Is China about to become the world’s largest economy?
I don’t deny that China’s economy is growing at a fantastic rate. But the idea that the size of the Chinese economy will overtake that of the U.S. by 2016, as
predicted by the IMF, seems like fantastic hype.
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Mark A. writes:
You are correct. It is nonsense. China’s economy recently matched the German economy. This means that 1.3 billion Chinese now have the productive capacity of 80 million Germans.
Moreover, China owns $2 trillion in United States Treasury bonds. With a stroke of a pen, Congress can declare those null and void. Heck, China has probably stolen $2 trillion in American intellectual property as it is.
As I heard Donald Trump say a few years ago, “If you owe the bank $100,000, you have a problem. If you owe the bank $100 million, the bank has a problem.”
Kristor writes:
Then there’s this video on the truly staggering scale of the brand new ghost cities China has built that are empty and falling apart. The opening shot, where you can see how big these cities are from satellite photos, is mind-blowing. It raises the question, how much of China’s GDP consists of making stuff for their citizens that their citizens don’t want? Most of it, or just a whole lot? Production of stuff people don’t want to buy is negative production; it is destructive destruction, as opposed to the creative destruction that occurs in free capitalist countries.
And, speaking of Germany, here’s a video that is staggering in the other direction, about VW’s brilliant and beautiful automobile factory in downtown Dresden.
Lawrence B. writes:
I agree that the China worries are exaggerated. Just as Obama’s popularity has been in free-fall for two years now, and the BP Oil spill was the worst disaster in history (after global warming), the Chinese economic worries are sensationalized to make desperate people make hurried, desperate decisions.
However, it’s also not so easy to declare U.S. securities null and void. We must keep in mind that, while we owe China $2 trillion, around 60 percent of the U.S. debt is owned domestically, and declaring the bonds null and void would also impair the U.S. economy. Unfortunately, China’s ownership of U.S. debt is secure because it knows that the U.S. government is held hostage to its domestic debt, and China can keep buying until it owns as much of America as Americans do. What’s really scary is the scarcity of politicians who see the great moral bankruptcy of being in debt, especially to the imperial China People’s Republic.
That being said, Kristor is also right. China’s production is a negative production, and would be totally pointless if we didn’t let them unload all of their cheap junk here. I don’t think it’s that Chinese citizens don’t want what these cities [produce], but they still can’t afford to live in them since China won’t let its currency strengthen.
April 26
Timothy A. writes:
On the prediction that China’s economy will surpass that of the U.S. by 2016, color me skeptical as well. Remember all of the hype about Japan’s economy in the late ’80s / early ’90s (MITI, 5th generation computers, etc.)? If you look at the growth of Japan’s GDP vs. America’s GDP from 1985—1995, you can see what got people excited.
Japan’s GDP quadrupled during those 10 years while U.S. GDP just about doubled. Straight line projection would have Japan GDP overtaking the U.S. by 2000. Instead, the Japanese economy fell off a cliff in 1995, and hasn’t gotten back on the fast track since. I imagine that the structural problems in China’s economy are at least as bad as those of Japan, and will take a toll on China’s growth sooner, rather than later.
Roland D. writes:
Another factor to consider is the fact that only a tiny elite in China possess wealth in measurable quantities.
There is no broad-based middle class; China pretty much consists of masses of peasants, a thin crust of urban more-or-less middle-class, and then a relatively tiny, but staggeringly rich oligarchy.
China is a miserable, depressing place; I dread every business trip I must make there. Over the last five years, I would estimate that I’ve spent an aggregate of about 90 days in China, all of them in Beijing, Shanghai, and Canton; only on two of those days was the sky blue and the air anything other than a dense grey fog of pollution.
I never even bother to bring my camera to China due to the impossibility of making decent outdoor photographs there because of all the particulate matter in the air. It’s essentially the Land of Mordor.
Posted by Lawrence Auster at April 25, 2011 06:49 PM | Send