China’s population is now a third higher than the whole world’s population was at the beginning of the industrial revolution. In effect, assuming that China can continue to export just enough to bring in sufficient of those raw materials . . . that it lacks absolutely, then the Chinese domestic market is surely sufficiently large enough not only to maintain its economy to continue development.
At present, with its economy in a dicey state — the government arresting what could have been a panic collapse of the Shanghai stock market only a few days ago — plenty of financial commentators in the West have been saying that China could easily have a crisis of its own. And that wouldn’t help us in the West — already in the doldrums — would it? We now depend on China.
But financial journalists and economists have been regularly pointing to an imminent collapse in the Chinese economy ever since Deng Xiaoping unleashed it in 1979. Several times since then when the growth of its GDP reached 9% or 10% p.a. our financial pundits said either, “Oh, they’re cooking their figures” or they said “this won’t last”. At other times, when growth slipped a bit, they’ve prophesied total collapse — and thus total justification for the Western way of doing things. Now that the Chinese economy has slipped to 7% (mainly because its export trade is now drying up). It may even slide further down to, say, 4% p.a. in the coming year or two but, Hey, that was the West’s growth rate all through the industrial revolution!
Janet Yellen at the Fed (America’s central bank) and Mark Carney at the Bank of England would each donate a year’s salary to a worthy cause if either of them could think up a national strategy that could lift their economies to even as little as 2% p.a., never mind 4% — Phew!
No, what Western commentators ought to bear in mind that although China was late coming to the party it has had an experience of monetary strategies (including spectacular mistakes) for ten times longer than Europe, America or Japan. (The spectacular mistakes? Twice going in for paper-only currencies during their Medieval Ages without traditional value-backing — bronze coinage initially — silver the second time — and finding that it doesn’t work.) But even if China sank to what for them would be doldrums — a 4% p.a. growth rate — it has still got a 4% central bank rate which gives them scope for used to be called “fine tuning” which we can’t do with ours at 0% or 0.5%! .
China has had a deeply Confucian society for at least 2,200 years (when Emperor Qin was the embodiment of every quality that Confucius yearned for by way of a king who would take his advice) (unfortunately for Confucius personally, Qin was a few hundred years too late!). Chinese people are far more deferential to their elders and betters — and particularly their governments — than other ethnicities normally are. In other words, given once again that China now has a world-consumer market at home, then it should get through any low spells better that the more individualistic countries of the West.
The same Chinese deference to authority doesn’t make for a high rate of creativity and it’s still the case that Germany, UK and America pretty well scoop up most of the fundamental scientific discoveries between them (with miniature-sized Israel coming up fast). Maybe, even if Western countries continue in their economic doldrums for most of their populations for some time to come, their elites may also be developing post-industrial fee-based personal services rather than the profit-based incentives that China will still be depending on (as I wrote about in my first posting today). So don’t knock China — not yet anyway.