Monday, June 6, 2011

China's Growing Pains

. Monday, June 6, 2011

Jon Western goes to China, and comes away impressed. Not impressed with China's improvements, although that too, but with its challenges. In a way, they are the same problems the US faces, but magnified:

1. ... In many ways, America's challenges with the future of Social Security pale in comparison to what China faces in the coming decades...

2. ... This has led to rising inequality in housing consumption as well as a new homeless population. Furthermore, while the financial industry is largely protected because of strict regulations and high downpayment requriements (a problem that ironically exacerbates the challenges to reduce domestic savings rates and jump start domestic consumption among young males), the housing prices -- especially in urban cities -- are at all-time speculative highs and many analysts now anticipate major price corrections that could well send significant shock waves through the economy. ...

3. Though China's domestic industry has grown more competitive throughout the world, there is some question about the degree and magnitude of technology upgrades in its domestic industries -- a key requirement for future development and growth. ...

For us IR scholars, we tend to focus on the data points that suggest American decline -- the US budget deficit, its military over-commitments, and the dysfunctional national politics and such. Yet, if we look closer at the internal issues within China, despite its impressive levels of economic growth over the past two decades, it's not at all clear that we are on the verge of some kind of global power transition -- at least not any time soon.

We've sounded similar notes before here, and I think it is important to remind people that growth is a long, uneven process. Over the past three decades China has shown a lot of resilience and agility, but the challenges continue to mount. I'm not a China doomsayer -- I think they'll continue to grow and modernize -- but it won't necessarily be at a linear pace. And in terms of global power, there is too much space, and too many intervening variables, to be talking in terms of "power transition" yet. China has quite a lot of maturing to do before then.


China's Growing Pains




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