831/posts

[RippleFire]

bump

[LS]

Manufacturing base for WHAT? Ceramic goods? Toys? This is the same argument that consumed people about JAPAN, which did the same thing---"protected" its industries so they could "compete" with ours, and promptly bankrupted their shipping, banking, and other sectors. Yes, some of their autos are very competitive (especially Honda, which the government tried to block from entering auto production). But Japan's investment in the next wave computer was a colossal disaster, eating up $5 BILLION, and it had to give up its "spaceplane" program and forget about competing with our aircraft companies. If this is what awaits China, by all means, continue.

[KC_Conspirator]

Americans seem to be fixating these days on the idea of China stealing away American jobs, starts the article. And then the article goes along merrily, never once refuting that concern.

In other words, Americans are right to fixate these days on China stealing away American jobs.

You know what, you are exactly right.

[bmwcyle]

Any economy proped up is as real as the western town in a movie.

[RayChuang88]

Yes, some of their autos are very competitive (especially Honda, which the government tried to block from entering auto production).

Honda showed the Japanese how to properly enter the US market, starting with the breakthrough Honda Civic CVCC hatchback that set a new standard for reliability and low emissions back in 1970. Today, it's small wonder why Honda is such a huge success in the US market. The only reason why Toyota (a company "favored" by MITI) has been just as successful is the fact Toyota decided to agressively go after the US market in the same manner Honda did--the current Toyota car line for the US market are models that were developed specifically for American tastes with very few exceptions.

[HighRoadToChina]

BUMP for later.

[John H K]

Had there been a FR in the early 80s, people would have been OBSESSED with the "economic threat from Japan" and job losses thereto even more than they are with China now.

And any prescient authors forecasting the economic problems Japan has now would have been laughed off the board.

[sphinx]

We are just back from China, and rising affluence is visible on the street. We were told that 12% of the Chinese now own their own cars (for which they pay cash, as there is no financing), and my friend at Daimler Chrysler says the automakers anticipate continuing explosive growth for the intermediate future. The household Holy Trinity of refrigerator, washing machine, and television is now standard in the cities and increasingly common in the country. Air conditioners are hanging out of windows in even very modest buildings. We spent time in a provincial city and did our shopping in perfectly adequate (and crowded) western-style supermarkets and department stores. Small town and country life is surely very different, but the change in the cities is overwhelming.

They do still have Mao's tomb and portrait in Tiananmen Square, but a rising number of people surely understand the wrong side won the civil war.

I ain't no expert, but I returned somewhat more sanguine about China's economic challenge. China will obviously be a formidable low cost competitor for years to come, but just as obviously, rising living standards will tend to erode that advantage over time. Right now the asymmetry may seem overpowering, but once China reaches middle class status -- think Korea and Taiwan today -- the relationship will be much healthier. This may happen sooner than we think, provided they manage the political transition without major missteps.

[John H K]

Actually, oddly enough, the situation you describe is more politically dangerous than simply living in grinding poverty year after year.

It's called a "crisis of rising expectations." You don't get revolutions from year after year of the same old poverty; you get them when conditions improve and then stop improving.

Any economic misstep or stall by China may well result in a civil war of unbelievable proportions, warlordism, millions dead, etc.

China oscillates between warlordism and a dictatorial central government, and has for thousands of years.

[ARCADIA]

If you are unemployed, or underemployed, would you care about China's potential woes ten years from now? That's a concern for globalist and free traders. The real issue is jobs leaving our shores, or American jobs filled by non-American labor. When 25 million free traders face off against 250 million organized workers, the result is a foregone conclusion.

[Post Toasties]

That may be the case, but it doesn't mean that tariffs and protectionism from countries like Japan and China don't hurt the US job market. The US once had its own television industry, for instance.

[sphinx]

I agree about the crisis of rising expectations. It is a potential threat. The other "Asian Tigers" have weathered political crises along these lines from time to time, and China will not be immune. China must also navigate the passage to social liberalization and eventual democracy, in whatever localized form that may take. I do not underestimate that challenge either.

That said, given modern communications and transportation, the world cannot continue 10% wealthy and 50% desperately poor. It is a wonderful thing that an increasing number of non-European cultures are finally figuring out how to make a modern economy work. Japan showed it could be done. The other Asian Tigers are following along. The modernization of China and India will move the majority of the world's population into prosperity. This is a good thing.

Culture matters, and I do not expect to live long enough to see the Arab world or Africa figure it out. But I do look forward to poverty becoming the global exception rather than the rule.

[ChadGore]

Re: with its currency so tightly pegged to the dollar

False. Their currency does *not* float and isn't accurately valued.

[q_an_a]

of today's chicken little posters you have made a reasoned comment. goo dfor you. did everything this guy explained go unnoticed by the "readers" of this article?

[old-ager]

Similar analysis on India please -- anybody?