Sunday, March 21, 2010

China...thoughts from one who's been there and returned.

A common topic among many conservative commentators is the looming threat of China as an implacable enemy intent on the destruction of the United States and our way of life. However, to the likes of Laura Ingraham and Rush Limbaugh, I have to say, "World communism as you knew it is dead. The harsh realities of the global marketplace drove a stake through the heart of that vampire in the late 80's." Is China an implacable enemy? Hardly. Are they our friend? Don't kid yourself...

To understand China today, you need to understand what really happened at Tienanmen Square. The impression that was left with the American public was that the powerful Communist government called in the full force of its military to brutally suppress a peaceful protest by Chinese students. A Chinese acquaintance who was a student at the time had a somewhat different story: The protest that was centered at Tienanmen Square was far more widespread than a collection of students and the military was called out only when the the government was faced with imminent collapse in what was quickly becoming nothing less than open rebellion in the populace. If we accept that this was the case, can Americans who moralize about the brutal government response at Tienanmen claim that our own government would respond any differently? I think not...

In any case, Tienanmen Square did serve as a wake up call for the Beijing government that economic reform was long overdue and, to their credit, radical and, literally, world-changing reform was made to happen in short order. The odd hybrid of socialism and capitalism, "planned capitalism" if you will, that exists today in China is the result of that reform. Nothing drove home to me the rapid and decisive nature of this change more than when I visited Beijing in late 1999 (ten years after Tienanmen Square) and found a McDonald's open for business across the street from Mao's Tomb. Ten years earlier, anyone standing at that spot would have been watching tanks running over students in the nearby square.

China has grown its economy over the past twenty years through the massive export of manufactured goods. It has, and still does, encourage foreign manufacturers to build plants in China as well as growing its own native manufacturing. This economic growth has provided for order of magnitude increases in the standard of living of the Chinese people, which of course, was the whole point of the post-Tienanmen economic reforms. However, this growth has not come without problems. There's an old joke that says, "Cocaine will make you a new man...and the first thing the new man wants is more cocaine." Prosperity is like that...once people get a little, they want more. Consequently, the Chinese government is faced with the dilemma of maintaining economic growth to feed the increasing demand for more "stuff" from the increasingly prosperous Chinese people.

Economic growth in China means continued export of manufactured goods on a massive scale, which in turn requires a healthy appetite for those goods in the world's dominant economy, i.e., the United States. A weak American economy threatens the economic health of China. China has lent hundreds of billions of dollars to the United States, not as part of a diabolical plot to destroy the U.S. economy, but as an almost desperate attempt to prop up the primary customer of Chinese manufactured goods. The lessons of Tienanmen Square are constantly on the minds of Chinese leaders. They stay in power only as long as the Chinese people are prosperous and economic growth continues.

China should be viewed as a fierce and determined economic competitor. The Cold War is over...capitalism won, but that is small consolation for the United States. Just as the most fervent Christian is the recent convert, China has not so much embraced capitalism as it has roped it, saddled up, and is riding it like a stolen horse. However, the economic growth that has stabilized Chinese society is not sustainable. Even now, wages in China are rising rapidly and I have spoken with Chinese factory owners who are seriously contemplating moving operations to Vietnam, among other places, to, ironically enough, take advantage of cheaper labor. The Chinese government has also started to recognize that their "growth at any cost" strategy has brought many areas of the country to the verge of environmental collapse - I've spent a lot of time in the industrial zone south of Shanghai and have yet to see anything resembling a blue sky and even tap water in downtown Shanghai is too polluted to drink. Correcting what can only be called "environmental atrocities" while necessary, will have a distinctly negative impact on China's global competitiveness. I don't know how the Chinese government will end up addressing the issue of economic sustainability, but I do know that whatever actions they take will dominate the world of Realpolitk for at least the next 20 years.

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