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04/03/2005

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A Chinese

In some extend,I agree to Prof.Posner's analysis on currently china's situation.However,the result of his analysis may make a larger mistake,which maybe caused by some indirect information sources.I just want to said that DON'T USE AN OUTER ANALYSIS CRITERION OR WESTERN VIEW TO THE CHINA AFFAIR THAT MAY MORE COMPLEXITY THAN YOUR CONSIDERED.

jack

Part of outflanking China requires fostering stable democracies in the "-stan" nations, promoting transparency in Russian governance, promoting the economic interests of India, and promoting the interests of Japan and South Korea (which seeks reunification with the North).

Why is it that China, instead of India, has most favored nation status?

I read somewhere, perhaps it was by Niall Fergueson, that China continues to purchase our debt because if it didn't its own markets would collapse, so the continued purchasing of our debt by China is the equivalent of a tribute being paid by a colony to the crown.

logicnazi

These seem like reasonable points and I don't see anything to disagree with. I am a little curious on what grounds Posner alledges that the gender imbalance is likely to lead to lower female marriage ages (which seems reasonable) as well as fewer women in the workforce. I mean one might alternatively think that with few women they would be in high demand and gain a high status. I seem to remember reading some studies suggesting that Posner was right and that women actually suffer when they are in the minority but I'm wondering if anyone knows the source.

Secondly as a comment I am constantly amazed that these discussions about countries constantly bring out this us vs. them mind set. Why do you (meaning some of the other commentators) care if it is the US or a future (possibly democratic) china that is more economically powerful? Self-interest is of course a powerful motivation but in the modern world personal self-interest and the interest of the nation state can often diverge (e.g. if you believe the US will suffer because of a poor education system when you have a PhD...arguably your interests are best served by maintaining your educational advantage).

I mean the chinese are people with the same moral worth as people in the US and I just find it so strange about how arbitrarily we choose to care about the nation state rather than care about things at the city or state level, or the continent level or that of all humanity. I mean ultimately shouldn't the question be how well off humanity is during the next century not which country will come out on top.

Note this isn't directed at Posner or Becker who seem at root to be discussing a question of what is the best economic model not writing a patriotic polemic.

Zathras

This same comment could, of course, have been made a century ago with respect to Wilhelmine Germany. Why should not Germany have been permitted to dominate continental Europe?

The reason was that whatever the respective "moral worth" of peoples, German political values were fundamentally different from those of other European countries. Chinese political values today are at least as different as those of its neighbors. Moreover -- and this really should be so obvious as not to require comment -- the geopolitical status quo in the Western Pacific and East Asia has worked to the great advantage of nearly every country in the region for over half a century, including China. Changes to it, from whatever cause, ought to be viewed with great caution.

R

You confuse the above post. Modern China has not proven an intent to engage in wars of conquest, as did Wilhelmine Germany. Logicnazi's point was limited to the economic context.

The point (or what I took to be the point) was that it is a little strange for us to worry so much over which country will win the "best economy" prize in the future. It probably bears on our individual self-interest somewhat, but less so than other things over which we have more direct control.

There is something else at work here -- patriotism or tribalism or whatever. I feel its pull as well. I think the point was just that we should recognize this motivation for what it is, perhaps question its logic.

In the event that China actually threatened the political stability of the region, I don't think Logicnazi's post would counsel against prudent intervention.

You will counter by arguing that China actually does threaten Taiwan. Very well, yes. And the economic and political realms are entertwined. But I think the point was limited to a reflection on anxiety over China's economic growth, for the reason that it might bump the U.S. off the top economic rung, and to that extent, was valid.

bc

Clearly, China's economic growth in itself is a good thing, but I am sympathetic to Posner's worries about the potential of Chinese nationalism. As the Chinese government continues to loosen its grip on the commercial sector, economic growth will continue at a high rate. But what happens when the Chinese economy (inevitably) hits a bump in the road and suffers a recession/depression? You could get a dissatisfied, disillusioned public ripe for nationalistic demagoguery. The reason China is prone to a post-Maoist fascist scenario is that, although it is liberalizing economically, it is not liberalizing culturally or politically at the same rate. Becker notes that Chinese rates of education are rising, but this education falls short of what we would call "liberal" education, which requires open but critical engagement with ethical pluralism. Liberal democratic market society, which sustains over time good things like human rights, peace, and even a dynamic entrepeneurial class (which needs civil as well as economic freedom to do what it does: innovation), requires citizens who have what we might call, following philosopher Charles Taylor, a liberal democratic "social imaginary." That is, they must have certain sorts of virtues, capacities, and explicit and tacit knowledge to know how to get around in and support liberal democratic market society. The Chinese may be learning free markets, and also some aspects of civil freedom, but are still a long way from developing the liberal democratic social imaginary. This (plus its historical national self-esteem problem) is why China, the economic-military giant, is prone to an illiberal and potentially dangerous nationalism. Hopefully, Becker and Posner are right that as China develops, the Chinese people will demand civil and political rights that will be granted, and China will become more liberal and democratic. Our foreign policy should be aimed at helping this process (and I think an initiative to encourage genuine liberal education is crucial as well). But we should be wary of the post-Maoist fascist potential of China.

kingsadvocate

One important way that I think either China or India is different than some of the other named countries can be attributed to "off-shoring."

I agree that at a certain point they can no longer expand by catching up, they both must compete with the other players. Making a BIG assumption that both countries continue to prosper under good governments and develop the necessary commercial, banking, and debt law--I think off-shoring still provides both countries with an advantage their industrial predecessors did not have.

Off-shoring, of course, permits the respective countries to siphon off intellectual and trade know-how, but I think these countries can continue to be competitive (and growing economically) even after they have caught up to the Western industrial countries. This is because the cost of having those services performed in either China or India will continue to be cheaper (compared to having those same services performed in the West) for a longer period than it will take those countries to reach basic parity with Western corporations and economies.

So, I think that although they will not be as competitive as other countries in producing industrial or consumer electronics, cars, aircraft, and so on, they will continue to be competitive in providing quasi-professional services in their off-shoring capacity. Perhaps, as Judge Posner suggests, this is a niche market. And, I suggest, that they will continue to be the most competitive supplier to this market. Maybe off-shoring will not be enough to surpass the US or the EU, however, because the demand for off-shoring will continue, these countries will be able to weather being less competitive in other areas, much longer than they might otherwise be able to.


Sam Lew

I was a bit surprised that neither Becker nor Judge Posner ( ;-> ) mentioned the lack of the rule of law in China as a countervailing force against China's continued economic growth.


Commercial contracts can't be enforced, no legal compensation for problems with products manufactured with substandard parts, no protection for Intellectual Property rights (mentioned by both Becker and Posner) and no ability to withdraw earned capital (is it true that taking capital out of China can be a capital offense, as one importer of Chinese parts told me?).


I suspect this problem is far from trivial. Does China have the human infrastructure required to implement an entire uncorrupted civil and criminal legal system needed for a modern economy?

For a nation of over a billion people, that might mean training hundreds of thousands of objective judges, prosecutors and lawyers, something China probably has not been doing since 1949.

I suspect the gap between wages and selling price is currently large enough to keep everyone happy. But when wages and other costs increase (NYT article about that the other day) and profits are squeezed, will the Chinese legal system be able to deal with the inevitable disputes?

If not, foreign producers and investors may flee. It's arguable that Africa is a commercial wasteland because of deep and broad corruption, effectively a multilayered variable tax system with no possibility of appealing unfavourable rulings.

But as in every prediction about China, all you can end with is "I guess we'll see".

Corey

Obviously China is undergoing change and development, but it is funny how often Western Commentators simply assume that they are developing towards a Classic Western Liberal Economy of free contract and individual property rights.

Recent historical demonstrations of the unworkability of totalitarian schemes in competition with free-market economies do NOT lead the the necessary conclusion that the best thing for China is to copy the current US system.

China seems to be operating as proof that you can compromise between lassiez-faire and state socialism. It is perhaps arrogant to assume that
China would be better off if it instituted protection for contracts and intellectual property. I think it would only be better for US interests in China.

Certainly a ban on the ability to withdraw earned capital is a rational response to the abuses of the WTO and World Bank plan elsewhere in the world. Countries in Central and South America have found it quite difficult to develop things like basic social services when up to 40% of their GNP is ultimately extracted to the US or Europe by multinationals.

Liberal Democratic Market Society is not the only way to protect human rights and peace. In fact, if you look at the overseas record of the US with the blinders off, it doesn't seem like a particularily effective one.

Nak

It seems up to this point, the comments have increasingly diverged from the point at issue. The point Professors Becker and Posner have commented on is the economic potential of China, not whose regime is better. Along this line, its my opinion that the current regime of China cannot out-grow U.S. economy, much less sustain a high-growth one. The reasons have been set forth succinctly by the professors, and as Prof Becker and Posner stated, it's way too early to tell what will happen in the future.

In regards to China's legal system, I'm aware that many seasoned U.S. attorneys, public defenders and the like are spending months at a time in China training young Chinese attorneys. Exactly on what basis the training is structured on, I'm not sure. But I'd imagine it's a Western-style rule of law.

RWS

I think that Chinas nondemocratic status will continue to result in the government privileging itself at the expense of the people whenever it can get away with it and find a convenient humanitarian rationale. Monkeying with the monetary system is just the most public, obvious, and large part of this phenomenon. I think that the undervaluation of the currency acts to benefit state export-oriented companies, which of course benefits the Chinese governmental officials and Communist Party. Hence, it persists, to the detriment of Chinese consumers and to sustainable, natural economic growth. Inevitably, though, either reality will sink in internally, or the WTO will finally find a way to get the Chinese government to let the currency rise some. Bank subsidies and other such graft will continue to plague that country and create the kind of false growth that has almost always persisted in totalitarian countries. Lastly, you have to think that the welfare state is going to become a major problem in some form or fashion with the sharply declining birth rates and quickly aging population. In addition, where there are more men than women, the men without wives and families can be expected to be less productive, as they have fewer mouths to feed.

The country to watch is India, imo. They have a democratic and therefore accountable government, better property rights, great work ethic, and exploding, youthful population. Hopefully, that country will be a good market for our products. I would definitely buy stock in Indian companies.

David

Just another thought: China will never be rich relative to the world until it permits its currency to float. Perhaps the Chinese government and large Chinese companies can become financially secure by putting their investments in dollars, Euros, or yen. However, as long as the yuan is artificially tied to the dollar (and thus practically worthless in real terms), the average Chinese citizen will not be able to purchase foreign goods (non-pirated, that is) or travel abroad. China's economy is currently being artificially inflated by underpaying the Chinese worker, resulting in cheap prices for Chinese exports and profits for companies that export products to the west. Still, this does not make China a rich country, as a whole.

I make this as just a general observation; I admit to not knowing much about the details of China's economy.

TG

I think a greater long-term trend may have been missed in both analyses. What about demographics?
I believe it was 1973 when China instituted population laws. Even partial effectiveness of these laws could have huge bearings on the future elderly of China, and in turn may possibly bear on the Chinese economy.
My thinking--China may not yet be rich/stable enough for the majority of citizens to be able to fully smooth out their consumption through savings. At this point, were it not for the natural obstruction of population law, they would be having more children to support them in their age, rather than entering a liftime savings cycle of sorts.
However, they are forced artifically into attempting to save. If they are not successful at doing so effectively, then I do not think it too alien a thought to think that China will be forced to support them through governmental intervention.
Depending on the demographics, such an intervention may have to be massive, and disrupt Chinese growth dramatically.

A disclaimer--I am not familiar with specific demographic values/consumption levels/wage rates, I only throw this out as a rough thought to be considered.

John

I suspect China will overtake the US economically this century, though I'd absolutely love to and may be wrong.

Why think this? All the standard reasons, but with a few points particularly emphasized: first, China is HUGE, population-wise, not substantially smaller than the US (as with every other example of would-be overtakers). Second, we live at last in the age of market economics, when even mainstream economists have some serious understanding of these things ;^>; China's authoritarian technocrats have a much better chance of getting it right than previous generations of ATs. Third, militant nationalism is indeed a possible threat to the rest of the world (particularly when thoroughly modulated by propaganda)--this is my profound concern about the rise of China--but it's also a powerful motivating tool for Chinese scientists, entrepreneurs, and workers, which (when combined with the above two factors) may let China innovate and dominate despite a lack of political freedom.

Let's hope and pray the China becomes a pacific (not just Pacific) giant--the all-too-plausible alternative could be disastrous for the entire world, ultimately even including China.

RWS

John, don't you think that the severe market distortions that have been going on for well over a decade now will eventually result in some sort of market correction? There is no free lunch. If the country continues to artificially inflate its export sector by depressing its currency, eventually that phenomenon will become unsustainable to the macroeconomy of China. Just as Japan and the other east Asian tigers underwent a major correction, so, one would think, will China.

India's the dark horse here, because its robust system of property rights and skilled labor are far better engines of growth than a country with rampant corruption and market distortion, not to mention population control coupled with major social welfare liabilities.

carlos castillo-armas

The difference between present day China and Wilhelmine Germany is SIZE.

Like all young nations they are afraid of their neighbors, insecure of their own strength because of inmaturity. They can only self destruct in my opinion if they fail to learn and change as they grow. They need not fear Japan or India or the United States. Anyone would be stupid to begin a war with the country that has the world's biggest by far population. I hope and I pray that their continued economic growth will be accompanied by political and intellectual growth.

Wanted: Native Chinese teacher must be fluent in
Cantonese ...

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