The conventional wisdom is that China is an economic juggernaut that'll overtake the United States by mid-century as not only the world's foremost economic dynamo but also the world's premier military power. The problem with conventional wisdom, however, is that it's so often wrong. Jonathan Wellum at Comment throws cold water on the Golden Age of China speculation and argues that China suffers from systemic moral problems that are more likely to turn it onto a path similar to that which Japan followed twenty years ago.
Here's his introduction:
With the U.S. embroiled in economic turmoil, three decades of unprecedented economic growth behind it, a seemingly endless supply of cheap labour and bulging foreign currency exchange reserves due to massive trade surpluses, Chinese growth does indeed appear unstoppable. Even the world's largest bank by market capitalization is now Chinese. Yet it is the image of the "flawless" girl lip-synching her way through the opening of the Beijing Olympics while the real singer was set aside due to her chubby cheeks and less than perfect teeth that offers insight into the challenges ahead.
Remember that 20 years ago, the same experts predicting China's inevitable coronation were forecasting that Japan would dominate the world financially. At that time, Japan housed some of the world's most highly valued corporations, including the most expensive financial institutions. Its future also seemed inevitable. But the Japanese forgot the most pedestrian of all economic realities: if you are not prepared to reproduce, you guarantee your extinction. Its low birthrate now means that, according to its own statistics, Japan will lose 70 per cent of its workforce by mid-century, and already its share of the world economy has dropped from a high of 18% in 1994 to below 10% in 2008.
Read Wellum's essay to find our what he thinks China's specific problems are.
RLC