Crouching or paper tiger?

The idea of East Asia as the economic center is nothing new. Indeed, from a historical perspective, the idea of a financial world ruled by the West is both unprecedented and astounding. Chinese rule would appear far more appropriate under such context.

The idea of China as the economic powerhouse of the world should not be viewed with surprise or trepidation. The simple truth about human history is that no one stays on top

forever. Some are more comfortable with this than others. Amateur soothsayers have reached a fairly stable consensus that the Chinese economy will overtake America’s someday, the only matter of debate being how soon. Within a decade seems to be the most oft-quoted.

However, I am not quite so sure.

While Chinese economic growth vastly surpasses American (some nine percent against 2.5 to three percent), this figure is misleading. A very basic fact of economics is that emerging economies tend to grow at a faster rate than more developed ones, based on the simple mathematics of percentages. Growth tends to slow down as an economy gets larger, as per the concept of diminishing returns.

A poor country, such as Turkmenistan with a GDP of $28 billion (about half the personal wealth of Bill Gates), could be said to experience growth of 20 percent if its economy grew by a mere $6 billion. The United States, on the other hand, at a GDP of $14.6 trillion, may have grown by only 2.7 percent in 2010. But that amounts to almost $400 billion in practical terms.

For perspective, although China’s economy grew at an admirable rate of around 10 percent in 2010, and Afghanistan grew at about nine percent, I can safely say that Afghanistan will probably not surpass the Western world in economic clout any time soon.

That, of course, discounts several important factors. China’s GDP currently stands at almost $10 trillion. In 2010, it is estimated that the Chinese economy grew by almost $1 trillion. There is a reason to believe that the Chinese economy will continue to experience exponential growth, already well into its entry into the realm of “developed” economies. Apparently, China is doing something right.

This is anathema to proponents of capitalism. For, as its leaders proudly attest, China is a

communist country, and an immensely successful one.

At least, it would seem so.

For one, China is hardly communist, at least in comparison to the late USSR. While tight government control and strict regulation of business all contribute to this image, the majority of Chinese success is owed to its entrepreneurs. These “bamboo capitalists,” as to they are referred, live in a cautious state of limbo. Given the authoritarian Chinese government’s tricky relationship with private business, an impudently visible entrepreneur can easily go from businessman to criminal in a matter of days.

The “success” of China is also misleading. Though China’s GDP is undeniably massive, as a ratio to its population, the numbers are dismal. Ten trillion dollars, after all, divvied up among a population of 1.3 billion, amounts to $7,500 a year. For comparison, GDP per capita in the U.S. hovers around $47,500 annually. For this reason, in many respects, Chinese livelihood remains in the Third World.

Even when China eventually surpasses the U.S. in terms of GDP, it will be a long time before China as a nation can compete with America as a story in success. China has no Hollywood, no Silicon Valley, no Ivy League. China fails to draw in the intellectuals of the world to its universities, and the heavy-handedness of the Chinese government continues to feed

the subtle-but-never-absent discontent in the population.

China likes to see itself as an example of state-driven economics, authoritarian capitalism done the communist way. If China ever experiences full realization of itself as the economic success story of the 21st century, it will be in spite of its best efforts toward the same. ?