David Boettger

China as an Economic Superpower: 'Watch Out Below'

"Marxist theory of capitalism"? Um... Huh? I almost don't know where to start here. Free markets and rule of law have nothing to do with each other. As for free markets not producing monopolists... you might check your early 20th century history. Ever heard of Standard Oil? US Steel? Carnegie? Rockefeller? For more modern examples, check out Hong Kong - a free market by any standard - and the handful of tycoons that controls every aspect of the economy. Just try starting a business that competes with one of Li Ka-Shing's businesses and see how quickly you can compete away his profit advantage.

A recurring theme amongst people that speak about China while knowing nothing about the place is that they think it's Communism/Marxism/The Party that's produced the current political-economic situation. In fact, the elites in China have manipulated the political system for their economic advantage for thousands of years. The common people have been disenfranchised for thousands of years. The Communist Central Government is just another Chinese dynasty, with the possible exception that they actually give a crap about the people's welfare (albeit for less-than-altruistic reasons).

And to the point at hand, there are hundreds of thousands of extremely well-connected vested interests in China who will use every last gram of their political power to ensure that something like the chart above doesn't happen. Further, the total collapse of FDI that would occur as a result is too politically risky - and too much of a loss of face - for the Central Government to tolerate. It often doesn't pay to be too rational/mathematical when analyzing Chinese markets; <b>everything<... in China is political.