Battening Down the Hatches
Is the Chinese Economic Juggernaut Slowing?
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  • Jacksonian_Libertarian

    I’ve been saying all along that China’s economy is headed for the wall. It’s easy to grow fast when your economy is one of the most backward in the world and your farmers are still using water buffalo to cultivate their fields. The US’s strategy of using free market capitalism to uplift mankind, saw China as the lowest hanging fruit. So the US encouraged businesses to build technologically modern and efficient factories there to bootstrap 20% of mankind up out of abject poverty. Now that China has been dragged forward it no longer looks like a good place to invest. The cheap labor is no longer cheap, and the lack of the “Rule of Law” makes the risk no longer worth it without the cheap labor. Now it becomes obvious that the “Feedback of Competition” that forces continuous improvements in Quality, Service, and Price in free markets is mostly suppressed in China, where the state owns much of the economy and where political power trumps the “Rule of Law”. A survey of Chinese businesses finds no world class brand names, revealing a huge gap in creativity and innovation between Western businesses and Chinese businesses (Chinese factories built with western know how, are becoming dated, and will continue to decay). This proves the fact that “it is easy to catch up to someone that is breaking trail for you, but much more difficult to be the one breaking the trail”. China has mostly caught up with the west, now any growth will become much harder, and China lacks the institutions (Democracy, Free Markets, Rule of Law) to advance past the west.

    • dan

      Excellent. I’m sure Tom Friedman will soon be sending you an email congratulating your perspicacity and apologizing for his many articles praising the Chinese economy and wishing the United States could be more like China.

  • Curious Mayhem

    This is old news if you listen to Bloomberg. China’s “honest” economic boom ended more than a decade ago. It entered a bubble phase in the 2000s with an artificially low currency (much like Japan in the 1980s), then got a powerful monetary stimulus in 2009 from its large foreign currency reserves.

    But, alas, like all forms of central planning, such policies mobilize resources, then wantonly waste them through lack of proper market prices (including interest rates and wages). Since late 2011, we’ve been on the downward slope of this artificial secondary bubble. The next financial crisis will probably start there.

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