Tuesday, August 02, 2005

Special Report: China

China here, China there, China everywhere.

It's the only song we hear these days.

China is the future of global prosperity.

With their torrid GDP growth, net exporting prowess, and mastery over low cost manufacturing, what's not to love about China?

The general consensus across the globe seems to be that China will overtake the US as the world's strongest economic power.

No multinational operating out of a country that consumes more than it produces (that would be us) can survive without partnering up with China, whose borders are becoming ever more porous to trade.

China even owns most our debt, buying boatloads of our Treasury bonds to hold down the yuan.

China's growth is undoubtedly impressive.

GDP has quadrupled since 1978, a watershed year for Chinese political & economic reform.

As an effort to augment and maximize the abundance of cheap labor the country possesses, foreign investment relentlessly pours into China.

Today, China stands as the second-largest economy in the world.

Yes, China is hitting all its economic cylinders, but if China's growth can't sustain itself, all the cause for alarm would've been in vain.

As the New York Times pointed out on Sunday, economists who are analyzing China's economic clout are underestimating the country's massive population size.

USA comes in with 3.2% GDP growth and we're supposed to shake in our boots because China reports 9%?

Not necessarily.

The US is where it is today because it sustains its growth.

Key word - sustains.

And it does so with about 300 million people.

China's population surpasses the billion dollar mark.

Simply put, The US does more with less.

In addition, the Republic remains plagued by government corruption, widening distribution gaps, and grave environmental infractions.

Per capita income in China, moreover, is a paltry $1,300.

Farmers are beset with tax problems: Agriculture accounts for over 50% of occupational positions but less than 20% of GNP.

Notice something?

So while China has its bullet points, it has plenty of ground to cover before it can pony itself up to US standards.

As a hybrid or "mixed" economy, China has to drop its socialist underpinnings before it can break on through to the other side where truly free and self-reifying market economies reside.

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