The Chinese economic threat
Posted by aogWednesday, 05 March 2003 at 19:06 TrackBack Ping URL
A background theme that one hears it that the next big competitor to the US will be China. I personally find that implausible. I still remember the 1980' s and the threat from Japan. My father was a big believer in that and I told him at the time that it was unstainable. I quite enjoyed the gloating in the late 90's on that score. China is the same way. If the country doesn't just break up as it has many times in the past, then the current economic boom will collapse, fueled as it is by bad accounting and government spending. Just listen to Zhu Rongji, the outgoing Premier of China:
China must continue to pump massive state resources into the economy to keep it growing at 7 percent or better this year
Of course, the 7% number is very suspicious to start with (as it is well known to all the people who are reporting the figures to a ruthless Communist Party). There may be just a bit of shading going on there. Disregarding that, if the economic growth of China depends on massive government funds it's doomed. Just like cocaine, it will pump things up for a while but eventually the habit catches up with you. The come down isn't going to be pretty. If China ends up as a hot enemy of the US, it won't be because it has succeeded but because it has failed [source].

UPDATE: We get results. Jintao, dude, that's a nice start but you clearly haven't absorbed the message of this weblog. This is good:

[...] the new commission would help segregate company supervision from economic policymaking, which is expected to reduce favoritism toward the state sector. "Managing the economy and managing state assets are two different functions of government. Keeping them together was unfair to other companies" such as privately owned firms, said Luo Zhongwei, a professor at the Institute of Industrial Economics
But at the same time you're planning the expansion of the major economic planning agency:
While it is intended to focus on high-level planning, the [newly expanded State Development and Reform] commission would continue to have broad authority to approve specific investment projects and industrial policies. "As Chinese government organizations get more powerful, it doesn't make them any easier to deal with," said Apco China's Horgan
Try to stay on message ...