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Is China Really the Next Japan?
China's status as a global superpower may be assured, or overstated
Bright B. Simons (baronsimon)     Print Article 
Published 2006-04-13 11:56 (KST)   
Like everyone else who has not been there yet, I can't wait to visit China next month. I must admit, however, that I am not going free of preconceptions.

I will explain why in a moment, but first -- in the extremely unlikely event that somebody out there has actually missed out on the gossip -- it is perhaps worth recounting why China is universally acknowledged as a brand-new megapower in the making.

Some hard facts -- the Asian giant has already surpassed Japan as the holder of the largest foreign exchange reserves in the world; fact two -- nine out of every 10 tons of steel produced in the world is destined for Chinese construction sites.

Yes, that's right: nine out of every ten. By the time you read this tomorrow the country will have sold close to a billion dollars more in goods and services to the United States than it will have bought from the latter, and, partly on that basis, will have lifted another 30,000 of its nationals from the grip of grinding poverty.

Such is the sheer force and power of what has come to be known as the "Chinese model," which, however, should more appropriately be referred to as Xiaopinism, after Deng Xiaoping. This remarkable party overlord and career bureaucrat miraculously chanced on the insight that a Communist need not be frightened by capitalist money, provided the political system is kept free of the rough-and-tumble of business enterprise.

Everything about the Chinese system inspires awe. Pundits do not remark often enough on the extraordinary genius of the country's unique political process that allows for a generally incident-free transfer of power to a new crop of leaders at regular intervals.

While it regulates society with military precision, it still manages to confine the entire security apparatus in the hands of the all-powerful civilian party. It is worth bearing in mind that the party itself consists of only 50 million members, and yet its hold on this nation of 1.4 billion is as close to absolute as can ever be said historically of the relationship between rulers and ruled.

Thus does China keep internal dissent at bay as she confounds a stunned world with the longest running economic boom in history. Indeed, by 2010 she will be poised to meet half the world's manufacturing needs and probably bankroll most of the rest. Similar estimates say that by 2025 her GDP will have overtaken that of the United States by some $3,000,000,000,000 (no, that's not a typo), and by 2050 the Chinese economy may well have outstripped the combined production volume of the Western Hemisphere.

Such frightening predictions necessarily arouse some reservations. Many of the extrapolations and estimations behind projections of this nature must make numerous assumptions to even begin to be practical.

Some analysts believe that China will not undergo prolonged recession or depression during the period under forecast. Some discount the possibility of recurrent mass revolts, either in the countryside or among the urban underclass, and the impact of such widespread upheavals on the centralized production model of the country.

Furthermore, we must not forget the well-known competitive advantages of China. There is nothing really mysterious about them: a well-educated workforce, low wages, the attraction of becoming the world's largest consumer market, and a level of foreign direct investment that makes planning entry into the Chinese market less risky with each passing year.

So, it does not require superhuman effort to deduce from these considerations the potential for future drawbacks. Competitors to China exist in the region; and there are already a few actors that may be able to compete on almost all fronts -- Vietnam or India, for instance?

One could effortlessly point to the continued lack of success on the part of Chinese entrepreneurs to develop truly global brands and remark that it is the same lack of genuine innovation that accounts for the fact that the majority of the exports moving out of Chinese ports that so dazzles observers are actually products from factories owned, managed, and operated by foreign firms in China.

In response to that one charge at least -- that few global brands are coming out of China -- the same can be said of Singapore or even Taiwan, but neither has seen growth stalled as a result. To which of course it can be countered that neither has China's burden of a billion mouths to feed as well as aspiring to global military superpower status.

So, matters are undecided on that score, and the innovation benchmark appears somewhat unreliable. Nor should we dwell too much on competition that may materialize in the future but that gives no real sign now of escalating significantly. There are, however, a number of other issues remaining to be explored. These are the issues that recall 1980s images of Japan from the hard drive of someone's rusty Commodore VIC-20.

People ask for clarification when you pose the question -- is China the next Japan? They usually want to know -- in what sense?

In other words, do you mean to ask whether China is going to surprise its doubters by shifting the gears of its economy from low-tech, high volume, mass production to futuristic-styled, R&D-fueled, hyper-technological, industry-leading production? As Japan did in the 1970s when she forced skeptics to laugh on the other side of their mouth by breaking into consumer markets in Europe and America with groundbreaking product ranges and design formats. As when, in one generation, it transformed its production capacity to allow its growth from an impoverished war-ravaged country into the world's second largest economy, surpassing Germany in the mid-1970s. Or do you mean the other half of that story?

The story, that is, of Japan's "glass ceiling." Of that country's inability to sufficiently understand and exploit the emerging industrial paradigms that were to define the closing years of the last century - software development for the interface of home and office, advanced aerospace technology, and the biomedical revolutions that re-launched America's domination of global boardrooms. That is the distinction that people understandably insist you make when broaching a comparison.

For China's rise actually may have more in common with another "miraculous" ascension in international geoeconomic history. It bears certain, not too easily dismissed, resemblances to the growth of the USSR into a global superpower between from about the mid 1920s to the late 1950s.

In the years preceding World War II, the Stalinist USSR posted consistent annual growth rates of between 12 percent and 15 percent, leaving flabbergasted western economists gasping for breath. This rate of growth is comparable to China's during the early 1990s.

Indeed, throughout the 1950s predictions that the USSR would outgrow the United States were becoming a strong feature of mainstream economic forecasting. After two decades of this prophecy failing to materialize, some economists were still far from doubtful about the potential primacy of Soviet industry. By way of justification they pointed to steel production, in which by 1972 the USSR was already the world leader, as indicating the imminence of even greater transformations in the world order. The Soviets soon lent greater plausibility to these hopes by surging past the U.S. in coal, iron, cement, and heavy transport production as well.

Today they read as almost comical, but in those days the writings of such pundits as Wassily Leontief, Calvin Hoover, and Paul Samuelson were taken very seriously as clear evidence of an impending changing of the guard in global economics.

Even when the United States' Defense Intelligence economic unit, tasked with assessing the Soviet economic threat and its impact on the arms race, reported, after extensive evaluation, that both technological and productivity levels were widening in favor of the U.S. during the tumultuous era of the Cold War, skeptics persisted in believing the opposite. Despite the fact that they succeeded in restraining, as the expert James Noren puts it, "a general tendency to exaggerate the threat" posed by Soviet economic expansionism to U.S. interests, neither the DI's nor the CIA's analyses managed to dent public enthusiasm for overstating the Soviet economic miracle.

Now it's heretical to suggest that China isn't destined for the role of top dog in global affairs. Respectable names like Goldman Sachs have appended their venerable signatures to the standard narrative of an impending era of world dominance from the Forbidden Palace, and there's nothing unbelievers can do about it.

Nevertheless, it argues for maintaining a prudent reserve as we recollect the spectacular unraveling of the USSR. With the luxury of hindsight it is easy to pretend not to remember that when Gorbachev launched Glasnost and Perestroika his agenda was not a liberal renaissance but a miscalculated Soviet attempt at its own version of Xiaopinist state capitalism. Miscalculated, because he had failed to appreciate the complete absence within the Soviet polity of the relative ethnic homogeneity that marks the Chinese state.

So why raise the point then -- that the Soviet narrative has parallels with China's? In the first place, the reference was to the USSR before the stagnant Andropov era. And, most importantly, the similarities do exist -- a few inches beyond superficial antithesis.

China is different from Japan, South Korea, or Taiwan, or indeed any of the other Asian "Tigers," and more closely resembles the USSR, not because of some vague notion underlaid by wet phrases such as "totalitarianism," "democratic deficit," or "residual communism." In fact, the much-vaunted link between "liberal democracy" and "capitalist success" has been as comprehensively discredited as that between the "protestant ethic" and "prosperity."

What China lacks is inter-elite harmony. There is much "intra-elite" harmony within the Communist party, but little consensus between it and other growing centers of influence, such as the religious and green movements. And its rapprochement with the entrepreneurial class is only tenuous. These are issues that even a relatively homogeneous ethnic environment cannot allow us to easily gloss over.

Contrast that with Japan at the height of its economic glory. The Zaibatsu and Keiretsu systems of capitalist ownership provided an overarching framework within which the state religion, Shinto, and the cult of the emperor, the business elites, and the political class managed to interact without alienating civil society. Similar features are observable in Singaporean and Taiwanese society, and even though they are less pronounced in South Korea, the situation there is still better than that in China.

While it is easy to see crude reflections of this disharmony in the widening social gulfs in China (perhaps the most glaring in the world), the real discord is far deeper than mere social inequity and cannot easily be remedied by the redistributive politics the party has suddenly begun openly to contemplate. With the country's equivalent of an ombudsman managing to resolve less than 0.2 percent of private-civil disputes, and an estimated 200 local protests a day being recorded in some particularly restless recent years, e.g., in 2003, the Chinese path to world domination may not be as smooth as so many strategists seem to think.

So, is China really the next Japan?

The jury is still out, but, with continuing reports that Beijing is aiming even more ICBMs across the straits at Tokyo, that question may soon begin to sound a bit risque. One wonders whether someone has factored that into the forecast models -- ah, now that's a thought!
©2006 OhmyNews
Other articles by reporter Bright B. Simons

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