In the meantime, here's some food for thought on China's domestic situation. Arvind Subramanian argues that China may have better prospects for future growth than India due to the latter's declining state infrastructure. This is an interesting article overall, but a couple of issues deserve to be raised. For instance, Arvind argues that:
There are few examples of countries that have grown as strongly and for such long periods as India and China have – 6% and 10%, respectively, for nearly three decades – and then suffered a sharp slowdown or collapse. If history is a reliable guide, then barring major upheavals, economic growth looks likely to continue in both countries until some threshold level of prosperity is attained.I'm sorry, but there are many people living in Thailand, Indonesia, Malaysia and South Korea that would respectfully disagree. The fact that the East Asian crisis is only ten years old makes this statement all the more shocking. After literally three decades of what the World Bank deemed "miraculous" growth, each of these countries faced the prospect of negative growth following enormous outflows of capital in 1997-8; Indonesia even underwent a regime change. Perhaps that's an exception to the historical trend but it's certainly worth acknowledging. And yes, China was spared from this crisis largely due to its tight restrictions on investment, but the China of today is considerably more open, not least due to its recent accession to the WTO. The very same factors which Mr. Subramanian argues lead to a virtuous cycle of investment can lead to the reverse should circumstances change.
And indeed, according to S&P/Citigroup BMI Global Index, this year the BRIC countries (Brazil, Russia, India and China) have been about as economically buoyant as literal bricks. Not encouraging, but perhaps only temporary.
Also, a good friend has pointed me to a good video summary of the challenges facing China by Shaun Breslin of the University of Warwick (thanks Manoli). Some highlights:
- Communism has been replaced by nationalism/patriotism
- We're seeing the implementation of "illiberal liberalism"
- Wealth in China has increased at a phenomenal rate, but so has inequality.
- Health care is harder to come by in some parts of China than in the 1970s
- It's entirely possible that the narrative will not be that of an emerging superpower, but that of economic collapse.
- How the government reacted to the recent earthquake vis-a-vis the SARS epidemic suggested there has been a greater effort to re-attach the party to the people
- The Chinese government has a long track record of dealing with difficult challenges not unlike those it faces today.
- If this film is anything to go by, one should not study film at the University of Warwick.