China – The Emerging Economic Powerhouse

Commentary, Globalization, Robert Sopuck

Robust economic growth in China is turning that country into an economic powerhouse. In fact, China’s main concern right now is a growth rate that is too rapid. The leadership wants to bring it down to a more manageable seven percent or so.

This is all the more astonishing when you consider that not too long ago China was considered a Third World country. While they still have their problems, such as 300 million “surplus” people in rural areas with little prospects for employment, it is obvious that the Chinese are going places. This phenomenon will have profound and positive effects on the rest of the world.

A common response on this side of the Pacific is hand-wringing about the outsourcing of jobs and manufacturing to China and other parts of Asia. The purveyors of this outdated view subscribe to an old zero-sum theory of economics that states, “If you get richer, it’s because I’ve gotten poorer.” Time and time again, this theory has been proven to be nonsense.

As China emerges from its Communist past, it has become a low-cost supplier of many goods like clothing and electronics. It adds value to natural resources and increases living standards in the West when we consume its less expensive goods. As China becomes richer, we will all benefit. Indeed, China is at the same stage as Japan was some 40 years ago. Japan now outsources all kinds of production to China.

Larry Reed, President of Michigan’s Mackinac Center, a market-oriented think tank, recently visited China. He reports that the changes over the last decade have been profound, especially the resurgence of free-market thinking among Chinese intellectuals. He notes:

“Economically, it is wildly apparent that China has made enormous progress since my last visit in 1988. Growth and construction are everywhere. Private businesses of all sizes are all over the place. Many Chinese told me that there is no turning back. Too many people are enjoying the fruits of economic liberties to allow any regime there to ever seriously turn back the clock to the days of Maoist central planning. The works of Hayek are well known and often cited among Chinese intellectuals, who are very aware and disturbed at the drift toward socialism in America. They told me more than once how laughable some of the academics from America are who come there and still extol some aspect of central planning, which no one ’with any brains’ believes in any more in China.”

Imagine that. Intellectuals in a formerly Communist dictatorship laughing at the socialistic trends in North American society! China achieved double-digit growth rates by reducing the size of its government from about 75% of its economy to 30%. If we continue our drift towards higher taxes, more regulation and government control, it’s apparent that soon the student will soon be teaching the teacher. This is one to watch.

China took an unprecedented step on the road to freedom at the recent National People’s Congress, where an amendment to protect property rights was entrenched in the constitution. Elegant in its simplicity, the amendment states “private property obtained legally shall not be violated.” This sort of language is notably absent from Canada’s Charter of Rights and freedoms. That’s a pity. We should consider it.