Everything you know about China is wrong

http://www.foreignpolicy.com/articles/2012/08/29/everything_you_think_you_know_about_china_is_wrong

by tytso • 14 years ago

56 54 14 years ago

OllieJones• 14 years ago

Here's a contrarian piece on the Chinese personal savings rate: no organized retirement benefits means all kinds of hiding of assets.

http://brontecapital.blogspot.com/2012/06/macroeconomics-of-...

nekojima• 14 years ago

If anything, that piece probably understates the problems mentioned. Though there has been recent moves to provide pension schemes for urban and rural workers, even if the programs are underfunded, it still covers a huge portion of the population, where before it was mostly urban and patch-work & underfunded at that.

http://www.economist.com/node/21560274

001sky4• 14 years ago

Longevity in China is increasing rapidly and the one-child policy results in a grandchild potentially having four grandparents to look after. The “four grandparent policy” means the elderly cannot expect to be looked after in old age. Four grandparents, one grand-kid makes abandoning the old-folk looks easy and near certain.

Nor can the elderly rely on a welfare state to look after them. There is no welfare state.

So the Chinese save. Unless they save they will starve in old age. This has driven savings levels sometimes north of fifty percent of GDP. Asian savings rates have been high through all the key industrializations (Japan, Korea, Singapore etc). However Chinese savings rates are over double other Asian savings rates – this is the highest savings rate in history and the main cause is the one-child policy.

- Summary of the argument

vorg4• 14 years ago

> Four grandparents, one grand-kid

Under present regulations, if two people marry, who are both "only children", then they can have two children. So four grandparents means two grandkids.

The one-child policy is slowly changing into a two-child policy, via the slow rollout of many exemptions. I'm guessing the policy will morph into a complete two-child policy one day (though never completely disbanded because the National Family Control Administration workers will want keep their jobs).

eli_gottlieb3• 14 years ago

You know, people really ought to listen to what the early capitalists and anti-capitalists said about overproduction more often. It's the never-solved problem of capitalism.

EDIT: Thanks downvoters. I hope you enjoy your ever-falling profitability, your unsold and unsaleable goods, your deflating currency, your rising indebtedness as the real value of nominally-denominated debts increases, your unemployment crises.... All of it. Keep downmodding; share and enjoy!

dredmorbius2• 14 years ago

Your post would be slightly more illuminating if you made more specific reference to whom you're referring to specifically, and where they commented on overproduction. Perhaps also a bit of the substance of what was said.

Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products.

Sometime clarity of exposition beats stridency for illumination.

giftedbygod2• 14 years ago

Europeans won't really have their pensions too. The same is about broken American SS system. But it is just so much easier to notice problems somewhere else. At least Chinese werent promised any pension so they save. Do Americans think what will happen if their politicians break the promise? Or pay them wii heavly inflated dollars for their benefits? Have they saved? Oh, no they trust the Government. You see how Americans are stupid and Chinese wise? How can you not save trusting that the Government will pay you pension in an old society?

Pensions made sense in young societies. They are temperorily phenomenon. Have existed for 60 years. Like communism. Gone!

newbie12• 14 years ago

Yeah, I'd much rather have the 12.4% a year of salary that the US government takes from my paycheck (and from my employer on my behalf). We are already getting cheated on our returns, and the Social Security program is still going off the rails in the next decade. It is going to get much much worse.

ixacto• 14 years ago

The majority have no fucking idea how to invest their money for retirement, or not to take out 100k of student loans for some no-name private university. Credit card debt is $14.5k/head, student loans will be screwing gen x/y for many years to come. It will be interesting to see how this plays out.

http://www.csmonitor.com/Business/new-economy/2012/0609/Cred...

akgerber• 14 years ago

Social insurance in Germany has been around since the 1880s. Social Security has been around since 1935, or nearly 80 years.

Social insurance may change in the future, but so long as the elderly still have a vote, they will vote very heavily in favor of maintaining a social insurance program.

And if the elderly don't have a vote, the socioeconomic system will have changed so much that merely having "saved" won't fix anything. Likewise, if the dollar has experienced hyperinflation and benefits are worthless, any private savings will be as well.

giftedbygod2• 14 years ago

Social insurance in Germany was Bismarck's invention. Everybody paid. One in ten lived long enough to collect any benefits. Now you will have 30% of the society to cover living cost of the other 70%. They can vote for financial pyramids in their beloved democracy as much as they want. Guess what, the ponzie schemes will still not work.

bsphil• 14 years ago

Linkbait? I'm pretty sure they do have a few buildings that are made of half styrofoam covered in plaster, and a bridge filled with garbage and covered in rebar and plaster.

loeschg• 14 years ago

I fully expected this article to say pretty much the exact opposite. That our view of China is "too weak."

tokenadult• 14 years ago

The author of this piece, Minxin Pei, has been writing about national policy in China for a long time for a variety of publications. I get the sense, from what I remember of his earlier writings, that his own views on issues have been updated by observing the path that China's development has followed since the end of the Cultural Revolution (back when I began studying the Chinese language and Sinology). There are an increasing number of observers who think the current governance and policies of China are unsustainable. I too think much of the gee-whiz reporting about China's "inevitable rise" in the last few years is very reminiscent of overoptimistic predictions of "Japan as Number One" back in the 1980s. Most likely, the more entrenched democracy and ability to criticize the government openly that the United States has as compared to China will help the United States muddle through and continue to be the world's sole superpower. First-generation immigrants from China like Pei will help that process of the United States adjusting to new world realities of the twenty-first century.

001sky4• 14 years ago

China is of a order of magnitude larger than Japan. 1200m vs 120m people. If china modernizes along the lines of Japan pre WWI, it doesn't really matter if they "stall" at some stage. Chineese construction sites look like something out of the movie Contact. The game has been changed. US needs to be paying attention. Technology has increased the ability to "play catch up." On the other hand, its had minimal impact ability to differentiate amongst the more advanced economies.

wisty3• 14 years ago

$7 Trillion GDP, 1344 Million people.

$15 Trillion GDP, 312 Million people.

When China only catches up to 25% of the US GDP per capita (where Brazil and Russia are), it will overtake the US. The the US will have to boast about its per-capita GDP, which really isn't that good (compared to many other OECD countries, most importantly Canada).

I get the impression that a lot of US things go unchallenged (by most Americans) because they are "number 1", so they are obviously doing everything right.

eevilspock• 14 years ago

But China is still a fraction of the world (<20% pop, <6.5% land). Also, the collection of democratic countries put together is much larger than China. Also, India is a dark horse: democracy is inefficient in the short run but I believe does better in the long.

I believe America is the last hegemony. Today's world is so much more intertwined economically and culturally than it ever has been in history. Borders are ever less relevant as cross-border commerce and communication between citizens increases (airplanes, then phones, and now the Internet).

No single country will be able to dominate. That America does is an artifact of history. China, India and Brazil won't so much as displace it as pull it back down to everyone else's level.

quanticle• 14 years ago

I'm a huge fan of Foreign Policy, but I do think that this article is one of their weaker pieces. It basically boils down to saying, "Well, yes, China looks strong, but it has many internal weaknesses that may bring it down, and therefore we should be careful to plan for a future in which the Communist Party falls." Well, that may be true, but it's also unhelpful. It can be said for any country. I mean, no nation is invincible or omnipotent.

Yes, China has flaws in its growth model. But are those flaws large enough to knock down the Chinese Communist Party within the next two decades? I personally don't think so.

vilius• 14 years ago

I wish there was a place, where you could read objective summaries of HN articles. Like yours "Well, yes, China looks strong, but it has many internal weaknesses that may bring it down, and therefore we should be careful to plan for a future in which the Communist Party falls."

F_J_H• 14 years ago

I'm not sure that is an "objective" summary, and hence the challenge with the type of site/place you are wishing for...

mhurron• 14 years ago

They don't necessarily have to be flaws big enough to bring down the Communist government, they just have to be big enough to bring down their rise as a global power, or at least cause something of a contraction.

paulsutter• 14 years ago

Moreover, even if the Communist party fails (or evolves) hardly means that China will have failed.

China will have crises proportionate to their incredible growth rate. But China's strong cultural emphasis on hard work, investment, and planning for the future indicate a strong future for China and the Chinese people.

I see more eagerness to find an achilles heel in China than I do blind faith that it will grow or dominate.

JumpCrisscross• 14 years ago

If China continues as an ascendant power the U.S. will need an offshore balancing presence in Asia-Pacific. If it dramatically implodes, ditto - a reunifying Korean Peninsula and reforming SE Asia, to say nothing of a politically ruptured China, merit our attention. Either way, it seems, the criticism Asia-Pacific pivot appears premature.

The only case where it is overshooting is in the case that China stalls and/or enters a period of slow, decades-long decline. Given the nationalist tensions in the South China Sea and the country's addiction to growth for social stability that seems unlikely.

w1ntermute• 14 years ago

> If China continues as an ascendant power the U.S. will need an offshore balancing presence in Asia-Pacific.

Isn't that what bases in South Korea & Japan are for?

skrebbel2• 14 years ago

Damn, you guys really talk about people and countries like they're pawns on a chess board.

legutierr• 14 years ago

Maybe queens and bishops, not pawns.

But I think you have it backwards. Chess was created to teach tactics and politics, was it not (at least apocryphally)? This way of thinking may be where chess came from, rather than the other way around.

stupandaus• 14 years ago

The thing about China is that outsiders fundamentally do not know the inner workings of the PRC Politboro. In recent years, there have already been major changes in the structure of the system (see: Xi Jinping, Bo Xilai, etc.) that were unforeseen.

batista• 14 years ago

>In the late 1980s, they feared that Japan was going to economically overtake the United States, yet the crony capitalism, speculative madness, and political corruption evident throughout the 1980s led to the collapse of the Japanese economy in 1991.

Crony capitalism, speculative madness, and political corruption? Yes, those things are not prevalent in the US at all... cough dot com bubble, Haliburton, housing bubble, Bush and co, Enron, trillion dollar bailout cough

batgaijin• 14 years ago

I've always been curious about the debt of the Japanese government...

http://www.independent.co.uk/news/business/japans-crime-inco...

http://www.independent.co.uk/news/world/yakuza-settle-bad-de...

VMG• 14 years ago

You're not refuting the argument. (http://en.wikipedia.org/wiki/Tu_quoque)

danso• 14 years ago

I'm surprised the OP didn't mention the inevitable demographic shift, as the number of able-bodied citizens drops in comparison to the over-60 population:

http://www.guardian.co.uk/world/2012/mar/20/china-next-gener...

Of course, every modern nation faces this problem. But China has had a particularly aggressive birth control policy, which makes repopulation inherently difficult.

stcredzero5• 14 years ago

> ...two left-leaning think tanks, released a report forecasting that China will have 200 million college graduates by 2030. The report (which also estimates India's progress in creating human capital) paints a grim picture of U.S. decline and demands decisive action.

What is the quality of those 200 million college graduates, however?

One can liken human capital to architecture and building. A house can look like an impressive fortress of concrete and rebar, while the underlying reality is quite different. Witness the buildings in the earthquake stricken regions of Turkey and Sichuan province that fell down because of cost cutting.

Companies can be like this as well. Most large corporations have a façade of solidity while much of the interior is actually made out of fluff, with particular strong structures contained within. In this analogy, good Startups are like little pillboxes or maybe even like tanks. They're all strength. (Or, in William Gibson's words, "all edge.")

I spoke at length with another resident of the hacker hostel I'm at. Her parents moved from China, and the family goes back periodically. She also just graduated from Stanford. Her take on the situation there is that there's a minority who relate very much to western tech culture. They view themselves as part of the same extended tribe that the SV tech belongs to. In other words, they view themselves as being like us. They are likely to be an influential and affluent minority, however.

Everything you know about China is wrong

Related Stories