Goodbye America, Hello China? Think again

By Bernd Debusmann
March 12, 2010

For the growing number of Americans who see China heading for inevitable global dominance, nudging aside the United States, a brief walk down memory lane helps put long-term predictions into perspective.

Not so long ago, Japan was seen as the next (economic) number 1. American executives studied the 14 management principles of The Toyota Way, developed by the automobile manufacturer that grew into the world’s biggest car maker and is now recalling millions of defective vehicles.

Between the mid-1980s and early 1990s, books with titles such as Trading Places – How We Are Giving Our Future to Japan and How to Reclaim It (by Clyde Prestowitz) were required reading in Washington. Learned panelists expounded on the wondrous efficiency of “Japan Inc.”

A glut of “Amazing Japan” books, Chicago Tribune writer Ronald Yates noted in 1987, hammered home the same theme: Japanese technology is superior, Japanese management is better, Japanese products are unrivaled, Japanese people work harder, Japanese are smarter, Japan is No. 1.

Skip over the two decades of economic stagnation of Japan Inc. that soon followed the hype and fast forward to the present. The book which best reflects today’s American worries is entitled When China Rules the World: the End of the Western World and the Birth of the New Global Order, by British author Martin Jacques. His forecast is part of a growing library of essays, analyses and books on the 21st century belonging to China.

If history is any guide, there’s a better than even chance that the “goodbye America, hello China” school of thought will prove as embarrassingly wrong as the 1980s assessment of the relative strengths of Japan and the United States.

Long-term predictions tend to be more often wrong than right and the decline of the U.S. is a topic of seasonal regularity.

In February, a poll by the Washington Post and ABC, asked whether the 21st century would be more American or more Chinese. In terms of overall influence on world affairs, 43 percent opted for Chinese and 38 percent for American. In a Pew poll a few months earlier, 44 percent saw China as the world’s leading economic power and just 27 percent named the United States.

That was a remarkable reversal of opinion from early 2008, when 41 percent told Pew pollsters they thought the U.S. was the world’s top economic power and 30 percent named China. That shift probably says more about the sour mood of Americans very slowly emerging from a painful recession than about facts.
LONG WAY TO CATCH UP
China the world’s leading economic power? Its economy is less than a third of that of the U.S. Its GDP per head is one fourteenth of the U.S., roughly half that of Kazakhstan, according to the World Bank. About a quarter of the world’s economic output is produced by the United States, whose population is less than a fourth of China’s 1.3 billion.

So there’s a very long way to catch up for a country beset by a variety of Third World problems, from lack of paved roads in many rural areas to water pollution so severe that 700 million people have to drink contaminated water every day, according to the World Bank.

China enthusiasts made much of statistics early in the year that the country had overtaken Germany as the world’s largest exporter in 2009. Along with many of the figures cited to show China’s relentless long march to superpowerdom, it gives an incomplete picture.

A large proportion of those exports, three quarters by some accounts, are products assembled for international companies from imported components, not the fruit of brilliant Chinese innovation. Similar to the maquiladora assembly plants on the Mexican side of the U.S.-Mexico border, such factories provide jobs but don’t do much for the economic well-being of the average citizen.

And the fast economic growth of the past (eight percent plus, year after year) that has so impressed many American analysts is bound to run into a giant obstacle for which there is no solution in sight. Nicholas Eberstadt, a Harvard demographer, has long warned that China is facing a surge of citizens aged over 60 for which the Communist-run system is not prepared. By 2050, according to estimates by the Washington-based Center for Strategic and International Studies (CSIS), China will have more than 438 million people over 60 and 100 million over 80.

It is an unusual phenomenon, a country growing old before it grows rich, and it has consequences that go beyond retirement policy. China’s rapid ageing, a consequence of the government’s one-child policy, “threatens to impose a rising burden on the young, slow economic and living standard growth and become a socially destabilizing force,” said a CSIS report last year.

Without a solution to that problem, “it is difficult to envision a prosperous, long-term future for China.”

So, here’s a word of advice for Americans fretting about their country’s standing in relation to China: Relax!

56 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Does the projection for 100 million over 80 take into account China’s life expectancy is currently 73?

Posted by drewbie | Report as abusive

Sobering. Always good to get a 360 degree view of the situation. Thanks Bernd.

Posted by Dr.Savage | Report as abusive

Life expectancy would be the mean age where people perish, not the upperbound limit where residents have reached a max age. 100 million is roughly 8 percent of their population, so it would be expected to see this many elderly. It’s nice to see someone who ISN’T a doom-and-gloomer these days, regarding America’s future

Posted by toneloco64 | Report as abusive

China owns the US. Admit it. When we went to war and spent trillions we didn’t have, the Chinese stepped in.

Posted by STORY-BURN | Report as abusive

Story Burn strikes again with its one liner non-sense. Basically China has been sucked into a US ponzi scheme where China is the only investor. But in order to not lose money and have its own currency come crashing down- they must keep “investing” money.

There investments are no more worthwhile at the end of the day than the millions of suckers whom bought real estate were in the past decade!

Posted by mynamehear | Report as abusive

Civilization power is based on resources, and China doesn’t have the same pool of resources as America or Russia…NAFTA and Russia are pretty much equal resource-wise, whereas Chinese are just ten times more than their resources allow sustainability. Especially the fresh water should be a concern. So, things will go bad one day in Asia, let’s see when…

Btw, the Pentagon has done this kind of resource sustainability development models since the 1980s, with particular focus on Russia and China.

Posted by Ananke | Report as abusive

China is not Japan. China is an independant country which has its own civilization, military and political system and thoughts(please stop comparing these with ours, ’cause it won’t lead anywhere.)

The best way for humanity is to cooperate with China where there is overlap of interests, and compete positively with it where there is conflict of interests, this way, our two people can only benefits of the progress.

Posted by Pterosaur | Report as abusive

They say that Chinese patience is proverbial. It’s interesting that, back in the 20th Century, when America was starting on the road to Empire there was certain urgency of now, everything had to be quick and fast. China in the 21st Century, on the other hand, is a completely different ball game. No great swooping manoeuvres packed with drama and excitement, no, no, no, the Chinese way is the Long March route, and if it takes 500 years all the better!
Caveat: Relax at your peril, because though it may be slow and gradual it will be as inexorable as a tsunami, and equally, if not more, ruthless in the long run.

Posted by GabinGrew | Report as abusive

It’s worth pointing out that for every dollar or euro that china earns, it prints the same amount of currency and gives it to the Chinese citizen who earns it then turns around and invests the same dollar overseas. essentially they double their money by printing more. If any other country did that they would have no problem maintaining a 8% growth rate. strange how the WTO has never called them out on it.

Written by an American who lives in China

Suggested reading: China Digital Times!

Posted by kc10man | Report as abusive

kc10man,

if that’s the case, chinese Yuan would be depreciating, and no pressure for appreciation. You don’t sound like someone who knows the basics of Economics.

Posted by Pterosaur | Report as abusive

Although I agree with Berny that things might turn out safer if we “relax” regarding China’s rise, I doubt it is philosophically wise or academically sound to so narrowly assume our current geopolitical relationship with china will imitate that of Japan 20 years ago. There are some obvious figures that I would think make the equation totally different: mainly, Japan’s population is less than half that of the United States. China’s population is more than 4 times the US size. Japan’s per capita GDP has stagnated at around 80% of the US; yet if China can manage to grow their per cap GDP to 1/3 of the US then their economy would be larger than the US in the order of the trillions of dollars. Most importantly though, The USA remained #1 not because Japan Inc. fizzled but because American enterprise adapted and innovated(many of these improvements were actually ‘borrowed’ from Japan. Today China is setting ambitious development goals. So far they have outperformed all estimates. Not to say that they do not have major domestic challenges to deal with, but unless the US can out-innovate AND fix our own problems, then we most likely will face a future in where we are not the most powerful country in the world. Here is an example on how well the US is doing in tackling obvious challenges in which nobody disagrees exist and everybody admits will limit future prospects for growth: Congress recently voted down a measure to create a bipartisan commission to look at ways to control the long term debt crisis! The commission would only give advice, it would not have any legal authority to implement any measure. Now the president used his executive powers to create one anyway. But do you think any real change is possible with a government that is afraid and unable to act in any way that would either appreciably raise taxes or cut spending? China has a lot challenges ahead and they are doing lots of things to solve them. One thing they are not doing is planning on success by hoping your competitor can’t deliver the goods.

Posted by Newsreader182 | Report as abusive

It does not matter whether you relax or not, China will become the dominant power.

Someone once mentioned Americans should learn Chinese. I had a good laugh – they first need to learn English!

USA – you are going down. You will be reduced to servants and slaves because this is what you are becoming. Might I add that you deserve it? Invading foreign countries on false pretexts is evil. Not taking care of the majority of your citizens because a certain group of people believe in material wealth above all else is also evil.

I look forward to your demise.

Posted by JohnG-73645 | Report as abusive

A very thought-provoking article. I wonder how far China will go with its one-party state system – essentially a dictatorship. Will China move towards democracy and prosperity as Taiwan did? Or will China maintain the same party in power for half a century of growth (as post-war Japan did)? Or will corruption spread and greed grow until the dictatorhsip collapses like the Soviet Union did? Time will tell us, that’s for sure.

Posted by Anthonykovic | Report as abusive

Bernie is right that the aging population is a looming problem that will haunt China for years.

But China is no Japan. To say the least, while the US pushed Japan to appreciate its currency during its heydays, Japan bowed to the pressure, while China does not now when the US is doing likewise to China. In East Asia it has been popularly believed that the appreciation of the Japanese yen triggered the stagnation of Japan.

China represents an alternative mechanism, different from the US or European models. We will have to be a little bit open-minded on what will be happening.

Posted by theorem | Report as abusive

china to overtake US as the world number 1?funny,we chinese never thought about it,or maybe in my dream,we still have a longlong way to go ,there is no need to worry,Uncle Sam

Posted by Ilovechina | Report as abusive

“We will have to be a little bit open-minded on what will be happening”,that’s right

Posted by Ilovechina | Report as abusive

By 2050, according to estimates by the Washington-based Center for Strategic and International Studies (CSIS), China will have more than 438 million people over 60 and 100 million over 80.
China’s rapid ageing, a consequence of the government’s one-child policy, “threatens to impose a rising burden on the young, slow economic and living standard growth and become a socially destabilizing force,” said a CSIS report last year.
If these numbers are even close, it makes me a little nervous and I live in the states!
One can only imagine what the Chinese powers that be could be planning for survival of the fittest!!

Posted by BrianOmdahl | Report as abusive

I find, today, that some of the posts by you guys/girls are as equally interesting as the article itself. However, it’s always a good idea to look at how a country has built it’s wealth before determining how it will continue doing so: The US built it’s wealth using innovation as the primary tool, China’s main utensil was (is?) the whip and cheap labour. This cheap labour will, inevitably, one day come to an end as it’s citizens/workers ‘smell the coffee’ and demand greater recompense for their efforts – manufacturing will have to be relocated to the next ‘cheap state’. Another good gauge of how things are progessing, and likely to do so, is the ‘wealth distribution’; in China it is far more concentrated, and likely to remain so – I don’t deem this a good omen for the country as a whole.

As for China “financing the US” – I prefer to look at it in a diferent way; they are subsidising their own manufacturing base, ensuring that the US remains a buyer of their goods. Ant threat, or deed, to reduce their exposure to US debt will be akin to cutting off their own nose to spite their face.

Incidently, you ought to ask yourselves: do you prefer a US hegemony or a China one? I know where my vote goes. For all of America’s faults, they can generally be related to an over-zealous will to succeed. China, and a few other countries, can be faulted by their insistence that you should ‘think and do as I say’.

Posted by nightlight | Report as abusive

I think that the problem of the US is not China (or any other country). Afterall China is helping the US by giving it loans..

The problem is the US itself (especially its leadership). What country can spend something like 30 of its budget in military spending and survive? Especially if it has nothing to show for it?

I would like to remind everyone that at the last days of the power of ancients Sparta the king gave as collateral to Egypt his own family as collateral – wars cost money…

Posted by stathis | Report as abusive

I mean 30% in the previous comment.

Posted by stathis | Report as abusive