Doubting the Chinese Miracle
Here’s a contrarian viewpoint that seems to be gaining favor among prominent Sinologists: As regards China’s rise, take nothing for granted. A little bit of skepticism can be healthy for everyone.
I say “contrarian” because it seems as if so much writing about China today is based on the premise that China will most certainly continue to grow at an unprecedented pace, and thus easily assume its place among the pantheon of great powers.
The fact of the matter is that because China has been able to sustain growth rates that were once thought unsustainable, many of us have begun to take the Chinese “growth miracle” for granted. Of course China’s economy will grow by 7%, 9%, 11% this year, we think. The numbers are automatically baked into next year’s global economic outlook.
What we seem to forget is that the chances of this miracle being interrupted are quite high. China’s growth “will not necessarily be a ‘linear’ rise without complications,” according to Richard Armitage and Joseph Nye, two of our foremost Asia experts and co-chairs of CSIS’ new report on “The U.S.-Japan Alliance: Getting it Right Through 2020.”
Here, according to the authors, are some of the potential potholes in China’s way:
- Large and growing disparities in development
- Systemic corruption
- Growing labor unrest
- An aging society
- A weak social safety net
- Weak banking and financial system
- Lingering ethnic disputes
- Environmental problems “almost unimaginable to Westerners”
- Vulnerability to epidemic disease
Jagdish Bhagwati, in a review of Will Hutton’s new book, adds to the list:
- Inefficiency of its state-owned enterprises
- Problems with its exchange-rate policy
- Relatively slow adoption of information technology - “the PC is incompatible with the C.P.”
- Human rights and its effect on China’s trade partnerships
That’s quite a risk premium. Mix two or three of these together and you have a powder keg. And there are many, many permutations.
Don’t get me wrong–I’m not betting against China’s continued growth. And I don’t exactly feel sorry for China, either. It’s only that given the magnitude and diversity of the challenges that lie ahead, it’s hard to believe that it won’t be a bumpy process filled with painful moments for China.
The real point is that these risk factors have always been present in China. Nearly all of China’s strategies and choices are shaped by them. It’s just that we’ve stopped paying as much attention.
February 21, 2007 at 4:08 am
That’s a great point. It does almost seem inevitable that China will continue to develop linearly. China’s economic growth and development has had no major setbacks since Reform and Opening began, and as you mention, “has been able to sustain growth rates that were once thought unsustainable.”
This reminds me of something David Wolf of Silicon Hutong wrote in his other blog, The Peking Review, “In China we are so accustomed to doing business amid great uncertainty that we come to take it for granted.”
And just as David says, “You wind up numbed to how bloody risky it is to do business of any kind here. That’s not good, especially if you’re putting your money into China.” Even more so if we forget that China’s continued smooth short-term development in and of itself is still pretty uncertain.
February 23, 2007 at 4:18 pm
[...] China Finances America’s Future China will have to manage substantial risk factors if it is to sustain its unprecedented economic development and growth into a major global power. [...]
February 25, 2007 at 1:28 am
Ben,
I just want to say that your analysis on this blog has been wonderful, objective, and well-thought. Kudos to you, please keep up the great work.
I’m a historian, not a futurist. But looking at China’s history, one could easily find examples or close variations of the nine problems listed in the Nye and Armitage report. As Ben notes, when two or three of these mix, the result is destabilizing to say the least. By way of example one could look at the late-Qing (environmental pressures, labor unrest, systemic corruption, developmental disparities, and ethnic tensions) or the “Nanjing Decade” (1927-1937) (systemic corruption (again), weak financial systems, weak social safety net, labor unrest.) That said, there are differences. In both of the cases cited above, considerable external pressures (the imperialist powers in the 19th century and Japan in the 1930s) made it more difficult for the government to respond effectively to these problems and vice-versa.
Personally, I would bet on China’s growth continuing, with some turbulence, if only because the CCP has so much of its political legitimacy tied up in their ability to deliver economic prosperity to as many people as it can as fast as it can.
February 25, 2007 at 7:15 am
Hey,
Thanks Jeremiah, I appreciate your kind words.
There is too much futurism in policymaking these days, and not enough history.
Your historical examples provide rich insights into the question of China’s future path and the problems it faces. Indeed, one could add many other periods in Chinese history to your list — the early and late Ming also shared many of these difficulties, for example. The Party studies their Chinese history very closely, and I think there is no doubt they believe they have learned the lessons. And I believe many of the current policies are direct responses to historical failures in China. Attempting to limit or mitigate external pressures is one example.
I certainly believe that China will continue to grow. And I do think their will be “turbulence,” as you say. The magnitude of that turbulence is the thing to watch — and whether China’s leadership can respond effectively.
March 24, 2007 at 5:04 pm
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