China’s economic model isn’t the answer for the U.S.

By Chrystia Freeland
August 30, 2010

This piece first appeared in The Washington Post.

Forget the “Ground Zero mosque,” Michelle Obama’s Spanish holiday and even the oil spill in the Gulf of Mexico. When future historians look back to the summer of 2010, the event they are most likely to focus on is China’s emergence as the world’s second-largest economy.

Mostly, this is a very good thing. The rise of China, and the related, albeit slightly slower, emergence of India, is the story of hundreds of millions of very poor people joining the global economy and getting a little richer. Gross domestic product per capita in those two countries was basically stagnant from 1820 to 1950. Then, it increased 68 percent from 1950 to 1973, and a whopping 245 percent from 1973 to 2002.

But we need to be careful not to draw the wrong lessons from China’s resurrection. The most dangerous one is that authoritarianism works.

That notion has become particularly tempting at a time when so many Americans, on the right and the left, are skeptical of the efficacy of their government. By contrast, many, particularly in the U.S. business and political elite, openly admire the effectiveness of China’s state-controlled version of capitalism. Indeed, a popular intellectual trend, as Stefan Halper, Ian Bremmer and others have noted, is to suggest that, especially in the wake of the global financial crisis, China’s economic model — a.k.a. “the Beijing consensus” — could replace the U.S. model.

That’s plain wrong. Centrally planned economies tend to be good at wrenching societies out of agricultural poverty into the industrial age — especially when the technologies needed to accomplish that shift have been invented elsewhere. Remember that in the 1930s, ’40s and even ’50s the Soviet model seemed viable, for precisely that reason.

So far, China’s rise has mostly been about industrializing an incredibly poor, rural economy. Even today, China’s $3,600 per capita GDP is roughly on par with those of El Salvador and Albania. We haven’t seen whether centrally run China will be able to take the next step and compete at the cutting edge of technological and financial innovation. When South Korea went through the same transition in the 1980s, it also shifted to a much more democratic form of government and freer version of capitalism.

One reason state capitalism may falter as China gets richer is that it may be hard to allow people to become consumers without letting them become real citizens, too. One of China’s big economic challenges over the next decade will be to allow its domestic market to grow. That will mean giving the Chinese people more spending power. As the Chinese become more bourgeois, they may demand more political rights, too.

A second constraint on state capitalism will be innovation. The American political economy has many flaws — collapsing infrastructure, a hollowed-out middle class. But America has one great virtue that no other country has yet to replicate: When it comes to innovation and its translation into things people want, America is unbeatable. This is the country of Apple, Google and Facebook. These are the inventions driving the technology revolution, and only an open society can create them.

In fact, China is an object lesson in the threat that centralized, authoritarian states pose to revolutionary technological development. One of the big questions historians wrestle with is why China, which was on the brink of industrial revolution in the 14th century, then seemed to give up on radical technological change, ceding the initiative to Europe.

A favorite explanation for those centuries of stagnation is the same one we offer for China’s current dynamism — its centralized, authoritarian state. As economic historian Joel Mokyr has written, “the absence of political competition did not mean that technological progress could not take place, but it did mean that one decision maker could deal it a mortal blow.” Meanwhile, in chaotic, divided, inefficient Europe, when one ruler decided to repress his innovators, “they did no more than switch the center of economic gravity from one area to another.” Dictatorships aren’t so great at self-correction.

The United States shouldn’t be complacent about China’s rise. At the very least, it means that American companies, American politicians and the American people need to adapt from the comfortable role of the globe’s sole hyper-power to the tougher task of working in a multi-polar world. China’s fans are right when they point to some of that country’s dazzling infrastructure projects and ask why Americans, whose average income is more than 12 times greater than that of the Chinese, can’t come together to achieve something so grand.

But America can respect China without imitating it. Dictators are easy to admire, especially at a distance. Free markets and free societies always look messy and inefficient, especially up close. But when it comes to inventing the modern world, and living at its edge, so far the best model the world has come up with is democratic capitalism.

38 comments

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We’ll have to wait and see if China’s rise actually manifests as an improvement in the quality of life for the common people. So far it’s success can be argued either way.

This article makes a great point. Authoritarianism can result in a fast-responding and highly effective form of economic control. However, it falters with high-complexity problems or when the people in charge are misinformed, make an error, or working for their own special interests. Don’t forget The Great Leap Forward.

True capitalism has an advantage in basically trying every technological option and every business strategy possible under the sun all at once. The ones that work survive and are perpetuated in a form of natural selection.

The most successful example of semi-authoritarian intervention into the economy by the government may be the newly third-place economy, Japan. They became a competitive technologically advanced industrialized nation extremely quickly at the beginning of the twentieth century by using government-subsidized private businesses. The government left established sectors alone and only focused on rewarding and building up weak areas to establish an extremely strong and self-sufficient economy. Again, though, it seems that technique only carries a nation so far. Once you’ve dug yourself out of the hole with centralized economic control, a shift to a more laissez-faire approach is needed to progress to the true superpower level.

Posted by WRL | Report as abusive

I think that you are misunderstanding China.

There have no intention to mimic American way as it is impossible to have 1.4 billion Chinese driving cars. So, 16,000 km of bullet train is under construction.

China is going to become the world economic leader by 2030 according to the ongoing trend. Their dictatorship has an important edge that should be admired like giving capital punishment to corrupt people that spoils general interest of society. Fat cats would probably get death penalty in China instead of bonuses for erasing 10 million jobs in the US and burning around $40 trillions from the world economy that no government can fix.

If obesity becomes a problem in China easily the Red Party can impose a mandatory law enforcing fitness in the same fashion that all societies already demand humans to wear clothes even though we are born naked

Posted by DrSilva | Report as abusive

Freeland sure has lost contact with low-level details since she became global editor, unlike her outstanding book describing the orgy of oligarchy greed in 1990s Russia.

She wrote: “We haven’t seen whether centrally run China will be able to take the next step and compete at the cutting edge of technological and financial innovation.”

Uh yes, we have. As reported by Der Spiegel, China has stolen railway technology from Germany and Japan to create its own maglev and high-speed trains with three years, something that should have taken them a decade or more. China demanded — and the timid world accepted — that companies share their technology. China stole it, made a few improvements, and is now selling it. In many areas China has already caught up to the West. And with their advantage in labor costs, they won’t be caught anytime soon. Also, they are restricting exports of rare earths, necessary for green energy, most motors, and advanced weapons. My series of blog entries “The coming USA-China war” and the many UPDATEs details the theft of railway technology and other moves by China.

http://saucymugwump.blogspot.com/

Posted by saucymugwump | Report as abusive

Chrystia, you are mixing polithical and economic structure in an effort to emotionally guard the superiority of the capitalism and democracy. However, China’s economy is much less centralized than you want to imply, i.e it is essentially “laissez-faire”. Their political structure is beurocratic, regardless communist or something else. So, your true questions should be if beurocratic capitalistic country is more vital than the present USA model. Honestly, that is a tough answer and I see no statistical information against it.

Posted by Ananke | Report as abusive

A fulcrum of American competitive advantage is our intellectual property law. Such protections are deeply counterintuitive to Far Eastern and South Asian cultural systems and will represent a persistent advantage for the American institutions of higher education and business. The real innovators – even the one’s born in Asia – will always yearn for recognition and security of a type that is not possible without a society that has been built around these principles.

Posted by effoff | Report as abusive

Must feel good to speak your “opinion”. I like your claim that “We haven’t seen whether centrally run China will be able to take the next step and compete at the cutting edge of technological and financial innovation.” Obviously you are not familiar with the technological capabilities of China. They are now only second to the US in annual Patents. They are also becoming the driving force behind medical fields like stem cell research which is limited in the US. Are you aware that China is graduating over 600,000 engineers per year, compared with the USA’s 30,000?

As far as economic reform, while it is not a system that an industrialized nation should copy, it has been producing 8%+ growth per year since 1978.

Technological accomplishments did not cause political reform in Korea, or any other country. Rather, it was a combination of liberally educated politicians and a much stronger middle class. Reform will come to China, but not for a long long time. Confucian Idealism has helped the politic maintain its control to this point and will continue until their economy falters and the current bureaucracy loses its “heavenly right” to lead.

PS: hey Saucy, China did not steal train technology from anyone. THEY BOUGHT IT! Try looking up China’s bombardier contracts as an example.

Posted by kc10man | Report as abusive

What an good article; it is clear and positive, and an important step in moving forward with the massive problem that the West faces, in dealing with the brilliance of the Chinese achievements.

Is it not possible for some part of US industry to be made more competitive in some quick controlled way, without necessarily emulating or displacing China?

Posted by Reliability | Report as abusive

It amazes me how many people take basic freedoms that we enjoy here in the West for granted. Perhaps no one has actually lived in a dictatorship (such as China) and tried to utter an unpopular opinion?

The main reason Europe was stuck in it’s development during the middle ages was the chokehold of the Church and Holy Roman Empire had on society. It wasn’t until the 15th century that the weight was lifted somewhat (especially in NW Europe) and witness the development that that brought over the next several centries.

I agree with the writer that personal freedoms and the protection of individual rights through law will be required for China to sustain its growth, or their society will collapse under the weight of it’s own suppression.

Posted by EJBe | Report as abusive

Disappointed with argument. This is an important issue that warrants a higher level of analysis. Unsupported general statements by the author do little to persuade us.

Posted by wbig | Report as abusive

Basically this lady says: China is an authoritarian country, so there must be some limit of its development, and let’s wait for that to happen; US doesn’t need to solve its problems since the competion from China will be gone someday.

Posted by Spacetime | Report as abusive

Well, her’s is just one person’s clever opinion. Her arguments hinge solely upon some idea of a centrally planned (i.e. totalitarian) powers coupled with the will to use this power against the individual to force any possible change upon a society (is this the type of “change” America’s elite are wishing for?). The causal link between totalitarian society power and a rapid economic societal transition from agrarian to industrial is unproven by her, whether in China, USSR, Mexico, etc. What she conveniently overlooks is the elephant in the room. China runs a $174 billion dollar trade balance surplus. Their current account balance is $282 billion dollars. Much of this trade is with the US which now has a -$592 billion trade deficit and a -$392 current account deficit! Second but I think most importantly, China’s banking system is seamless with its national treasury. It creates all of the money supply that it requires for its economy by spending it into circulation on a myriad of public infrastructure projects, rather than by borrowing with interest every last dollar required from international banks, rather than reliance upon foreign capital inflows; with these internally created funds China has casually built up whole cities on a whim (think Brasilia circa 1956…) this monetary economic model is the primary engine to its growth and the trade surplus it runs with US and the rest of the world is part of the spoils of this policy. Moreover, its commercial banks which are national organs but with decentralized decision making are also creating new money every day and spending it into existance to the benefit of the average Chinese, and also the above average (income) Chinese, and they only think to occasionally deal with excesses of corruption by the extnesion of credit process, and rarely worry so much about repayment problems or timing, they are not so anxious to foreclose on their own society, as others are now so anxious to foreclose on American and European societies to the lenders’ benefit. The US and other nations could do well to emulate this aspect of their success, and it would not take an armed national police within the Treasury dept or central bank corridors to do this, it can be done completely within the framework of an “open” society, a constitutional republic even such as the USA. Finally, her statement about what democratic capitalism does best (inventing the modern world, and living at its edge) is sheer nonsence and old fashioned international jingoism, this time not national but western international societal ethnocentrism that in her cocoon worldview believes it superior to all other models, all is perfect in her perfect world. I am not arguing against US and west’s apparent ability to generate the modern world, invention; it appears to have done this pretty well, but much of this invention is the result of an unbridled ability of the M-I-C (military industrial complex) to generate innovation and invention as a byproduct of its ever-refining the methods and means of war, and these are rarely wars of defensive nature… Also, not to rest upon its laurels of the past, it would appear that the US and the west is very much in danger of having lost, or to soon lose, that edge in innovation if for no reason other than the poor education of its people and the crumbling infrastructure because all of its national resources are diverted to the financial sector, paying interest to the financial sector on an infinate amount of public and private bonds, to the disadvantage of the real economy sectors.
Unless by her statement “inventing the modern world” she is alluding to that ever exporting western culture – Disney, Hollywood, and MTV which is possibly her low standard.

Posted by boxerrebellion | Report as abusive

Mussolini and Hitler and their political and economic systems were admired by people like Woodrow Wilson, who enjoyed Mussolini’s initial beginnings, and Charles Lindbergh, who admired the Nazi state. The look clean, like a football team with a tough head coach.

But….

First, no one wants to live in a dictatorship–it can only sound good in the abstract.

Second, what is wrong with the US economy now can be attributed more to the govt than anything else.

Tons of uncreditworthy mortgages made and then sold, and ultimately packaged to serve bonds? Not possible without FNMA and FHLMC, which in the 1990s and early 2000s would buy any crappy paper.

Decline of industry? Too much environmental and personnel regulation, and a tax system that pernalizes success and doesn’t sufficiently reward risky long-term investment. Domestic industry must compete where it stands, not in the abstract gleam of some idealist’s eye in some govt agency seeking to regulate a business practice that was acceptable for the previous 50 years.

China will have to change or stagnate. People yearn to breathe free, and always will. The USA has problems, but they can be fixed without having to destroy the basic framework.

Posted by bobw1 | Report as abusive

Chrystia neglects one thing. It is how people think that makes them something and it is God’s blessing that makes one rich. Northern European society, from which America descends, was the prime source of all innovation since the 1600′s. That is because of Christian thought expressed through the Reformation. These are the societies from which democracy, science, innovation, freedom of speech, universal education and heath care have sprung. The knowledge that God was an ordered, law making God, gave rise to modern science. On the other hand Eastern mysticism, is pantheistic believing that the creation is a God in itself and does not give rise to odered laws but rather superstition and totalitarianism.
Atheism expressed in evolution, is also similar to Pantheism in that it sees the creation as self creating.e.g. the big bang. It is no coincidence that American children are now starting to think in terms of Pantheism. E.g attributing human like qualities to inanimate objects. As America does this it will decline.
Also as it accepts other false gods that breed superstition and t
On the other hand China has 100m Christians. They will make an influence on that society. Hopefully one day freedom will come as it came to England. The government under Cristian influence steadily becomes free in accord with Jesus words, “If the Son makes you free you will be free indeed.” This is the future one hopes for China and that America will not lose it.

Posted by neilcadman | Report as abusive

China is the role model of the future but not for society at large…just the ruling elite. Innovation in the US equals economic growth…for China. Estimates of the total future consumer market for China will about 300 million the same as ours with very useful and profitable poverty at the low end. The remaining billion will be out-right slaves, starve or remain living off the dirt.

Capitalist buying power for labor is equal to their borrowing power and the Chinese consumer was in the process of piling up such debt as to be cut off by the govt. What does it take after all…to raise up peasants ?

China is the world’s future slave labor camp (capitalist gulag) with 10′s of thousands of riots every year already. They are committing suicide over wages and many are now up to a mere the $2/hour. The future of China’s capitalist fascism…is the new role model and will over the generations…be followed by the US.

Posted by Pedestrian | Report as abusive

Comparing to the present China to events of the past, and drawing conclusions is precarious. What we are seeing today is completely new. The Chinese have reached a level of collectivization never seen before, and this has occured at the psychological level. To think in political terms is sadly superficial, since the reality of the Chinese phenomenon is a completely new definition of human life which is being enshrined into the minds of the Chinese, who are reduced to an unconditional allegeance to the collective, in what can be best described as a most incestuous attachment to their clan. Chinese efficinecy relies entirely on this mutation of the human being.
Very sadly, this insane and deseased society is still regarded as “semi normal”, and even admired for what amounts to some impressive economical statistics. By the time the West completely understands the reality of China, much destruction will have taken place already.

Posted by Neander | Report as abusive

[...] For the full piece by Chrystia Freeland, click here. [...]

So, Obama’s socialistic medicine isn’t the answer? Huh…

Posted by STORYBURNthere | Report as abusive

We will see how the world does as intellectual freedom and innovation get squeezed out of the USA. The thinking and innovation must come from somewhere. Here we have abandoned independent research and outsourced it … to China and India. At least our power elites have. When was the last time a major innovation survived the venture capital process in the USA?

Everything changes. People must realize that the interests of the American people, or at least 90% of them, and the ruling elite have diverged to a dangerous degree.

Posted by txgadfly | Report as abusive

China orders its development through central planning decisions and laws that may grate on western nerves and perceptions. But they hate cheats, especially the financial cheats. But I can think of sellers of bric a brac on eBay who should receive a party scolding or at least from eBay itself. And what economic system hasn’t used other people’s inventions?
It’s almost an act of desperation to have to worry about intellectual property rights when the country that claims them can’t generally afford to manufacture them at a sensible cost to meet the needs of the vast world market. Ideas tend to grow like weeds. Getting them built and disseminated is what is difficult.

But the Industrialized and democratic countries seem to use tax incentives, tax breaks and “pork” to keep their economic shows on the road. And all of them are prone to influence peddling and even outright bribery. The developed countries also live with layers of civil and criminal law defining every activity a person can pursue. And unless the author is a little deaf to many comments that appear in these pages, many people in this country think we are far too centralized already.

The Chinese hate economic bubbles and have outlawed many types of derivatives. Somehow that all looks so much wiser. Their contempt for human rights as the west defines them is a matter of culture. The matter of who embraces the Universal Bill of Human Rights the best, is a matter of what one thinks is most important. The Chinese have agreed to them in principal. But the author isn’t taking about Human rights but about economic privileges and property rights.

Can the world not live without Warren Buffet? Did that railroad benefit from his purchase of it? I tend to see it as the purchase of a rock solid investment because it will always have a future shipping goods to you know who. And it really wouldn’t matter what type of government produced those goods as long as they kept a respectful distance from the management of the company.

In both economies it is obvious that having adequate incomes is the basic necessity and wealth is the best guarantor of having the ability to guard one’s own human rights. The rest of the article is chamber of Commerce rhetoric. People tend to have nothing but contempt for the poor.

There must be a clinical name for the fear of poverty and of the poor. I think a lot of us are going to have to learn it because we may very well experience it.

Posted by paintcan | Report as abusive

Completely missed in this article is the role of U.S. trade policy in China’s explosive growth. Such growth is easy when you can plunge your proboscis into another country’s flesh and suck out $250 billion per year.

If and when the U.S. ever gets over its infatuation with failed 18th century economic trade theories, China’s economy will be in serious trouble, with a bloated labor force and insufficient domestic demand to employ them.

The only thing about China’s economy that America should envy is that there isn’t another sucker out there for us to latch onto.

Posted by Pete_Murphy | Report as abusive

Here are a few points to think about.

1. China may have a lot of technology, but they got it from the west. How, because western companies have to sign over their technologies if they want to compete in the Chinese market!
China bought Volvo, well they complained that they couldn’t get their hands on all the engine patents because they only want the engine technology because this is where they lack.
Looking at the cars in China, we can all wonder why they sell so many cars. Well pretty simple, Chinese would like to look cool but worry not about safety. The first two cars tested using the NCAP in Europe scored 0.5 and 1.5 points (on the old test). One car was deemed a death trap. These cars couldn’t be sold in Europe because people do not want cars that are dangerous.

2. Patents, well most of these have been derived from western technologies and in the future I’m convinced that they will be debunked once tested in court.

3. Wealth, well most Chinese are poor. Even the middle class has problems buying their own home in the bigger cities.
Denmark is one of the most expensive countries to live in at the moment. But people working in a super market can still buy a home.
Take Shanghai as a comparison. A supermarket employee can buy 1 square meter a year if they use their entire salary!
Milk, meat and many other products are more expensive in China than in Europe!

A quick comparison:
160 square meter house in Denmark with a 2000 square meter garden in a very good location in Denmark would cost around RMB 2.500.000,- in Shanghai you can buy a small 80 square meter apartment in a less attractive area. What is wrong with this picture.

The average salary of a European is app. 10 times higher than the average Chinese!

4. Most Chinese are convinced that the government will take care of them. They falsely believe that if the housing market crashes, which it will sooner or later, the government will compensate them for their losses!

I do not drag these conclusions from a hat, I’ve interviewed hundreds of Chinese and also talked to many foreign entities here in China.

All we have to do is to look at the USSR. This is where China is at the moment and if the Chinese think that nothing will change they may get a surprise wakeup call sooner or later.

Posted by ChinaManager | Report as abusive

“. . . as China gets richer is that it may be hard to allow people to become consumers without letting them become real citizens, too”
I challenge you to prove it. Such sweeping generalizations make your opinion piece shallow.

“. . . the threat that centralized, authoritarian states pose to revolutionary technological development.”
Did the industrial revolution happened in a democracy? Did the Chinese invented/discovered silk, gunpowder, paper, the compass, astronomy, etc etc under a democracy? Why are you so blinded by your own preconceptions and have the cheek to write opinion pieces in this Internet age!

Posted by axioum123 | Report as abusive

Surprised me still someone here making this kind of nonsense. Your non-existing god won’t help you, because Mr. Science says it doesn’t exist.

——————————
Chrystia neglects one thing. It is how people think that makes them something and it is God’s blessing that makes one rich. Northern European society, from which America descends, was the prime source of all innovation since the 1600’s. That is because of Christian thought expressed through the Reformation. These are the societies from which democracy, science, innovation, freedom of speech, universal education and heath care have sprung. The knowledge that God was an ordered, law making God, gave rise to modern science. On the other hand Eastern mysticism, is pantheistic believing that the creation is a God in itself and does not give rise to odered laws but rather superstition and totalitarianism.
Atheism expressed in evolution, is also similar to Pantheism in that it sees the creation as self creating.e.g. the big bang. It is no coincidence that American children are now starting to think in terms of Pantheism. E.g attributing human like qualities to inanimate objects. As America does this it will decline.
Also as it accepts other false gods that breed superstition and t
On the other hand China has 100m Christians. They will make an influence on that society. Hopefully one day freedom will come as it came to England. The government under Cristian influence steadily becomes free in accord with Jesus words, “If the Son makes you free you will be free indeed.” This is the future one hopes for China and that America will not lose it.

Posted by Spacetime | Report as abusive

ChinaManager has perhaps made some of the most excellent points in this argument. Does anyone else actually live in China?

To paintcan, who says:
“Their contempt for human rights as the west defines them is a matter of culture. The matter of who embraces the Universal Bill of Human Rights the best, is a matter of what one thinks is most important. The Chinese have agreed to them in principal. But the author isn’t taking about Human rights but about economic privileges and property rights.”

Economic power and human rights go hand in hand. For instance, technological innovation. You have to have independent thought and creativity within your engineers to create innovation. It’s all very well to build roads and trains, but what about other stuff? ko10man earlier says China is graduating over 600,000 engineers per year, compared with the USA’s 30,000? Do you know how many of those engineers can think for themselves? Not many of them. Do you know how many are encouraged to think about things from a new angle? None. Do you know what happens when someone gets too creative? They either leave the country, work for an international, disappear or are beaten down by their higher ups – depending on the field. Do you know how many solely Chinese technological innovations have come out of China that have been adapted around the world? 0.

Look at how many projects have constructed with great pomp and circumstance…to tepid results. Three Gorges Dam …. (showing cracks, backing up, clogged with trash, toxin levels rising in the reservoir, energy efficiency not maximized — I’ve done the tests, I know) Maglev – it’s great, but do you know how much profit it’s making. None. You know who rides it? Japanese tourists, with the occasional German. Sichuan Earthquake — you know how all those buildings fell down? Well, they’re being reconstructed and — aside from a few “model communities” — the exact same level of corruption is happening, and schools are being built without reinforcements. Nuclear plants are being built all over China to provide it’s citizen with clean energy? Speaking with a nuclear engineer the other day, I was told that they had to tear the facade of one down because they were given weak bolts that couldn’t stand up against the weight of the building. The engineers in charge all missed it. China is getting lots of pharmaceutical investment from foreign sources – but most of it is outsourcing, and a lot of it is stolen and sold in local pharmacies — whether or not they’ve been tested correctly.

Obviously, some domestic companies are doing great. Alibaba, Hai’er, Cosco and a handful of others. China is a fascinating place to be — it’s changing at a great rate, lots of interesting stuff is coming out of it, and perhaps someday it will be a world power. Not soon though will it dominate the sphere. There is just too much faulty pipework.

Posted by happaliau | Report as abusive

oh and hey, paintcan?

“China orders its development through central planning decisions and laws that may grate on western nerves and perceptions. But they hate cheats, especially the financial cheats. But I can think of sellers of bric a brac on eBay who should receive a party scolding or at least from eBay itself. And what economic system hasn’t used other people’s inventions?”

They hate cheats? They only hate the ones that make the government lose face. Companies, especially foreign ones, get cheated nearly everyday and have to constantly struggle with business partners willing to sacrifice quality and the good of the company for extra money. There are bric-a-brac sellers on eBay. Then there are the people in China who steal brands, style, technology – and market it as real. Sure it’s harmless is small doses, and perhaps even a compliment to the brand – but it’s also encouraged – because people feel they can’t get ahead without stealing the ideas of others.

Posted by happaliau | Report as abusive

As a Chinese born in 70′s, I agree with most points from the author.

Chinese’s development today can be seen as a catch up. As earning per capita was so dead flat on the ground compared to neighbors in 80′s, and even today. You can imagine what N.Korea will look like if they begin to let foreigners do business under their nose. Dose that mean they have better system for their poor citizen?

Our government simply stand out of the way, to let cash rush in. And created a droll controlling system which worship only money, and rely on corruption without, a sufficient supervising and morality.

If the system won’t change… , well it simply has to be. I feel so sorry, as how majority of Chinese can do nothing about how things turn good or bad on them, including myself.

Posted by winglion | Report as abusive

I have to confess that the odd mix of knowledge and nonsense that the respondents above display is mesmerizing at best and nullifing at worst.
China, if it is indeed to overcome the US as the world’s dominant superpower, both economically and militarily, needs to shore up herself in many different arenas. Not just in terms of cold hard cash, but, from a holistic approach. This is the crux of the good lady’s argument. The party is flying high at the moment only because of the global financial crisis. Once this is over with, we will see a different China.
China is buying assets at a very fast pace? True. However, this is not entirely because it wants to rule the world. In the eyes of many, it is trying to do so to shore up its own affairs. The Chinese population is aging and dying (or being executed) at a very fast pace and shall soon eclipse Japan as being the world’s most age inverse society. When that happens, the fact that the majority of its population, over a billion people, being rural, impoverished and unable to attain advanced care or provide for themselves are going to become a major burden on the younger producing Chinese. When this happens, they are going to need what assets they have to survive. This is the main reason why they are ‘buying the world’ today. It’s so they can sell it off tomorrow. The majority of their patents, as was true of ours a hundred years ago, are bogus. A bus that swallows swaths of traffic at a time? A train that runs on refuse water? These are not entirely viable ideas and it is wrong to view them as anything else.
China is coming on, but, the ball is going to bounce into someone else’s court.

Posted by Spasmodic1 | Report as abusive

Chrystia, the insight presented in your piece on the macro economic changes taking place in the global economy are dead on and paint a good picture. However, I simply don’t agree and think you’re trying to compare apples and oranges. You just can’t use the models of the past, be it the US, Japan or any other now modern country to draw perfect parallels with China. You’ve worked all around the world, but your resume doesn’t include much time in China according to the Reuters bio you have posted. After spending 5 years here, I think you would have produced a very different piece.

China in my opinion has no intention of aspiring to a Western model, or achieving the “next step,” in the same way the US, South Korea or Japan have. They will follow their own path.

Posted by GloboBenito | Report as abusive

The most enjoyable part of any article on India or China is that you actually get to see moderately well thought out arguments with only minor spelling mistakes. If you were rating innovation and education by a random sampling of posters here the results would be telling.

On one point, science has for the last 50 years been the engine for innovation. Given this point and given that China is outproducing the West in almost every educational department. Is this going to correlate to a increased volume of talented? (btw real talent for these industries is somewhere around 1:15,000 graduates, but this is by the Australian university system)This point has alot of facets but i would say that it may take longer then expected to develope the necessary mentoring and intellectual property that will lead to more innovation.

One last thing, sending the next generation for oversea’s education is one of the most simple but effective infomation gathering strategies.

Posted by outsideopinion | Report as abusive

I hardly think that we need to worry about the U.S. becoming a centrally planned economy. Think about the continuing outcry over the bailouts of the banking and auto sectors, or think about the complaints over intervention in health care, if these actions create such a stir I don’t see the U.S. having a centrally planned economy anytime soon.

On the other hand there is a lot of soft direction strutured into the economy. From subsidies to tax policy there is a lot of policy intervention in the working of the U.S. economy, and it has been that way for decades, the U.S. didn’t need China to teach them that.

Three things will bedevil China yet on it’s road to empire. The first is the inevitable vagaries of business cycles. Right now China is the darling of direct investment, and it has benifitted from the huge currency reserves it has accumulated, but that is not a static situation. When I hear of China having the largest economy by 2030 I have to wonder how many recessions are being factored in, how many asset bubbles, this experiment is far too young to give it a non-stop green light to empire.

The second is the unfortunate limiting factor of resources available to China to build it’s standards of living on. And I don’t mean national resources I mean global rsources. The commodity inflation we were seeing prior to the global financial melt down was not an illusion we do have limited resources for an awfull lot of people. This will put strains on the ability of the Chinese government to satisfy the hunger for higher standards of living in China. We are also already seeing wage pressures in China.

The third is that China has the same demographic problems many nations do, and it will need to face a glut of aging citizens without the social infrastructure of many developed nations.

All in all of the BRIC nations the one I like best is Brazil. Will they become empire? No. But they have a well managed economy fat with national resources and without the crushing population isssues that China and India have, and without the corruption of Russia.

Posted by ERhoades | Report as abusive

Spacetime – Thank you for reposting my post. I note that I put “totalitarianism” in the wrong place.But I think it is still understood. All true Christian societies breed freedom. All atheistic societies breed totalitarianism. Jesus says,”the truth will set you free.” Non Christian societies, which are always Anti-christian cannot be free because the truth destroys their leadership, which is built on deceit and lies.
The atheistic or godless societies such as the U.S.S.R. self destruct from within because they have no morality. They do not value life and hence oppress.
As for science disproving God, how is it that man so often immitates the Creator by copying so many things which He has made? Why does he not just sit down and design and make things by chance? Because only a fool tries to do that. The fool says there is no God.
One of the most foolish statements made this century is “Evolution is a fact. It is just that it has never been observed yet.” Dawkins, wasn’t it. I rest my case.

Posted by neilcadman | Report as abusive

I think you’re right – one or two of the radical chique tendency around the globe are beginning to hold China up as a paragon of virtue or a new paradigm of some kind. Perhaps a virtuous paradigm. The reality is that the stop-go jackboot of Beijing confuses external investors, Chinese bankers and the real estate sector.
Also being controlling fascists, the Chinese do systems but not people. Their lack of grasp of social anthropology means they keep being surprised by corruption and profiteering: it’s a Left thang…we’ve had it in Britain since 1997,but we may be getting better again.
http://nbyslog.blogspot.com/2010/08/bern anke-in-wyoming-blind-mans-bluff.html

Posted by nbywardslog | Report as abusive

This article may well take us back when the British and other empires were justifying there existence and in the same time dismembering themselves: Capitalism, Socialism lol “the king is dead: long live the king”, however the last “Great” Recession that still works out its ways elsewhere have shown to anyone who likes being objective that the Globalization and rising Productivity, China’s industrialization and the outflow of industrial production from US and EU to China have established constant fiscal shortages almost elsewhere so the so called “trickle-down” Capitalism could not respond anyhow to these new conditions of rapidly expanding supply to a slowly dragging demand, therefore even a totalitarian Chinese political structure showed better then anyone else that “it is the economy…. Stupid” it is not anymore “the ideology…. Stupid”; the “Great” Empires are gone, the Ideology is gone and for sorry (because still so Marxism roles the Western Economics) many privileges succeeded by the Western Civilization such as social stability and high life standard could be up to be gone too.
With these personal freedom and liberties could get away too! If ideology of such articles like this one continues ruling the science of economics, because China is a strong economy getting stronger by the day, because the industrial production so associated with the most industrial countries and economies of the US and EU even being democratic and not oppressive to their peoples could not compete economically, …. Because the reality of economics have changed and the Capitalism cannot provide economic instruments to raise needed demand nor to maintain consistent economic growth, neither to save the Earth from pollution or exhaustion of recourses….?

Rulers and economists should open their eyes to the most recent changes of the marketplace, dispose their ideologies and everlasting “we are better then you are” attitude and start being more pragmatic in handling the Global Economy, when to expect China’s failure is not going to help no one.
Sincerely,
Joshua Konov

Posted by Joshuak2077 | Report as abusive

For some reason a lot of folks thinks china is not entitle to development and economic growth in the their own right.
Economics;
Globalization is pure basic economic, demand and supply. If you are so much concern about China, than don’t buy anything from China (remember Taiwan is not China). There are a lot of cries on why they always stabilization their currency against the dollar (simple………………basic economic. If the price is cheap, you buy more quantity, hence economic growth).
It used to be the “WEST” (Britain, France, Portugal, Spain, and USA) use economic intimidation to get Good, Services & Raw Materials from the third world countries. If you practiced socialism, monarchy or communism, you pay a huge price called Coup D’état. France used to dictate what the FX rate will between FRA to CFA. (I think they still do it but I stand corrected on this one in modern day)

Politics;
Has anyone thought of how to govern 1.4billion people with different ethnicity in the mix? (Again 1.4billion people). Western type of democracy will not work everywhere (for example in the Middle East and Africa), but unfortunately a lot of people thinks democracy plus capitalism equals prosperity. We should all remember beauty is in the eyes of the beholder (in this case communism plus economy growth is their way of success).
Now with strong centralization government (communism), they can muscle their way with rapid economic developments and growth… Rails, Road, Housing, Manufacturing, Production.
A little history learn here, once upon a time there was this great president of Ghana; Dr Kwame Nkrumah, he was too smart, American educated, visionary and ahead of his time( Steve job, Warren Buffet has got nothing on this guy, not even close). What China is doing now is what he wanted and started doing in the 1950s. The “WEST” stated panicking, hence a Coup D’état.
You got the picture? But when it comes to China and their Military might (they proved shooting down a satellite without the WEST knowing about it for days, is possible). Than you know you have to live with them (at best criticized their form of government) and know how to dance with them too will be in the world interest

Posted by GaiusCaesar | Report as abusive

Hey reliability; It’s way to easy to tell that you are a 50 cent Chinese government employee. 5毛政府工作人员

Posted by kc10man | Report as abusive

Lolz, I like the name Boxer Rebellion. And I agree that our goal now is to try and make China as “Americanized” as possible before they finish consuming us. There will be no stopping China’s economic growth and its importance on the global stage will be here as long as there are man on this Earth.

But could it be so hard to believe that the same nationalism that we created 100+ years ago will no longer be of so much importance 40 years from now? Our kids, if they are successful, will much more likely be global citizens more than they will be citizens of a nation state. Look at the US as more of an insurance policy and less as your home sports team.

Those whom already possess great wealth, already see nationalism for what it is and what it shall become.

By the way, I would not go with the Chinese insurance program. No healthcare, but if your federal you can retire at 55 for men and 50 for women, which is not bad. Taiwan has a better deal right now, or you guys in the US could opt for heading to Canada, but then again the schools there are just as crappy.

Posted by kc10man | Report as abusive

Hi happaliau,

I agree with most of your assessment. And yes, like you, I have lived in China for several years. It is true that the vast majority of the 600,000 graduating engineers every year do not have the ability to innovate, because they have been taught their whole life to conform. Questioning a professors position in China is considered an insult, so debating in order to find better ways, in order to find the truth, is not acceptable. It’s a fact that engineering students graduating this year in China will make an income on par with a migrant worker at Foxconn.

Construction is also ridiculously shoddy. I know of a skyscraper that was under construction in Chengdu that used almost no steel re-bar in its support structure. After it sat still for two years, the construction company finally bribed the right people to finish building the death trap. I currently live in the penthouse of a 31 story brick skyscraper, my rent is about 450 USD, the owner payed two million for it, haha.

Only China would brag about building the worlds tallest concrete and brick skyscraper. Western countries would immediately be terrified of it.

And yes, the high speed trains are far to expensive for most people. But you can try to see it as a stimulus project that invests in the future. I’ve rode several of these trains and they are always filled with Chinese businessmen! It’s just the trains that go long distances that make no sense. Why would anyone pay more money to take a train that will take twice as long as flying?

There is no doubt that there will be many painful obstacles that the Chinese people will have to overcome in the near future. The most dangerous of which is the housing market, and how the government/people respond to it.

If you are like me, and happaliau, I think you are, when the housing market shows the smallest downward tick, take a vacation to somewhere a little less totalitarian and a little more economically stable.

Posted by kc10man | Report as abusive

kc10man wrote: China did not steal train technology from anyone. THEY BOUGHT IT

In some cases, that is true. In other cases, it is not. Read Der Spiegel’s article “Beijing’s High-Tech Ambitions
The Dangers of Germany’s Dependence on China” especially Part 6: War of Nerves: “Videotapes show how Chinese engineers went into the assembly buildings at night to secretly examine parts of the Transrapid.”

Posted by saucymugwump | Report as abusive

Add this URL to my last post: http://www.spiegel.de/international/worl d/0,1518,713478,00.html

Posted by saucymugwump | Report as abusive

Chinese film on 1960 labor camps cheered in Venice…

VENICE – A powerful Chinese film on the plight of political prisoners condemned to forced labor camps in the late 1950s wooed critics in Venice on Monday, with some tipping it as a …

[...] China’s economic model isn’t the answer for the U.S [Chrystia Freeland on Reuters] [...]