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Ten reasons why China is different
Despite a new w av e of criticism regarding China's economy, it has fundamental strengths w hich cannot
be ignored.
Stephen S Roach Last Modified: 31 May 2011 13:30
Despite the worrying increase in inflation, China's strategic growth plans are encouraging [GALLO/GETTY]
The China doubters are back in force. They seem to come in waves - every few years, or so. Yet, year in and
year out, China has defied the naysayers and stayed the course, perpetuating the most spectacular
development miracle of modern times. That seems likely to continue.
Today's feverish hand-wringing reflects a confluence of worries - especially concerns about inflation, excess
investment, soaring wages, and bad bank loans. Prominent academics warn that China could fall victim to
the dreaded "middle-income trap", which has derailed many a developing nation.
There is a kernel of truth to many of the concerns cited above, especially with respect to the current inflation
problem. But they stem largely from misplaced generalisations. Here are ten reasons why it doesn't pay to
diagnose the Chinese economy by drawing inferences from the experiences of others:
Strategy
Since 1953, China has framed its macro objectives in the context of five-year plans, with clearly defined
targets and policy initiatives designed to hit those targets. The recently enacted 12th Five-Year Plan could
well be a strategic turning point - ushering in a shift from the highly successful producer model of the past 30
years to a flourishing consumer society.
Commitment
Seared by memories of turmoil, reinforced by the Cultural Revolution of the 1970s, China's leadership places
the highest priority on stability. Such a commitment served China extremely well in avoiding collateral
damage from the crisis of 2008-2009. It stands to play an equally important role in driving the fight against
inflation, asset bubbles, and deteriorating loan quality.
Wherew ithal to deliv er Top News
China's commitment to stability has teeth. More than 30 years of reform have unlocked its economic
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dynamism. Enterprise and financial market reforms have been key, and many more reforms are coming.
Moreover, China has shown itself to be a good learner from past crises, and shifts course when necessary. Syria's opposition dismisses amnesty gesture
Dozens killed in overnight clashes in Sanaa
Sav ing
A domestic saving rate in excess of 50 per cent has served China well. It funded the investment imperatives
'Captain' Blatter to stand unopposed
of economic development and boosted the cushion of foreign exchange reserves that has shielded China
from external shocks. China now stands ready to absorb some of that surplus saving to promote a shift toward Japan 'underestimated' tsunami risk
internal demand.
Rural-urban migration
Over the past 30 years, the urban share of the Chinese population has risen from 20 per cent to 46 per cent.
Opinion
According to OECD estimates, another 316 million people should move from the countryside to China's cities The crimes of Ratko Mladic
over the next 20 years. Such an unprecedented wave of urbanisation provides solid support for infrastructure Saleh: Suppressing opponents from within
investment and commercial and residential construction activity. Fears of excess investment and "ghost Ten reasons why China is different
cities" fixate on the supply side, without giving due weight to burgeoning demand. Turning the 'right of return' into reality
Low -hanging fruit: Consumption Remembering war crimes and media
Private consumption accounts for only about 37 per cent of China's GDP - the smallest share of any major obligations
economy. By focusing on job creation, wage increases, and the social safety net, the 12th Five-Year Plan
could spark a major increase in discretionary consumer purchasing power. That could lead to as much as a
five per cent point increase in China's consumption share by 2015. What's Hot
Low -hanging fruit: Serv ices Viewed Emailed 7 Days
Services account for just 43 per cent of Chinese GDP - well below global norms. Services are an important
piece of China's pro-consumption strategy - especially large-scale transactions-based industries such as Tortured and killed: Hamza al-Khateeb, age
distribution (wholesale and retail), domestic transportation, supply-chain logistics, and hospitality and leisure. 13
Over the next five years, the services share of Chinese GDP could rise above the currently targeted four per The daredevil pilots of Colombia
cent point increase. This is a labour-intensive, resource-efficient, environmentally friendly growth recipe -
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precisely what China needs in the next phase of its development.
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Foreign direct inv estment Tribesmen seize government buildings in
Modern China has long been a magnet for global multinational corporations seeking both efficiency and a Sanaa
toehold in the world's most populous market. Such investments provide China with access to modern
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technologies and management systems - a catalyst to economic development. China's upcoming
pro-consumption rebalancing implies a potential shift in foreign direct investment - away from manufacturing Ten reasons why China is different
toward services - that could propel growth further. Syria's opposition dismisses amnesty gesture
Are Palestinian children less worthy?
Education
China has taken enormous strides in building human capital. The adult literacy rate is now almost 95 per Italy renews call for Gaddafi to leave
cent, and secondary school enrolment rates are up to 80 per cent. Shanghai's 15-year-old students were
recently ranked first globally in mathematics and reading as per the standardised PISA metric. Chinese
universities now graduate more than 1.5 million engineers and scientists annually. The country is well on its
way to a knowledge-based economy.
Innov ation
In 2009, about 280,000 domestic patent applications were filed in China, placing it third globally, behind
Japan and the United States. China is fourth and rising in terms of international patent applications. At the
same time, China is targeting a research-and-development share of GDP of 2.2 per cent by 2015 - double
the ratio in 2002. This fits with the 12th Five-Year Plan's new focus on innovation-based "strategic emerging Recent activity
industries" - energy conservation, new-generation information technology, biotechnology, high-end
equipment manufacturing, renewable energy, alternative materials, and autos running on alternative fuels. You need to be logged in to Facebook to see
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Currently, these seven industries account for three per cent of Chinese GDP; the government is targeting a 15 your friends' activity
But that's why China is so different. It actually takes these concerns seriously. Unlike the West, where the very Germany to go nuclear-free
concept of strategy has become an oxymoron, China has embraced a transitional framework aimed at 2,776 people shared this.
resolving its sustainability constraints. Moreover, unlike the West, which is trapped in a dysfunctional political
Silencing Bahrain's journalists
quagmire, China has both the commitment and the wherewithal to deliver on that strategy. This is not a time
1,191 people shared this.
to bet against China.
Stephen S Roach, a member of the faculty at Yale University, is Non-Executive Chairman of Morgan
Stanley Asia and author of The Next Asia.
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A version of this article first appeared on Project Syndicate.
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's
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Danny Schechter
Ah someone who has been there and seen the inequalities. I agree with y our comments, and will add a f ew other
observ ations.
1. positions of power e.g prov incial gov ernors, city police chief s are usually seen as limited time opportunities f or
gov ernment of f icials to enrich themselv es..which they do. There is a pattern f or most succesf ul businesses to be
part owned by party of f icials. If y ou start a business and they see y ou are making money y uo will be inv ited to News In Depth
"sell" a part to whoev er is in power locally . ref usal usually means arrest f or "corruption" and when they release y ou Africa Opinion
ev en if y ou hav e not been charged y our business has been transf erred to a party of f icial. I actually saw this Am ericas Features
happen to two people. In one case it was the prov incial gov ernor's son who decided he liked a particularly succesf ul
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heav y equipment dealership.
Central/S.Asia Briefings
Note. many of the companies that are pushing the construction boom in China are owned by the f amilies or f riends
of prov incial gov ernors or other powerf ul party of f icials. There are many empty buildings in China, in some places
Europe Blogs
whole suburbs and at least 7 empty new cities. Why do'nt house prices crash? 3 reasons, greed by speculators, 2. Middle East Your View s
banks (under order f rom?) hav e been holding properties that repossess when loans go bad, rather than sell them and Sport
most importantly 3. Since the gov ernors are the ones making money out of the boom they can control the land
registry , I saw in at least two cities occassions where sales were knocked back by the gov ernment of f icials
because the price was lower than what it had been bought f or. Programmes
Riz Khan
2. Like y ou said the health sy stem is in shambles. So if y ou get sick y ou're can be f inancially ruined. There are Witness
limited insuarance schemes but they only cov er part of the costs. The medicines are where they real cost lies and Inside Story
where the doctors (who are not that well paid) get their real prof its. They usually prescribe their own (hospital brand) Listening Post
medicines which are not cheap. Y ou can go outside and buy generic medicine, but it is not much cheaper and may
People & Pow er
possibly be f ake too. This is the major reason why people sav e so much of their money ..by the way I f ound it
Fault Lines
disturbing that most banks usually of f ered interst rates on sav ings that were below the inf lation rate, so the poor
Fabulous Picture Show
3. The education sy stem (My daughters also went to school in China) is good at maths and memorizing but terrible
at initiativ e and lateral thinking. This I believ e is due to the language. The Chinese characters (Hanzi) are v ery Watch More
dif f icult to memorize it usually takes +10 y ears of study f or a Chinese student just to write f luently . Thus students
Live About Us
spend y ears writing Hanzi characters ov er and ov er again. At Univ ersity I saw most courses depended on one or
On Dem and Search
two textbooks, if y ou could write the correct paragraph f rom the book during the exam f or a question, y ou passed.
There was basically no hav ing to explain why or discuss other alternativ es.
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4.There is so much competition f or relativ ely f ew good jobs (6-8 million univ ersity graduates/y ear) that parents who Broadcast Com m ons
hav e the means send their children to tutors/cram schools in the af ternoon and/or weekends f rom primary school Schedule Work for us
lev el. There is currently among the richer f amilies an issue with children (usually an only child) hav ing Transparency Unit
health/psy chological problems..they cannot understand why . Some of our f riends complained their children are Com m unity Rules
v ery short compared to them but similar to their grandparents (short due to poor nutrition)..when they go to the Term s &
doctors they were adv ised that the children are not getting enough sleep or exercise thus their bodies are not Conditions
growing properly . Our f riends though shocked hav e not adjusted their kids study regime, one of the children studies
to 1 o'clock in the morning ev ery day to f inish the homework she is giv en ev ery day ..the child is only 10 y ears old.
Strangely ev en the Chinese laugh at their Univ ersities with a popular joke shown ev en on telev ision about Beijing
Univ ersity graduates being barely good enough to look af ter children in childcare centres..
5. Massiv e dif f erences in what the rich (party of f icials or their f amily ) earn/steal and the middle class earn and then
another big step to the f arm labourers and construction workers. There is now a growing anger against the party
because their spoilt children are arrogant and think they can do whatev er they want, which they usually do. It is
v ery rare f or any them to be punished when they do something wrong (rape, run ov er people while drunk etc).
Thus the party uses propaganda to keep their people happy .."they are superior", "the whole world listen to them"..etc
They are v ery sensitiv e to lack of f ood in the general population, they are aware that ev ery Chinese dy nasty
bef ore them has f allen due to this key issue. Thus if China needs to get oil, water or more land f rom others(buy ing,
stealing or by inv asion) they will or it will be them f acing an uprising and I doubt other countries will suddenly
accept 60 million f leeing party members.
Stev en -- welcome to my world-- its nev er dull. And y ou answered my earlier question. Y ou did not mention a
couple of points worth mentioning. Univ esity 's are cheap, the students do not take their classes v ery
seriously , there is tremendous pressure to pass ev ery one- y es there are a f ew students who generally stay in
academia who are as good as any in the world work hard, and mov e on to graduate school-- in the US, in
China, and elsewhere. The kids in college of ten act more like kids in high school in the US (although that is
changing). Y ou mention of the language is spot on-- while they study a great deal more, my back of the
enev lop guess (f rom watching my children) and other children is about a 1/3 of the study time is spent with the
writing of characters-- if y ou reduce that to a 1/5 howev er, they still study subjects much more than their
American counter parts and their time on task in the classroom is higher as discipline is less of a distraction.
asiajack that was brilliant, really respect y our point of v iew. it gav e me a complete and real perspectiv e on China,
especially f rom someone who has experienced it. that is what I'v e been looking f or.
Thank y ou !
China's secret is actually something v ery simple. A gov ernment that is still in control of things (and not economy and
banks) that can actually dev elope and execute longterm plans whereas western democracies are completely powerless,
slav es to economy and the legislation period is so short that no longterm plans are possible because the next
gov ernment would change it any way s.
Jan the real secrete is that Chinese people care about each other
What I said was: "Chinese people care about each other" I did not say they care about all mankind, people in
general, etc. And while two wrongs do not make a right-- it is worth pointing out American hy pocracy since
George Bush and 9/11. The Chinese legal sy stem is not based on rights, but the US is, it is not based on due
process and prior presumption of innocence, but the US sy stem is, China, has not to my knowledge signed
the Genev a Conv entions, but the US has- in short, y our critism is correct, but the US is hy pocrtical-- let them
restore the constitution, stop torture, rendition, close G-Mo, stop destroy ing public inf rastructure as a means of
keeping minorities supressed, and then I am willing to listen to US critism- until them the US should stop telling
other people about morality . By the way are y ou related to Gen. Duckworth USMC?
Except f or those ev il separatists and troublemakers like the Tibetans, Uy ghurs, Falun Gong, house-church
christians, human rights activ ists, etc. The "compassion" those ty pes tend to get is of the Orwellian
"Ministry of Lov e" v ariety , and that ain't so lov ely .
Aj I said they care about each other I did not say they care about people, humanity , mankind, etc.
John Johnson reads that single sentence of y ours and deems y ou a horrible person.
John his comment hardly describes his personality , I literally just took the time to read ev ery post on this
thread, and I think y ou misinterpreted what he has written entirely . I took it as, Americans (the av erage
American that is, there is much div ersity in thought here) tend to be v ery indiv idualistic when it comes to our
well being, especially our economic well being. Our gov ernment has destroy ed countries and taken adv antage
of others through corruption, that is a f act.
Like
I'v e trav eled all ov er the world f or 20 y ears including China. In ev ery country people care about each other the
same way they do in China.
Y ou statement is completely baseless.
Tan with all due respect trav eling is not the same as liv ing and rasing a f amily and we will simply hav e to
disagree-- there are dif f erences in the degree to which people care about other people, and I might add
editorially that people in the US are v ery self ish and do not care about other people f or the most part
On second thought let me answer y ou in a more positiv e way -- I was only ref ering to Chinese people liv ing in
China within Chinese culture-- I was not making a generalization theref ore comparing my comment to other
countries and cultures does not make my statement baseless
Moign Khawaja and 1 more liked this Like
Y our point of v iew is utterly disgusting. People in the US are "self ish and do not care about other people".
Where the hell are y ou? This is one of the f riendliest countries in the world. And y es I trav el a lot.
clearly I am not going to agree with y our characterization, perhaps my comment is hy perbole, nonetheless the
US does not hav e national healthcare, elderly are lef t on their own, children are a minority and a cost and so
the public schools languish. The only conclusion I can draw is that Americans do not care about other people. I
may be wrong, and obv iously I am talking about the same country that is the f irst to send aid to a desaster,
the f irst to respond to a world crisis, has Mercy Corp, the Peace Corp, the Red Cross (although its not really
American). Friendly , so lets see Sarah Palin "real ameicans" which implies there are unreal or nonamericans--
v ery f riendly . Guns guns guns-- do f riendly people really need all those guns to protect themselv es f rom other
f riendly people. Corporate controlled healthcare which cares so much it drops cov erage and lets people die!
Political disagreements lead to assinations (when was the last time someone was assinated in China, or
Europe). While I hav e to admit my statement was too broad, and the US is v ery div erse (something it does
not celebrate), in general I will keep my now qualif ied statement: A signif icant segment of Americans do not
care about other people. Oh and I am neither self ish nor closed minded
I pretty much agree with ev ery thing y ou are say ing here! With ref erence to the perceiv ed threat of China, as
Brit, i think the idea of China as a threat exists in the public consciouness to a degree, but this is partly
because Europeans are inf luenced by American culture and f oreign policy etc. and many ideas do cross the
atlantic. I think a great deal of American f ear of China comes f rom the possibilty that they might not be the
strongest economy in the world f or much longer. Because the US and China are economic riv als, as well as
historically ideologically opposite (in name at least), people talking of real world military conf lict is inev itable,
y et i think it is unlikely to happen. Another f actor I think is a hangov er f rom American isolationism, and the
f act that they don't like rely ing on other countries as much as they do actually rely on China.
Back to the UK then, y es China is perceiv ed as a threat by some, perhaps politically there is a f ear of a world
led by a country which doesn't conf orm to the western idea of democracy . But in reality our economy depends
on China, and on a strong China with cheap exports, at that. As well as our tourism industry which can only
benef it f rom a wealthy Chinese middle-class. At the end of last y ear the PM went to China to talk about
increasing trade with Britain, and things will only get better f rom there.
So y es China can be perciev ed as a threat, only really because the media reacts to that sort of economic
change hy sterically , when in reality probably not much will change if China becomes the biggest economy in
the world, and we will keep on buy ing cheap chinese products.
Thank y ou !
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