China -- peaceful rise or crash and burn?

Posted By Daniel W. Drezner Monday, March 2, 2009 - 8:48 PM Share

Political scientist Minxin Pei and economist Jonathan Anderson have a debate in the latest issue of The National Interest over China's future. Anderson is bullish; Pei thinks that all of China's problems -- environmental degradation, flawed economic and political institutions -- will lead to stagnation.

My take on this has always been that these two outcomes are not mutually inconsistent. China can go through vicious downturns even as its relative rise continues.

Think of the United States 120 years ago. America was a country that was unquestionably on the rise, but it was also coping with the vicissitudes of the recession/depression that lasted between the start of the Panic of 1873 and the end of the Panic of 1893. The latter did not stop the former.

Short of breaking apart, it seems hard to imagine China not augmenting its great power status. Of course, I'm not George Friedman....

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BLUE13326

9:29 PM ET

March 2, 2009

The market's lost nearly 3000

The market's lost nearly 3000 points since Obama's election.

Still feeling good about Obama's economic policies?

But hey, we can look at the bright side: using Obamaspeak, he actually saved or created 6,763 DOW points today.

DON S

1:07 AM ET

March 3, 2009

Not so sure about China's rise

"My take on this has always been that these two outcomes are not mutually inconsistent. China can go through vicious downturns even as its relative rise continues."

I have two problems with forecasting China's continued rise.

First, China has been on a boom for 30 years now, and is getting large enough that it is incredibly dependent on demand in other countries. China is not doing very well at reducing the gap between rich and poor, and given that most of it's younger populace comes from the ill-educated poor, and much of Chinese relative advantage rests on very low wages, that does not bode well for a rpid rise in domestic demand. If the US savings rate rises a lot (as seems likely) that could be very bad news for China.

40 or 50 year economic booms are possible, but are also relatively uncharted territory. The Japanese boom lasted between 1955 and roughly 1990, 35 years. The Germans had a boom between maybe 1860 and 1890, 30 years, which carried it to the #1 power on earth.

The problem I have with China is that it's not a democracy. Established democracies change governments and policies at the press of a ballot lever, and thus keep legitimacy and popular support relatively easily. Autocracies like Imperial Germany and present day China have a harder time handling change, I think. Germany had a great period of growth during Bismark's chancellorshig, but the period between 1900 and 1950 was very hard on Germany, which gave up most of the relative ground that it had gained. A century ago the Kaiser woke up knowing he headed the most powerful nation on Earth, today Angela Merkel wakes up knowing that she heads a nation somewhere between #6 and #10. A huge difference and I put it down to growth elsewhere and inability to adapt.

China is going to have a huge economic/political shock sometime soon. The current crisis could be it, or it could be in 10 or 20 years. I doubt it's ability to adapt easily.