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michaelhopkins
FM Editor
Member Since:
06 Dec 2005
Posts:82
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12 Dec 2005 3:12 PM |
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[BETA-PERIOD CAVEAT: The "findings" posted at launch are only representations of the kind of content that eventually will appear in this space. They're derived mostly from results and verbatims in the FM Trend Survey. When FutureMonitor is out of beta, they'll be the product of discussion and debate (and objective assessment)--the tests that ideas will be subjected to before being posted as conclusive.]
CHINA, UNDERHYPED?
Forecasts too low
This item is primarily a nod to the FM Trend Survey’s collective ranking of China’s economic growth as the single most important near-term trend affecting business. The trend also placed among the top three in terms of the amount of attention network members think they’ll be paying to it in two years. In the verbatim replies to the survey’s open-ended “name three important trends” question, “China” appears repeatedly. Though, interestingly, it is almost never elaborated on. The mere noun seems to suffice.
For the non-Chinese business world, is China’s rise more threat or more opportunity? An FM Trend Survey question asked, “On balance, over the next five years will China’s economic expansion more likely be…A) Good for non-Chinese business, or B) Bad for non-Chinese business?”
The overwhelming answer, 70% to 30%, was “A.” Looks like opportunity, says the FM network….
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chrismeyer
Member Since:
20 Dec 2005
Posts:33
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20 Apr 2006 2:39 AM |
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I wonder if people are correct that it will be most important, because it will affect commodity pricing and availability and the terms of trade for many nations, and also that they will be, personally, paying somewhat less attention to it than some other trends because it will surround them in ways most can do little about?
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lhsmithnet
Member Since:
25 Apr 2006
Posts:6
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25 Apr 2006 2:27 PM |
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Ok, I'll take a leap... I have thought a little about China and the future. We live in as competitive a world today, maybe more than any time in the past. I don't think it's reasonable to expect nations to start behaving altruistically towards one another any time soon. An open economy, i.e. America, cannot compete fairly with a determined, controlled economy, i.e. China. If China doesn't change fundamentally, it is only a matter of time (decades) before they threaten to control the world economy, and the price of oil lately may be an early sign of things to come... I see two responses. Either America engages in military intimidation, or the world slowly moves towards a controlled economy. Are there any other possibilities, or is this analysis too extreme?
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lukebattye
Member Since:
09 May 2006
Posts:2
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09 May 2006 4:04 PM |
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I guess one other option is that china's economy will become more open. There are a number of groups of people who see the fall of the communist party as inevitable due to a number of different factors. Supression of religious minorities - e.g. falun gong practitioners, potential conflicts with Taiwan, corruption within the party, a banking system which is in a mess due to the party's pressure for them to lend huge sums of money to failing state enterprises (who have an overwhelming tendency not to repay) the list could go on. My point is simple, I live in china as a teacher and hear many stories about political instability and social unrest, especially in the countryside, which makes me think that the fall of the communist party might well be something we see in the not too distant future - most likely meaning that the people will pursue a free market economy. I guess that's possibility number 3.
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chrismeyer
Member Since:
20 Dec 2005
Posts:33
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09 May 2006 4:47 PM |
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A variant of lukebattye's future is that China's economy becomes more open without the fall of the Communist Party--that would just be a continuation of what's been happening since Deng.
About five years ago, I was in Beijing with a high-energy Chinese entrepreneur, maybe 25 years old, who'd grown up in both China and California, so he made an interesting interpreter of what was going on. His take on the Party's attitude toward the economy: "if it's good for the economy, we call it Communism and move on."
This would suggest that indeed, as lhsmithnet suggests, China will control the world's economy, but only in the way the United States has controlled it since World War II...the U.S. will get to see if it followed the Golden Rule...
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EngFear
Member Since:
05 May 2006
Posts:12
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12 May 2006 5:27 AM |
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I want to examine this statement:
"An open economy, i.e. America, cannot compete fairly with a determined, controlled economy, i.e. China."
i. America is not a fully open economy - in the senses that its government has significant impact on several big markets (e.g. defence) and it engages in tariffs, subsidies, etc.
ii. China is not a fully determined, controlled economy - e.g. it buys oil & commodities on the world market; as already noted the "communist" government likes capitalism in so far as it is not politically threatening. Karl Marx would see little of his vision in the PRC.
iii. Why can an open economy not compete fairly with a controlled one? The issue is how productive an economy is, not how it is ordered.
"This would suggest that indeed, as lhsmithnet suggests, China will control the world's economy, but only in the way the United States has controlled it since World War II"
The US controls the world economy because:
- It has the biggest consumer market in $ values.
- It has access to resources (both at home and abroad).
- It has effective institutions (esp. a relaible legal system).
Let's see how China stacks up:
- Sheer demographics mean that China will b a huge consumer market (but the same holds true of India & Indonesia - both of which have bigger populations than the US).
- China is actively making moves to secure access to resources.
- China's institutions exist primarily to defend The Party, not encourage free enterprise & wealth creation.
In the short term (<5 years), China has been overhyped - and this will continue until it faces an economic slowdown. In the long term, it will inevitably come into conflict with the US. Direct military action is unlikely but you might have an economic version of the "Cold War" with both nations attempting to secure resources & lucrative trading relationships.
One thing that struck me on a visit through China in 2002 was the nationalism I got from ordinary Chinese people. China sees itself as the centre of the world - and you had better start learning Mandarin...
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lhsmithnet
Member Since:
25 Apr 2006
Posts:6
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12 May 2006 1:35 PM |
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I'm enjoying the discussion so far. I see all of these points, but I admit that I am not yet convinced that my analysis is incorrect. Let me clarify what I mean by closed versus controlled economies. By controlled economy I mean one that can make very large transactions that are not determined by free-market consumption. All nations have some degree of control, that's obvious. But frankly I don't see the US cornering the market on a commodity in order to hurt a competing economy, while I can see China engaging in this kind of tactic. A large controlled economy, like China, if they are willing, can drive the price of a crucial commodity so high that it can destroy the world economy without significantly damaging their own. I don't think this is a communist thing either, it's about nations competing with each other for "world domination". There is a lot of hatred of the US and it's world domination, that may be reflected on this very forum. But please let's avoid demagogy.
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chrismeyer
Member Since:
20 Dec 2005
Posts:33
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12 May 2006 10:46 PM |
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Can you say more about what China would be pursuing in this scenario? What would this kind of triumph buy them? We might argue that today, the U.S. energy policy meets your description (i.e. our actions since Carter, culminating in CAFE rollbacks), raising oil prices for the rest of the world--is this getting us something we want as a nation?
As was said somewhere recently--possibly a postumously broadcast interview with J.K. Galbreath around the time of his death, economic competition is a self-fulfilling prophecy, while economic collaboration is not.
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lhsmithnet
Member Since:
25 Apr 2006
Posts:6
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12 May 2006 11:33 PM |
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There's not much more to say. Galbreath was probably a much more intelligent person than any of us, whether I agree with him or not; actually I don't know any more than your quote. I don't deny that the US competes, nor am I claiming that it has moral superiority in the way it goes about it. I merely suggest that China can beat it. And it is hard for me to believe that China will eschew competing, or that anyone will ever be able to say, honestly, that China has moral superiority in the way it goes about it either. You don't actually think that we can make the world less competitive in the future by avoiding speculation on future competition, do you?
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EngFear
Member Since:
05 May 2006
Posts:12
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15 May 2006 7:11 AM |
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"But frankly I don't see the US cornering the market on a commodity in order to hurt a competing economy, while I can see China engaging in this kind of tactic."
I think China's primary aim is not to "hurt" the US economy but to secure sufficient access to natural resources for its own. Three points to make here:
1. The Chinese economy benefits immensely from its trade with the US. It has no benefit at present in "hurting" the US.
2. China does not have a wealth of mineral resources. Hence access to these is a matter of security for the Chinese. I think that Chinese security concerns are difficult for Americans to understand - although I would not claim that they are always rational...
3. What China will compete with the US for is technology & the intellectual propoerty that backs it up. The battleground this century will be around innovation and the human brains that come up with it. At present, the US offers a far more conducive environment to these activities than China.
It is actually very hard to corner the market in a commodity - because if you do, your customers will transfer to another commodity to meet their needs. Very few commodities aren't fungible in some way. This is one of the reasons why high oil prices can be bad for OPEC in the long term.
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EngFear
Member Since:
05 May 2006
Posts:12
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15 May 2006 7:19 AM |
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"All nations have some degree of control, that's obvious. But frankly I don't see the US cornering the market on a commodity in order to hurt a competing economy"
Well, the US does engage in a lot of foreign policy activities through trade regulation. Everything from tying bi-lateral trade deals to particular behaviours to full-blown sanctions against states it doesn't like very much. It generally doesn't need to dabble in particular commodities to exert its influence. Now, some of this can be good - e.g. encouraging human rights. And some of it can be more suspect - e.g. tying AIDS funding to abstinence programmes. But it goes on a lot.
N.B. I am not picking on the US or engaging in demagogy - but I think it's important to point these things out...
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lhsmithnet
Member Since:
25 Apr 2006
Posts:6
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16 May 2006 2:29 PM |
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I have a bad habit of responding to "the board" as if it were the opinion of a single person. I hope I haven't gotten too confused about who is saying what.
EngFear, you agree that the US uses foreign trade in its own political self-interest. So there is no denying that it is something that is done. I just don't believe China is "too good" for this kind of behavior.
Someone implied that it is not in China's interest to compete aggressively or hurt the US. I see two reasons why it might:
"China sees itself as the centre of the world - and you had better start learning Mandarin... "
and
"China does not have a wealth of mineral resources. Hence access to these is a matter of security for the Chinese."
Remember, this is the rational basis for the start of many a horrible war. And nations have been known to believe (naively) that they can continue trade in one area while engaging in warfare in another. I *hope* and believe that today's world wars are fought economically, especially since China has the bomb, as did the Soviet Union. And the US was rightly concerned (I believe) about *their* intentions, and *their* ability to gouge deep economic wounds if it ever got on its feet.
"The battleground this century will be around innovation and the human brains that come up with it."
It's hard for me to see how China will compete for human brains. Clearly they have an excess of them. I seriously, seriously doubt that the world will ever learn Mandarin. And that may be China's ultimate handicap. But that is a debatable speculation.
"It is actually very hard to corner the market in a commodity."
I'm not an economist, but I accept your argument. Maybe I shouldn't speculate on economics, and besides speculating can be dangerous in a public forum. But here goes nothing... I think a free market economy is easily derailed by unpredictable price spikes on key commodities. And maybe that, besides the bomb, is an ultimate weapon that the US fears from Communism.
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atsumi0
Member Since:
07 May 2006
Posts:1
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16 May 2006 2:39 PM |
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The Economist had a projection in a recent issue; by 2010-2012 (not sure if I'm recalling years accurately, but they were pretty near term) there will be more English-speaking Chinese than native English language speakers in the world.
Learning Mandarin won't be an issue.
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Frymaster
Member Since:
23 Mar 2006
Posts:32
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16 May 2006 8:12 PM |
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Development and Democracy: Posting of an article from Foreign Affairs, Oct 2005 by Bruce Buena de Mesquita and George Downs.
- Abstract (Document Summary)
Ever
since Deng Xiaoping opened up China's economy more than 25 years ago,
inaugurating an era of blistering growth, many in the West have assumed
that political reform would follow. Economic liberalization, it was
predicted, would lead to political liberalization and, eventually,
democracy. This prediction was not specific to China. Until quite
recently, conventional wisdom has held that economic development,
wherever it occurs, will lead inevitably -- and fairly quickly -- to
democracy. The argument, in its simplest form, runs like this: economic
growth produces an educated and entrepreneurial middle class that,
sooner or later, begins to demand control over its own fate.
Eventually, even repressive governments are forced to give in. The fact
that almost all of the richest countries in the world are democratic
was long taken as iron-clad evidence of this progression. Recent
history, however, has complicated matters. As events now suggest, the
link between economic development and what is generally called liberal
democracy is actually quite weak and may even be getting weaker.
The authors say that by strictly rationing a small set of public goods called "coordination goods" (political rights, more general human rights, press freedom, and accessible higher education), repressive regimes use increasing economic activity to strengthen their hold on power.
Argues strongly to the idea that China will not democratize in any substantial way.
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EngFear
Member Since:
05 May 2006
Posts:12
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17 May 2006 1:50 AM |
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Frymaster> Interesting article. Kinda undermines the Francis Fukuyama "End of History" thesis that free markets / liberal democracy & human rights automatically go hand in hand.
John Ralston Saul made the point that for most of the industrial revolution, most of the population of Europe & the US did not get major benefits - e.g. declining standards of living and no access to democratic institutions (remember that universal sufferage is a comparatively recent innovation). Capitalism & democracy were not mutually reinforcing.
http://www.amazon.com/gp/product/0684871084/102-1042447-7121763
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EngFear
Member Since:
05 May 2006
Posts:12
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17 May 2006 2:03 AM |
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lhsmithnet
>I just don't believe China is "too good" for this kind of behavior.
Nor do I. In fact, history has shown that few countries are.
>Someone implied that it is not in China's interest to compete aggressively or hurt the US.
I stated that it is not in China's interest to hurt the US. It will certainly compete aggressively - it views the US as its primary international opponent. Altho the US is currently the primary market for many Chinese-made goods. Where it is competing with the US is for natural resources (as you note).
As regards actual war, China's ability to project military force outside its borders is limited. Otherwise it would be occupying Taiwan now. It is contained by Russia to its north, India to its South-West & Japan to its East. Hence my comments about an economic cold war around access to both natural resources & markets for consumer goods.
>I think a free market economy is easily derailed by unpredictable price spikes on key >commodities. And maybe that, besides the bomb, is an ultimate weapon that the US >fears from Communism.
Any economy is derailed by a sudden removal of a key commodity (which is what a price spike entails). I don't understand your last sentence at all.
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lhsmithnet
Member Since:
25 Apr 2006
Posts:6
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17 May 2006 1:24 PM |
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I wrote "And maybe that, besides the bomb, is an ultimate weapon that the US fears from Communism." ... Sorry, I should have written that sentence better, or better, not written it at all. Anyway, my underlying belief, which may be wrong, is that a controlled economy can build increasing leverage in the world market without exposing its own economy to risk of fluctuation. I think the US feared communism from the beginning because of this prospect, and had the cynical, pessimistic, or paranoid belief (all of which I tend to agree with) that a nation with such power will eventually use it to the detriment of others. This is what I took away from sociology 101, and something else I vaguely remember (like Jackson's theorem?) that says a system of actions founded on a belief tend to confirm the belief.
My original hypothesis may have been refuted, some things went over my head and that's ok. I still see things rather simply. Namely, in the next 20 to 50 years, either (1) China will change internally, and emerge as an equal partner in the world economy, or (2) failing that, the US will escalate a cold war in order to contain it, or (3) failing that, China will come to dominate the world market, reversing the current roles in the world economic order. I also have a simple view that (1) will not occur, and owing to the bomb, (2) won't get very far, so that (3) seems to me to be the most likely outcome.
I don't know that the US government has this view, or if it has UNDERestimated China's impact. I think there is an undercurrent of fear of China in the US, maybe I'm merely reflecting that. But it does seem to me that perhaps with the exclusion of acadamia, "we" have actually UNDERestimated its impact. That's my opinion... which is always subject to change.
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EngFear
Member Since:
05 May 2006
Posts:12
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18 May 2006 1:34 AM |
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"Anyway, my underlying belief, which may be wrong, is that a controlled economy can build increasing leverage in the world market without exposing its own economy to risk of fluctuation."
I don't think this is true. Controlled economies cannot buffer themselves from commodity shortages any more than market economies can. It's just the side-effects are different. In a market economy you get a price spike when supply of a product drops but demand stays the same or increases. If the price is kept artificially low then you end up with shortages (c.f. the endless queues outside Soviet-era shops) as demand outstrips supply then a black market starts up & people pay more to obtain it on the sly.
"But it does seem to me that perhaps with the exclusion of acadamia, "we" have actually UNDERestimated its impact. That's my opinion... which is always subject to change."
I think that depends who you mean by "we"...
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chrismeyer
Member Since:
20 Dec 2005
Posts:33
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18 May 2006 5:07 AM |
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My original hypothesis may have been refuted, some things went over my head and that's ok. I still see things rather simply. Namely, in the next 20 to 50 years, either (1) China will change internally, and emerge as an equal partner in the world economy, or (2) failing that, the US will escalate a cold war in order to contain it, or (3) failing that, China will come to dominate the world market, reversing the current roles in the world economic order. I also have a simple view that (1) will not occur, and owing to the bomb, (2) won't get very far, so that (3) seems to me to be the most likely outcome.
Based on population and education, it seems to me likely that (3) will occur in all cases. If internal liberalization occurs, China will still be dominant, as we have been--I don't think Europeans would say we're an equal partner to the EU, though we would not say we've been trying to contain Europe. And failing non-economic aggression by China, I don't see the containment approach, since the US economy will be so intertwined with the Chinese--it's not a bomb issue, it's an economic one. So I agree with the conclusion--do you think the US has something to gain by resisting this development? The more China is intergrated into the world economy, the more it will be constrained to play by the world economy's rules.
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Rudy3
Member Since:
16 Dec 2005
Posts:2
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18 May 2006 5:02 PM |
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Atsumi0 - While that may be true, I would give two reasons to forge ahead with those language lessons.
1. Language reflects thinking - If you really want to understand the way people think, study their language. Not only does it give you access to content that is only in that language, it also helps you understand some of the nuances of how they perceive and express the world around them. You can learn a lot from how they talk about time, possession (mine, yours), their use of honorifics (expressions of status), etc.
2. The other half of the story - I lived and worked in Japan for several years and although most of the Japanese businesspeople I dealt with spoke (or at least understood) English rather well, when dealing with non-Japanese they always had the option of speaking Japanese to each other when they wanted to say something without the other person understanding. I also saw them use interpreters even when they didn't really need to so that they had extra time to consider what the person said based on their own understanding and on what the interpreter said. It always seemed to me that both those factors gave them a real advantage in negotiating, and in communicating in general, in an international context.
So, learning Mandarin may not be necessary but can certainly be quite helpful.
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