There are some wildly divergent schools of thought on China’s economy, as you can see in this new post by my friend Dror (with whom I disagree on a lot of things). He blasts the rosy scenarios in some Western media claiming China will “1.) decouple” from the US and other countries it has depended on for exports and 2.) continue its growth by domestic consumption instead. His conclusion:
[I]n the real world, China’s economy is becoming increasingly dependent on investment in fixed-assets (by government, or via government-induced loans), and depends less, not more, on local consumption. China’s development trend and growth in real manufacturing income is very different from that of other “Asian Tigers” and seems to offer a very limited benefit to those working at the lowest paying jobs – which means they are not going to become the world’s new consumers any time soon.
It looks like the only decoupling we have been experiencing over the past 12 months is a decoupling from reality – a growing gap between what we read in the papers and what really happens in the global economy. There is a lot of growth in China, and while some people are making more money, there are even more people who don’t, and a few people who make more than everyone else combined. And while there is an increase in retail spending, local consumption is not likely to become China’s main growth engine any time soon.
No matter what the CIA World Fact Book or The Economist says, I’d have to agree that China is not ready to decouple from the US, just as we aren’t ready to decouple from them. I’m not as pessimistic as Dror is about China’s prospects, but the points he raises are definitely worth considering. Decoupling, I believe, is a long way off, as much as the propaganda wants you to think otherwise.
Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.