Maybe this mess isn’t going to hit China so hard, after all. Brian Wang over at Next Big Future makes the case that China has stronger economic fundamentals now than it did in 2000. The real gems from NBF’s post are in the comment back and forth with one of his readers. When (rightly) challenged on the assumption of linear growth beyond 2008, bw replies:
“By 2015, at the rate of 35 million people per year moving to the cities, China would have 900 to 950 million in the cities and towns and 65-68% urbanization.
I think China is going to 80-85% urbanization like the developed countries. People in the cities make 3 times more than those in the rural areas. So 35% more urban would be 70% more GDP when those people are absorbed and productive in the cities.
So is a basic level of continued infrastructure improvement, modernization (GDP catchup) and urbanization possible. Infrastructure is where china is building out its highways and rail and shipping up to the density of level of the USA and increasing its per capita energy. Those infrastructure projects are already underway and look certain for 2020 and likely through to 2030.
China has 1.9 trillion in currency reserves and has the national financial means to fund continued development even if there was a significant financial problem or a natural disaster or something else unforeseen. They can self insure without going out for credit.”
These are three critical, and unique, economic drivers: a huge, nearly irresitible push to urbanize, a solid commitment to national infrastructure, and a lot of cash. These are uniquely Chinese advantages right now. The US certainly doesn’t share any of them, and the EU fundamentals are in question. Even though there is reason to believe that China may have to ease up on buying US debt if it has to dip into cash reserves, and while this will force it to let the yuan float a bit more in order to weather the storm, bw argues that China can afford to let the yuan rise.
With regards to the cleantech race, EU leaders are scrambling to reassure the public about their continued commitment to carbon reduction given the slowdown. Meanwhile, the US is silent on the issue, and whoever gains the White House is going to face enormous pressure to throw carbon targets out the window until the recession recedes. Meanwhile, China is ramping up nuclear and cleantech development. This illustrates once again that carbon reduction is mainly perceived as a drag on economic growth in the US, a clear public policy mandate in the EU, and part of the fundamental economic growth strategy in China. These radically different views of carbon reduction are going to create increasingly stiff headwinds for US entrepreneurs unless the conversation can be changed.
For those of us who believe that staying competitive in the cleantech race is an important, albeit indirect, US foreign policy objective, the potential for the US to lose its focus will certainly impact the global power projection dynamic. As Parag Khanna puts it in The Second World, the three empires are using very different methods to expand. In very general terms, China pursues consultation, the EU pursues consensus, and the US pursues coalition. Khanna is not shy in suggesting that coalition is likely the weakest strategy of the three, and I would suggest that bw’s analysis amplifies the point. Assuming it can manage the crazy demographic shifts that it faces, China is likely to come out ahead, given its unique capital, infrastructure, and cleantech drivers. The EU is likely get maimed, but will stick to its cleantech guns. And even though it has gotten snagged by the credit crunch, the EU will likely replace the US as the new global spokesperson for some sort of ‘capitalism with a human face.’ The US is getting painted ever closer to the corner. Unless the political will emerges to pursue a role as a leading net exporter of cleantech infrastructure, and unless the US foreign policy ‘coalition’ model is tweaked to include elements of true partnership and consensus, the US is going to face devastating asymmetric power projection from both China and the EU.
