Libre Magazine

Both references give a pessimistic vibe to China and its fame. However, this may certainly not be the case. My discussion would predominantly be focussed around the former, with a general thought, while concluding on the latter.

For starters, I would draw an analogy between the current Asian giant (China) and the pre 1990’s crisis East Asian giant (South Korea) and then diverge away as the discussion unfolds.

Currently, the pre giant is bagging 3-4% growth rate every year- which is sustainable and draws in line with the economic fundamentals of its economy. However, what was so different a dozen or more years ago. Regardless of the factors leading up to the crisis, it was achieving 8-9% growth levels each year, driven by its transforming indigenous and export economy supported by the creative and innovative management of its leaders.

Apart from the obvious reasons which instigated the crisis, why has South Korea not been able to maintain its pre-crisis high’s? As pointed out by Dr Anjum Altaf, It can be argued, such high growth rates cannot be maintained forever, as evident by studying the US economy, within which an average 1.5% growth rate each year translates into a large absolute expansion in real terms. However, I would argue, in the case of South Korea, regardless of its classification as a developed country and the current trend, its eventual flattening of growth rates, investment to saving patters and changing composition of exports post crisis, can be contributed to deeper factors within its economy.

The following can be well articulated through the point made by a few in the field (Krugman/Quah), they argue that the only manner to sustain and value growth in the long run is by increases in total factor productivity (the residual in output not explained by inputs), which the current China (similar to South Korea of the pre crisis period) is heavily slacking in, relative to the developed world. Therefore, considering the total factor productivity (TFP) as a direct measure, is China’s growth sustainable? A direct critique would be our capacity to accurately measure TFP, which is a highly debatable issue (Quah).

Secondly, the contribution of China is driven primarily by its large population size (who said, a large population is a curse), therefore once we correct for GDP per capita, the economy is not classified in the current race.

However it would be naïve to draw a conclusion based on these findings as there are several other factors at play, which when considered can negate the above drift. Important considerations and differences need to be drawn based on China’s untapped market potential driven by its population numbers, unskilled labour and the west-east divide within the country. Other factors such as trade as a share of output, mode of governance, positive sum territorial competition, dependency of the western markets along side environment and social sustainability, are very important considerations to make. Therefore my argument is inconclusive and fruits a strong basis for future research (Current trends).

Furthermore, if China is to be the future giant of the world economy as claimed by the figures produced by Merrill Lynch- would it be the beauty or the beast in its imperial life. Will its history, values and culture detach itself from the western mode of imperial practice or would it soon follow. Its recent expeditions in Africa and how they nurture in dialogue and practice over the coming years can be a base of evaluating the inevitable future.

Read the snipet by Pranad Bardhan to overview some myths about the rise of the new asian giants.

Above all, the real question is: What Does China Think? (A Interesting Book by Mark Leonard)