All the eyes are on China
blogosphere echoes

Portland, Oregon

I've spoken with executives at American companies that tell me they have "their own factories" in China, and they seem proud of it. But then when I ask, "Doesn't the Chinese government own 51% of your factory?" they'll then say "Yes, well, err, that's the way they do things over there, but it's our factory!"

Not really. Since we began on this road to globalization, that is, free and mostly unregulated trade, just about the same time that Chairman Deng was opening China to Western capitalism, China has played us for fools.

We've taught them how to make everything we know how to make, from steel to computers, iPods to cell phones, giftware to American-style furniture, and all the fittings and components and add-on's as well.

When we decided to invade Iraq, Congress and the Bush Administration decided to keep the costs off the books and out of the budget, so we borrowed as much as $200 billion each year from China and Saudi Arabia, and a few other countries here and there. This, at the same time we were running a trade deficit with both countries and had to borrow from them to be able to afford importing all those great things we buy from China and all that Saudi oil.

So while we were forcing American businesses to set up factories in China that brought in labor from the countryside at a whopping $5/day for 60 hours/week (no labor unions in Communist China, I suppose), we were exporting our manufacturing base and all of our manufacturing technology to that country and in the process enriching the Chinese government with virtually every dollar we spent.

Now we're in a so-called Great Recession in which we're having to face the fact that we've lost literally tens of millions of good-paying manufacturing jobs, and China is doing great, up 10% a year, raising its general wage to another whopping $6.50/day and building what will become the second strongest naval, air and armed forces in the world. Not to mention their advanced missile technology, which they'll sell to anyone with money to buy it.

We've been such chumps.

Of course, Obama says he has a plan to create great jobs that can't be outsourced. Nonsense. The Chinese are way ahead of us in wind and solar technology. They've taken their riches and put it into vast new infrastructure projects and research, and when we finally have the resolve to build those new highways or create that new electric grid it will be with Chinese machinery and technology.

The Republicans are no help either, as they don't seem to have a clue about how to create jobs. They just want to protect the banks and Wall Street so they have the money to win elections and make it easier for the rich to get richer while denying any help at all to everyone else.

I see no future for this country unless and until we confront the outsourcing of jobs to China head-on. Globalization doesn't work for us when overseas labor is so cheap. China doesn't play by the same WTO rules in any case. It's time to establish bilateral trade agreements with key trading partners under which they can't export to us very much more that we export to them. At the same time, we need to protect key industries that are vital to our national security, like steel, metal fabrication of all kinds, shipbuilding, electronics with military uses, on and on.

There's no other way out of the downward spiral of cheap goods forcing Americans out of work, so they have less money and have to buy cheap Chinese goods, which leads to more layoff's, and down we go to being a third world country. It's time someone in Washington, and in the media, had the courage to call a spade a spade. The loss of our manufacturing base is what's killing America and unemployment won't go down until we begin to restore it.

Hong Zhou

Sorry to disappoints the author, but the answers to the questions are:

"Experts on both sides of the debate have but two questions. One is how much longer state control of vast swaths of the economy will generate that growth."

A very, very long time still. China is in the same state of development now as Japan was in the sixties. So do your arithmetic.

"The other is whether, when that strategy inevitably stops working, China will be able to change it."

"inevitably"? In which country please do the large conglomerates fail to be the first in line to get state help, anywhere in the world? Is the strategy of bailing out AIG etal. "stopping to work"? Or how about Airbus, or for that matter Boeing, who's always the first in line to get big US government contracts?

So much ink spilled for a faux dilemma and a bunch of false questions....

Perth, Australia

For an impoverishment nation, why should the emphasis of state enterprise be about profits? It must be about the raising of the people from poverty. Like in Singapore to do this, instead of producing more private billionaires and millionaires which only help to exacerbate inequality, the state enterprises learn to be viable and this helps the ordinary public more. The share of state equity amongst the people is balanced against the share of privately held wealth, preventing the excesses of the rich as in the US and Russia.

In capitalist US the individual entrepreneurs and private enterprise comes first; in capitalist China the ordinary people of the nation comes first and the private capitalists second. Yet this is allowing the emergence of a wealthy private class. Both state and private enterprises eventually enrich the whole nation instead of enriching only a few private individuals. This is what made Singapore the first world nation it is; it is a proven new working model for capitalism, state and private, in balance!

Los Angeles

Compare China's state-sponsored recovery to our situation. China is being flexible about its recovery, and is totally willing to allow its government to prop up the private sector during this global economic downturn. In evolutionary terms, their economy has an adaptation that the US economy does not have - a dynamic and fully integrated participation of state-sponsored industries in the national economy. Instead, the US is in political/class/race deadlock about cultural diversions like "birthers" "gay marriage" and "ground zero mosques." China's economy is a demonstration of what our economy needs - Massive investment by the government in the national economy (not just banks). Instead Bernanke/Geithner are playing patsy to the economic establishment and protecting their meager hedges against "the specter of inflation" when they should be taking decisive action to adapt our economy to the current global conditions. A bank recovery alone is not an economic recovery! The Bush bank bailout doesn't help the national economy, only insures the financial sector against losses from their past irresponsible behavior. We need a national stimulus, direct support by the government to our vital competitive industries - Info Tech, Biotech, Skilled Manufacture and Small Business. We must adapt or go extinct.

West Coast

The level of inefficiency and incompetence in US banks, makes Chinese government institutions look good by comparison.

Consider that we are a consumer driven economy.

Consider that our elected leaders gave our banks 750 billion dollars in taxpayer funded TARP monies, with no accounting required.

Consider that the FED supplies our banks with 0% funds to loan out, at taxpayer expense.

Consider that these same banks, loan these 0% funds out at rates up to 29% to consumer/taxpayer customers, many of whom have timely paid their bills for decades.

Consider that retail spending has taken a dive, and the economy, in this consumer driven economy is failing.

Do you think maybe the bottleneck in our banks where executives continue to collect multi-million dollar bonuses, while the taxpayers that subsidize these banks, get charged almost 30% per year to borrow back their funds....during a period when the price of money is 1-4%, might be part of the problem?

The performance of our banks suggests the creation of government banks. Our current banks are generously subsidized with bailouts, 0% FED money, tax deductions on their losses, taxpayer financed law enforcement protection, and still, they randomly steal from their customers at interest rates that should be outlawed and refunded if charged.

The argument that usury is necessary in a free market only applies if the banks are freely operating, not heavily taxpayer subsidized as they are now and handling money priced at significant interest rates on capital markets, which they are not.

Our banks are stealing from us, and making what used to be considered a relatively inefficient Chinese government financial sector, look good by comparison.

Imagine that.

David Underwood
Citrus heights, CA

There are a number of misconceptions about China in general.
China has a one party system that has been labeled Socialist. However it is nowhere near what the Soviet type Socialist system was. the government finances business, but these are not state controlled businesses. They are not given production quotas, they are not required to hire people just to make the system look good, they need to make a profit or they do go out of business unlike the Soviet system.
The Chinese government runs a country of 1.3 billion people and they are directing the economy to accommodate as many people as they can. They do not give more personal freedom as they believe it would result in anarchy, and they are probably correct, and i not anarchy, a division of the country into several Balkanized countries.

They also have the ability to do things their way. If they want a high speed rail line, there are no laws, property rights, environmental considerations to worry about. If your house is in the way, you are given a choice to rent an apartment, or get a new house further from the city, if you refuse, you are moved. Business competes on a basis unlike anything we have seen since the 1800s. There are huge industrial parks where a manufacturer can get new materials and equipment almost overnight. For instance if you need a new circuit board for a product, you contact the companies that make those kinds of things, and there will be several choices on your desk in the morning. You can hire and fire employees at will. Yo can not compare the Chinese style government to anything we have previously known. So called Socialist governments did not compete on such a scale. The government sets limits on political action, it sets limits on the press and it encourages industrial espionage.

No matter how much you may think the Chines government is oppressive, it is in no way anything close to the Mao regime or those of the eastern Soviet controlled countries in the past century. The Chinese people you meet will tell you, they think their lives have improved more than most of them could have imagined. They are free to move about the country, we see them in the parks which are clean and well neat. Their stores are full of products and full of customers, they have first class hotels, we ate in restaurants that held a thousand people and were full. Thee are rows of high end auto dealerships and the streets are crowded with cars and buses.

There are also the traditional areas of alleys where shops sell novelties, and have food stands of all sorts, and these are crowded with Chinese shoppers. The Chines are entrepreneurs, make no mistake about it.

The Chines have also improved the schooling and universities, the government wants them to be as good as any there are.

Another thing the Chinese did that took away some of the US industrial dominance was in building modernized industrial complexes. The built the most modern steel mills while the US steel industry failed to upgrade. The US steel companies were being run like they had been run since the 1800s and management was just plain hidebound, engaging in war against the unions and not reinvesting their profits. Once the Asian steel industry come on line, they were through.

Finally the American consumer helped the Chinese ascend. Once companies like Wall Mart found a way to bring you goods cheaper by having them made in China, shoppers were willing to give up quality for price.

It is time or Americans to realize that other countries and governments have learned how to compete and even beat us at our own game.
No one country as a monopoly on competition and the well being of its citizens. The Chinese have taken up the American idea of we will buy you, and they are doing a good job of it.

The denigration of President Obama by some misanthropes shows just how far many have degenerated. These people seem to think returning to the 1890s would beat a country that is looking toward the 2090s. Give it up and join the 21st century.


Many have no clue, let's start here. It is "The Peoples Republic of China".
Not "Communist China" not "Socialist China". Get it?
I ask you, for such an impoverished society, how is it at 11:00PM on Sunday night there are more people out having dinner, shopping, drinking in public, having a good time in a little town like Jinhua then I ever saw out on the town in Detroit or even Toronto for that matter. Most of you people are clueless. By the way, didn't our genius President, Justanotherbushofadiffrentcolor name Alan Roger Mulally as head of "Export" development for the U.S.? I thought Al was the one that sent the Boeing work to China. I thought Al was the one that tried to break the Machinists Union on the west coast by shipping all of the foundry work to non-union (anti-union) shops in the Detroit area. Funny how Al turned up here, borrowed 28 BILLION from Bill Fords college room mate at Goldman Sachs 12 months before the economy collapsed because of fraud perpetrated using "credit default swaps"
and then used that collapse to eliminate even more union workers. I wonder why there has been no investigation into who knew what. Maybe Carl Levin has been too occupied with his lip tumors to actually do some work other than grandstanding last October with the Goldman Sachs grilling. You are right, in China executives responsible for tainted milk and toys paid the ultimate price. Maybe its time for some Americans to pay the ultimate price for what they have wrought.


My observations are based on living and working in China for over a decade. The question is where China will go from here. Yes, economic growth has been strong numberwise, but the standard of living has not really improved much over the last five years. Infrastructure is strong, but mainly because the state either throws tremendous tax dollars at projects (roads and rail) or allows oligopolistic control with subsidies (telecom, airlines, banks, TV, oil). As a result, private money scrambles to find outlets in places like real estate, resulting in distortions (read: bubble) caused by inflated land values, which are high in part so that government can raise income. Where else do the central and local governments get the money? Exports are certainly a big part. Also, the tax man is very strict about foreign companies--whereas state enterprises are given more "flexibility." Yeah, tax evasion is just a way of life in China. The government attitude seems to be that "We'll cut you (the taxpayer) some slack, but, in exchange, you won't get uppity and keep your mouth shut." Not too much taxation for very little representation. As far as China's growth is concerned, a lot of people assume China erupted ex nihilo around 1978, when Deng Xiaoping solidified control. That's one of the myths drummed into everybody's head by the Party, where discussion of life pre-Deng is discouraged in the public sphere. In fact, China had built a very strong industrial base between 1949 and 1959 and plugged along despite some political disasters over the next two decades. (Okay, maybe over twenty million people starved to death between 1959 and 1961, but still.) It makes little sense to compare China in 1978 to Japan or Korea immediately after WWII or the Korean War, when those economies were destroyed and in disarray. But, getting back to the key issue, where is China now headed? Chinese state enterprises do get the job done, but they're still pretty inefficient, despite efforts to make them more responsive to the market. In short, where private companies--especially foreign firms--are allowed to compete on an equal footing, they blow the SOEs away. Which is why other countries shouldn't put up with Chinese restrictions on investing in China. The United States buys tons of Chinese widgets but has incredible trouble making headway on exporting things like telecom services. Then again, the Chinese are scrappy because they've been trading horses and just surviving for a long, long time.

James DeVries
Pontoise, France

What's the difference between politics and history (gross oversimplifications department)? Politics is a big, long, laborious story told about a very short period, set against a tiny corner of interest. History, on the other hand, is an extremely short story told about a big, long, laborious period, set against a nearly immeasurable area of interest.

American journalism would do well to resist today's impulse to regard China in purely political terms---leave that to the politicians---and consider her career from a more historical perspective. China has a long history and has survived as a civilisation through vast upheavals. Whatever short-term economic tactics China may or may not be adopting today barely qualify as a “concern”, let alone an upheaval. Seen from the point of view of history, goings-on in the right-now, contemporary Chinese pond barely rate as a ripple or wavelet.

Too much directive government intervention or not enough? That is a discussion couched in purely Western political terms. A China that, despite its internal tensions, is feeling particularly cohesive today, isn’t thinking about itself in purely Western political terms. So any judgments passed in those terms probably won’t register on Chinese consciousness as significant, let alone something to worry about. The Chinese are probably thinking something more like, “Look, we’ve suffered enough over the last 100 years from being forced to think of ourselves in Western terms. Now the industrial revolution has fully caught up with us, imperialism has been shaken off and the worst excesses Communism can lead to are well established (although the latter is probably still more an unvoiced suspicion or vague hope than an outright admission), why should we listen to a lecturing West that 1) just nearly put paid to the whole world economy and 2) just launched two perfectly disastrous, unprovoked wars?

Others will say, Afghanistan? Unprovoked? And they have a point. But if the United States hadn’t bitten on the gaudy lure of backing the call to international Jihad at the end of the 1970’s, if they had they silently helped the likes of Ahmad Shah Massoud rather then publicly encouraging grandstand events like calling all Muslims to come and become “Afghan resistance fighters”, well, they wouldn’t have got the triple fishhook of Al Qaeda in their lip a couple decades later.

The Americans, and I’m one, must resist the trend to become more Maoist than Mao. What are you doing? Trying to imitate the Cultural Revolution? Shouting slogans, refusing to listen, worse, refusing to think? Aren’t there enough wounds to heal at home, without continuing to stab foreigners? And on top of it, delivering lectures to China because she decides for herself? China probably never noticed the huge success that Sloan/Harvard/Wharton-style neoliberal economics-inspired “capitalist shock treatment” initially brought to Russia… Follow the West’s advice on how to run an economy? Are you kidding?

Bruce Olson

Fascinating comments.

While I do not intend in any way to understand China, its economy, its government and its society, a few things stood out to me in the article which, if anywhere near accurate, explains China's recent economic successes, especially when compared to our own economic performance over the last few years.

First, it is now abundantly clear there is more than one way to run an economy. China, with its history of Communist top down planning, is going to continue to be a top down run economy. It is working for them and as long as the leadership is acting in the best interest of the economy as a whole, it will continue to work.

Second, America, with its history of free market Capitalism and minimal regulation is going to continue to be a free market economy. It has worked well for us and as long as the private leadership in America is acting generally in the interest of the economy as a whole it will continue t serve us well.

Third, as both systems have evolved into industrial giants: China’s rapidly at warp speed since their Cultural Revolution and America’s more slowly but still very rapidly since the 1850s, especially following the Civil War and each the world wars of the 20th century. Along the way both countries have been forced to make adjustments to their systems and philosophies. China, coming from the top down central planning model, has moved toward a more decentralized, free market capitalist influenced system in order to more efficiently allocate and develop its resources. America, coming from its private capitalist system, has moved toward ever more regulation and government influence to more efficiently preserve its free market structure in the face of the inevitable abuses that occur as the most successful competitors become more powerful and less focused on meeting the true needs of the free market.

Both systems are constantly required to accommodate to changing conditions, in order to survive.

Both systems must be seen by their citizens as working to improve their economic condition.

Both systems are currently working, at least in the short term.

Both systems are being forced into finding a broader mix of free market capitalism and appropriate government regulation/control to overcome the shortcomings of each respective system.

Contrary to the beliefs of most who call themselves Capitalists or free marketers and also many top down planning Communists, the key to success in either system lies not with the systems themselves but with the people running them. Both systems are working, albeit one apparently a little better than the other at the moment.

I believe one thing for sure. Far Right or Far left ideologues who put their “line in the sand” and refuse to adjust will drive either system to failure. Right now, I believe that is what may be happening in the United States. Too many seem to be worshiping at the alter of unfettered, unregulated Capitalism and an ill defined idea of reduced government, refusing to see the damage the currently over concentrated wealth and power has done.

The reality is that China and the United States are both heading toward more “Socialized Capitalist” systems, to better serve their citizens. If they don’t they will fail.

The alternatives to failure will be more revolutionary than evolutionary or, if the Chinese model continues to work, it may well embrace us. I hope I am wrong, but given the politics of the moment here in America I can see it happening.

Bruce Olson, Houston

Chennai, India

China today is pretending to be Modern to reap benefits.
To build Wealth and Minds, there needs to be space and
Chinese Minds have to free themselves.
What comes out of China is filtered and so there will
always be simmering frustration within. The advantage of
democracy is that frustration is expressed spontaneously and things appear worse than it really is.I would rather live in a poor democratic
country rather than an autocratic rich nation.
While in China it is a Pretentious economy, pretending to be great
the reality could be shocking. The greater shock is that
even US is carried away by Chinese pretensions.

I have always been an admirer of the American spirit but it
is getting diluted as US waters down her convictions especially
on Free Enterprise for the benefit of immediate needs. Instead
of leadership by convictions, American leadership has resorted
to management of crises by giving up time tested convictions.
Obama instead of the challenge of taking up world leadership
which would have benefited US, has become regional leader and limits
himself to be the Prez of US. Am deeply disappointed with him. He needs to prove that he is worthy of the Nobel Peace Prize.
I can understand China's behavior but ET TU US?

Mr. Ho

Do top-down, state-run economic growth programs work? If you are on a low state of economic development, definitely yes. That's how Japan, Korea, Taiwan etc. started up. Does it continue to work forever? No, definitely not. Japan's economy has stalled in the 90's and it hasn't really been growing since, Asia's "little tiger" economies experienced the 1998 crisis and learned that after reaching a certain level of development, it's time to change your strategy. For now, except some big privileged cities, vast areas of China are in a state of low economic development. So for now, the system keeps working.

The big question is: What will happen if China reaches a per-capita income of §10,000 per year? The communist bureaucrats may think that they are infallible, but no advanced economy has had a top-down planning and succeeded. The reforms carried out by Thacher and Reagan, which dismantled state-control and was so painful because it was not accompanied by a corresponding social-welfare program to mitigate the effects on the poor, was in effect an acknowledgment that government-control over the economy is a bad idea. Short-term stimulus packages work, but long-term control will lead to stunted growth.

So expanding the state-run sector and propping up inefficient state-run companies against competition from the private sector via massive subsidies won't have a visible effect now, but in the future it will create a big headache. And it's already creating a huge waste:
"The state airlines immediately began a price war. The state-owned monopoly that provided jet fuel refused to service private carriers on the same generous terms given the big three. China’s only computerized reservation system — currently one-third owned by the three state airlines — refused to book flights for private competitors. And when mismanagement and the 2008 economic crisis drove the three majors into financial straits, the central government bought stock to bail them out: about $1 billion for China Eastern; $430 million for China Southern; $220 million for Air China."
Well, you might think that we just used billions of taxpayer dollars to bail out big banks, which in turn provided its managers with large bonuses, but think on this: Using billions of taxpayer dollars to bail out banks in a country with a per-capita income of ca. §45,000 is outrageous, but using billions of dollars to prop up mismanaged companies in a country where the per-capita income is ca. §6,000 and where people used to ride bicycles instead of cars until recently is an atrocity.

No comments:

Blog Archive