Waiting For China's Real Test to Begin

Come on......how great can China be? Haven't we heard this before? Didn't the same hyperbole get spun during the 80s about Japan? If I remember correctly, at that point America was doomed to be overtaken by the land of the rising sun. The belief then was that we couldn't compete and our days in the sun were over. Now China comes along - 10 time the size of Japan, communist, and filled with overflowing promise and ambition.

Well...if it sounds too good to be true then it probably is.

We're seeing that now in the markets and it will likely get worse. The truth about economies is that it is easy to catch up with the industrialized countries. Why? The path is already laid. Much of what China is doing is just copying the industrialization path that America took at the beginning of the 20th century, Japan took (again) during the 1970s-80s, and Great Britain undertook during the mid to late 19th century. Once a nation catches up to the industrialized giants, it's harder to come by huge growth and quick riches. Economically mature countries must create new industries and sciences. Only from these can they ensure continued growth and wealth. China is growing fast, but this will slow and when it does, China's real test will begin.

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Comments

[ehp246]

This is the best you have? "China will slow?" No crash and burning, no train reck? Oh, come on, this is a Communist country for god's sake. It's got to be worst than just "slow".

2007 Nov 06 08:39 AM

[rlirph]

True...except this Communist government is probably more capitalistic than the U.S. government. Take a look at what they have done - artificially low currency exchange, barriers to foreign trades especially banks and insurance companies, retailing etc. etc.

To those who hope China will crash and burn, good luck! With a foreign reserves of US$1.4 trillion, one can make lots of mistakes and still be able to stay afloat.

2007 Nov 06 09:08 AM

[rlirph]

Just another China bashing posting! Since yesterday PetroChina is the favorite target because by one measure it has become the world's #1 largest company.

The truth is that China will continue to grow until 2025 or 2030 when it will overtake US as the world's #1 economy. Why should Americans be threatened? Because at that time the per capita income in China is still 20% of the US counterparts.

If you are willing to throw away your jealousy, there are plenty of money to make in China, even for foreigners. I, for one, have moved from Los Angeles to Guangzhou and love every moment in China (even though I have never lived in China in my life!).

With my thirty years in the US one can be steps ahead of the other people and be able to benefit economically. I for one am very grateful and thankful to be here.

2007 Nov 06 09:04 AM

[omooc]

The way you framed it, it reads as if 19th century England "copied" from 20th century USA. Well done. "This will slow" -- when will the slowing come about? Of course, in time, every one -- and every nation -- slows down. The question is when? omooc

2007 Nov 06 09:34 AM

[J.D]

China crash? No way. Governments have a wonderful record when it comes to deep interference in business decisions. Systemic corruption isn't nearly as bad as you think. Capital controls and market bubbles are good for wealth creation over the long term. Information control and manipulation helps decision makers. Over-investment is impossible, per capita. Past GDP growth is a wonderful predictor of the future. Effective financial intermediation is overrated. Nothing unexpected ever happens in emerging markets. And hey, it's not just the 1.4 trillion reserves, there's a big army to keep things in order should the situation really look bleak. China has found the secret of eternal growth and bliss so it's only a matter of time before the whole world becomes a police state and starts pumping its economy on empty highrises, shoddy goods, market manipulation, and environmental degradation. China crash? Impossible, it's such a low risk model.

2007 Nov 06 02:48 PM