Defying Gravity: Is Asia’s Economic Miracle About to Stall?

Even in Asia, where gains in wealth have been unparalleled, policymakers are finding it harder and harder to improve the welfare of the common man.

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Nelson Ching / Bloomberg via Getty Images

Pedestrians cross an intersection during the morning commute in the central business district of Beijing, China, on May 28, 2012

As the West struggles to recover from the 2008 financial crisis, it is only natural that many have looked to Asia with envy. While Americans contend with a housing bust and joblessness, and Europeans suffer through their debt crisis, much of Asia (except Japan) seems to gain economic power, wealth and competitiveness year after year. The East looks like it is eating the West’s lunch.

Much of that storyline is true. The rise of Asia is the single most important economic trend of the past half century. But at the same time, looks can be deceiving. Asia has its own share of economic troubles, which threaten to derail its heralded economic miracle.

(MORE: China’s Economic Slowdown: Why Stimulus Is a Bad Idea)

We can see that in the current slowdown in the region. Despite Asia’s burgeoning wealth, its economies are still to a great degree dependent on the advanced economies of the West, and as the recovery there sags, so have Asian exports, manufacturing output and GDP growth. China is likely to post its worst economic performance in 13 years in 2012. South Korea notched its slowest growth rate in nearly three years in the second quarter. Growth in India has fallen precipitously as well. The IMF predicts the economies of developing Asia will expand by 7.1% in 2012 – not bad, of course, but a sharp drop from the 9.7% recorded in 2010. Clearly, there is a limit to how much Asia can defy the gravity of the global economy.

Most in Asia assume that this slowdown is a temporary, cyclical phenomenon, fixed by a bit of easy money and the eventual global recovery. That is likely accurate – to a point. A recent study by HSBC economists Frederic Neumann and Sanchita Mukherjee asks the uncomfortable questions: Is the current downturn a signal that something deeper and scarier is going on? Will the region’s billions, accustomed to rapid progress, have to get used to slower growth?

Simply put, is Asia losing its mojo?

The challenge Asia will face in coming years is, ironically, a result of its gains in wealth. History tells us that the richer economies become, the more difficult it is to achieve very lofty rates of growth. As Neumann and Mukherjee point out, Asia was able to accelerate growth through massive gains in productivity brought about by shifting cheap labor from farms to industry and adding in healthy doses of new technology provided by foreign investment. The problem is that as this process increases wages and economies become more industrialized, new gains in productivity have to come from improvements in efficiency, advances in technology and better management, both at a corporate and a national level. That’s not easy. Not many developing countries have successfully jumped into the ranks of the truly advanced. Those that fail get stuck in what’s called the “middle-income trap,”  in which they hit a ceiling in income levels before they reach the highest echelons of the global economy.

(MORE: Has the European Slowdown Finally Hit the U.S.?)

How vulnerable is Asia to falling into the ‘trap’? In their study, Neumann and Mukherjee uncovered a few worrying trends. First, they noted that growth has slowed down in Asian countries as they become richer. They charted income levels (on a purchasing power parity, or PPP, basis) versus average annual GDP growth over the past decade and found that low-income nations grew about two percentage points faster than those with high incomes. Secondly, Neumann and Mukherjee discovered that income gains in some Asian countries have already been less stellar than you’d probably expect. The two economists plotted PPP income as a share of U.S. income in 1970 and 2009. Here’s what they found:

On this measure, Malaysia, Thailand, Sri Lanka and the Philippines have not markedly improved their position with respect to the United States. China, India, Indonesia, and Vietnam, however, have graduated from low income to middle income status, while Korea, Taiwan, Singapore and Hong Kong have moved from the middle to the high income bracket.

However, when Neumann and Mukherjee used real (inflation-adjusted) data, India and Indonesia remained stuck in low-income status, while Thailand and China moved into the middle income category “surprisingly slowly when measured over the span of four decades.”

(PHOTOS: New Delhi Demands Water: The Indian Capital’s Annual Shortage)

What does all this mean? The study concluded:

Even in Asia, a region accustomed to higher, and more sustained, growth rates,…it cannot be taken for granted that countries swiftly graduate from one income bracket to another. Development is a long and arduous process.

Yes, it is. The fact is that jumping from a poor country to a middle-income one is relatively easy. It just requires a generally stable policy framework that allows under-utilized resources (labor and capital) to get tossed into building an industrialized economy. Taking the next step from there requires a degree of reform that in certain respects is much more challenging. Companies have to transform themselves from simple manufacturers to innovators and designers. Education systems must churn out workers with creative thinking skills, not just basic skills. Policymakers have to forge an environment in which entrepreneurs and executives are willing to take risks by investing in R&D. Those Asian countries that have not achieved significant gains in income in recent years – such as Malaysia – have tailed to take these steps. Even more, some Asian countries are suffering from a similar problem to those in the West – widening income inequality. Even in a rapidly growing nation like China, the average guy isn’t gaining as much as he should from the high rates of growth. That’s because the structure of the economy remains  biased in favor of investors and against consumers.

In other words, if Asia wants to keep its economic miracle alive, it needs to engage in some pretty serious reform. The question is: Will Asia’s policymakers take those necessary measures? If they don’t, Asia could find itself mired in many of the same problems the West is facing today.

MORE: Can Asian-Style Capitalism Save the West?

54 comments
panasian
panasian

My comments have been deleted.

panasian
panasian

@aditya  rajveer singh.  You are very wrong on many things. The American k-12 education has failed miserably in teaching the basics to the American students.  As the result of this malfuctioning educational system, American students are very deficient in reading,math, science,  The evidence of the academic deficiency of the American students  is very well shown  in the PISA tests and various SAP tests. On the other hand the Chinese students from Shanghai and 9 other regions did extremely well.

panasian
panasian

my comment has been  deleted.

panasian
panasian

my comment has been deleted.

aditya rajveer singh
aditya rajveer singh

mr. vikas i agree all is not well with the u.s too,but as you would also agree nothing is perfect,and as for the chinese products in the indian market we all very know how reliable they are,we are talking about long term here,and as i said china doesn't have any semblance of a chance against the u.s.

About education, the chinese education system is far inferior to that in the U.S ,maybe even worse than in India,and Indian education will gradually improve but you bet the chinese won't because the ccp just won't allow that ,you know what people tend to do when they start thinking too much liberally and creatively.

Bottom line is america is just too far ahead and as for your talk on education in the u.s not being perfect too,but it's still probably the best in the world and will remain so.

aditya rajveer singh
aditya rajveer singh

@panasian:disqus  how do you assume that the american economy will stay at 2% growth rate for the next 20 years and the chinese economy will continue to grow at 8 to 10%,doesn't this sound like wishful thinking.As for the way you reply to people that's the problem with people not living in a democracy,you guys just cannot except an opposite point of view,what you say should and is always correct.

God bless you buddy hope you get well soon,prepare to keep an open mind.

Cthulhu Shrugged
Cthulhu Shrugged

He believes it because it is the script he is paid 50 cents a post to believe.

panasian
panasian

my comment has been deleted.

panasian
panasian

If you go back to my commemt, you will know I said  7.5% for China's growth,not 8-10%.  America will be lucky, if it grows 2% a year for the foreseeable future.  You are the one who refuses to see the possibility other person's opinion might be right. Open your mind and see the world more objectively. 

panasian
panasian

 If you go back to my comment, I said 7.5%  for  Chinese growth,  not 8-10 %.  America  will be very lucky if it grows 2% a year for the foreseeable future. You assume falsey a lot of things about me. What makes you think I don't live in so-called democratic country?   What makes you think  I'm CCP-paid Chinese?  You sound like a  one-sided  person who can not think of the possibility  the other person might be right. You should be more open and objevtive to consider other people's views with respect.

panasian
panasian

Hey stupid, you falsely  assume a lot of things about me.   I'm not even Chinese, what makes you think I don't live in so-called  democratic country?   Obviously you have a reading comprehension problem. I didn't say  8-10% for Chinese growth, but 7.5% growth. America would be very lucky if it grows 2% a year for the next 20 years.   I can see  you as a low- intellegene person with narrow right wing views who do not consider the possibility that other people's opinions might be right. Read and study more objectively before opening your dumb mouth again.

Firozali A.Mulla
Firozali A.Mulla

Hong Kong shares jumped on Monday, tracking an

Asia-wide rally following better-than-expected U.S. jobs data on Friday that

spurred gains for riskier assets, propelling the Index above a technical level it

has struggled with since mid-May. Shares

of HSBC Holdings Plc, Europe's largest bank, rose 3.3

percent to its highest since July 17. Part of the strength was due to short

covering after short-selling interest averaged 16 percent of total turnover

last week, dealers said. At

midday, the Hang Seng Index was up 2 percent to 20,069.4, its highest point

since May 14. At that level, the index topped its 200-day moving average, now

at 19,689.5 and a chart level it has found hard to break above for almost three

months. Mainland Chinese

markets rose, but by a modest 0.5 percent at midday, with the CSI300 Index of

the biggestShanghai and Shenzhen listings up 0.5 percent and the

Shanghai Composite Index up 0.4 percent. But

gains in Hong Kong and China came in weak turnover, belying a lack of

conviction ahead of a slew of interim corporate earnings throughout August and

China's July economic data, which will start to come out on Thursday. "Buying is still very

short term and a lot of it is rotational," said Jackson Wong, Tanrich

Securities' vice-president for equity sales. "I'm

actually advising clients to sell into the rally today because we are still

very vulnerable to data from U.S. and China and developments in Europe,"

Wong added. On Monday, the

favourable U.S. jobs data lifted shares of Li amp; Fung, which manages supply

chains for U.S. retailers such as Wal-Mart Stores Inc and Target Corp, by 3.7 percent. On

Friday, Li amp; Fung fell 2.3 percent after data on Thursday showed U.S.

manufacturers suffered an unexpected drop in June orders. Li amp; Fung, which is

expected to post interim earnings on Thursday, is now up 6.2 percent in 2012,

compared with the Hang Seng Index's 8.9 percent gain. The stock is trading at

16.7 times forward 12-months earnings, a 23 percent discount to its historic

median. Four out of 20

analysts have downgraded their earnings estimates for Li amp; Fung by an

average of 2.9 percent in the last 30 days, according to StarMine. VANKE LEADS CHINA PROPERTY DOWN Chinese property counters were

weaker on Monday after Shenzhen-listed China Vanke posted a 14 percent increase in July sales from

a year earlier. For some, the mild rebound reignited fears that China might put

more curbs on the sector. Shares

of China's largest developer by sales slipped 0.9 percent at midday, plumbing

four-month lows, but were still up more than 15 percent year to date, compared

with the 0.8 percent gain for the CSI300. Vanke

is expected to post first-half earnings on Wednesday. But these are likely to

be overshadowed by China's maintenance of policy curbs on the sector at the

same time it is easing other parts of the economy to combat slowing growth. On Sunday, China's central bank

pledged to intensify its monetary policy fine-tuning in the second half and to

improve credit policy to bolster the real economy, echoing earlier government

commitments amid an economic slowdown. I

thank you Firozali A.Mulla DBA

MaryWaterton
MaryWaterton

1st paragraph: The East looks like it is eating the West’s lunch.

They ARE eating our lunch ... and it's because Washington and Wall Street are serving it to them on a golden platter. If they aren't exporting American jobs to China, then they are busy bringing them here on work visas. Wake up and smell the coffee! Our fight is not with China, it's with Washington and Wall Street.

Ed Kim
Ed Kim

Yes it will stall, just like 1996.  However, it won't crash because of the immense holdings of dollars that China has.

Fabian Mok
Fabian Mok

Very little or no asian countries has a broad and comprehensive welfare program. furthermore, asians are paid less for longer hours and there is very little government aid in terms of healthcare and housing with exceptions for developed countries like Singapore and Japan. there's no miracle really, just work more for less pay,save more and stay healthy. and if u're talking about taxes, asians pay a hell lot of taxes.just that they are not officially called taxes!inflation is skyrocketing, and increments cant even keep up.sure, its nice to see your country's economic performance , but give me a pay rise anyday....

IQMinusOne
IQMinusOne

As I am starting to understand what capital means, it dawns on me that the Chinese people have almost no capital (except their own labor). The term "communism" literally means "produce together" in Chinese and gives a sense of a big happy family. But In essence, it seems to actually mean that all capital belongs to the state.

To the outside world, China definitely looks like a giant corporation, but as a country, it is still totalitarian, as it has been since the start of the imperial era, just the vocabulary has been updated from Confucianism to Marxism.

So what is the miracle? If you have an army of hard workers who are paid just enough to sustain their basic needs, you can surely create a miracle. Corporate America knows this too and it has been a very happy partner.

But this is not sustainable because absolute power corrupts absolutely. Sooner or later the wealth will concentrate to such a degree that no one can maintain stability.

Cthulhu Shrugged
Cthulhu Shrugged

We saw this same shallow hand-wringing over "Asia" (then, meaning Japan) in the late '80's-early-'90's.  And now China is the object of envy du jour for the West.

Is China's economy booming?  Absolutely.  Your central point is that is it easy for poor countries to boost themselves into the "middle bracket" of incomes, and that is definitely hte case.  It's made all the more prevalent by the fact that China in particular only really even got "into the game" in the mid-'70's.  Prior to that, its people, industry, and intellect had been utterly squelched by the hegemony of Mao.  So it's only natural that  a spring compressed for so long would rebound pretty darn high, especially considering that this particular spring happens to house the most people in the world.

But it is absolutely incredible to me that this idea of "The Miracle Economy" still has any traction among those with even a basic understanding of socioeconomics.  Yes, Asia has overperformed, and achieves markedly higher growth rates than the West - for now.  But that is simply a product of it as a continent having lagged so far behind the last few centuries.  Of course moving from 3rd World to 1st World is easier and fast than moving from 1st World to.... whatever is beyond that.

But I'm glad you're exploring the myriad problems with the "Asian myth."  Authoritarian capitalism does achieve short- to mid-term increased growth... provided you are one of those hand-selected lottery winners who get to front your pre-destined to win industry moguls.  But in the long run, it's like an Olympic runner taking amphetamines... yeah, the rush is great, but the crash will come long before the finish line arrives.

panasian
panasian

First  of  all, don't call me your sweetheart,  I''m not your sweetheart, you sound like a very effeminate little  man or a third-rate  over-the-hill barmaid.   By just imagining how you look and sound   makes me puke.  Your stupid picture doesn't help either.  Please spare me of your nonsense.    Your list of anecdotes does  not make a trend.  I'm sure  there are  some people who are financially insolvent  in Wenzhou or  any other places.  It happens all the time throughout the world. . I hear  a lot of  cases in which  financially distraught Americans committing  suicide or simply vanishing.  This is not  anything  new.      According to  China Daily, the Hong Kong published China Economic Review,etc,   the volume of  property sales( or buying the  right  to  lease  a property) is  increasing and the sales prices of the properties have  inched up in June  for the first time in many months.   For your information, I have nothing to do with CCP or the Chinese government so get that out of your small brain.   As I mentioned  before,   the property prices throughout China have fallen only about 2%  on average year over year. Also Chinese proprerty owners unlike  the American  homeowners,  have   lot of equity in their homes due to having bought  them with cash or made substantial down payments.    All these things make the Chiese property market  a lot healtier than the American real estate market, swamped  with  huge amounts of  foreclosures.    Just by looking at the track records for the past 20 years, Chinese economy has done  a lot better than the anemic American economy.  Also the Chinese government has already started the long-waited economic reform by partially liberalizing interest  rates( this is fundamental to the Chinese economic reform), legalizing the underground financial institutions starting first in Wenzhou, expanding the foreign exchange trading  band  and opening  wider   the capital account to foreigners.  All these steps are in line with moving  the investment-driven Chinese economy  to a consumption driven- economy and better allocation of capital which in turn makes the Chinese industries move up the value chain.   All these   things willl  happen slowly and sometimes  be  very painful.   But Chinese government knows   it has to keep  making economic reforms  in order to  take China     to a high-income bracket.

Cthulhu Shrugged
Cthulhu Shrugged

"First  of  all, don't call me your sweetheart,  I''m not your sweetheart"

Whatever you say, darling.

"you sound like a very effeminate little man or a third-rate over-the-hill barmaid. By just imagining how you look and sound makes me puke. Your stupid picture doesn't help either."

Ad hominem attacks are so very effective, and in no way make you look like a blithering idiot. Hive five. Way to not take on the role of sputtering buffoon.

panasian
panasian

 Good luck, gay boy, LMAO!!!!!

aditya rajveer singh
aditya rajveer singh

yeah,somebody is putting out the facts given by the chinese media.The whole world knows that the chinese media is state controlled ,they only tell what the ccp wants them to tell.

panasian
panasian

Hey monkey, I also read  The Economist, China Economic Review(published in Hong Kong)   Foreign Policy, Time,  New York Timts, Newsweek, etc,  I don't think these media are  propaganda arms of the  CCP or Chinese government. You sound like  one of the stupid narrow- minded right wing  nuts.

Beany Garbonzo
Beany Garbonzo

I don't really understand your point. 

China may have all sorts of terrible problems, but the concern for Westerners is that we are rapidly losing our economic supremacy.

From the Western point of view what matters is China's international influence. Whether the citizens are miserable and oppressed and the government is a ruthless oligarchy doesn't really matter.

If people are taking the "rah-rah, 'authoritarian capitalism' is the new hotness" position that 'panasian' seems to be taking, that's another matter. To refer to America's "corruption" in the same breath as China's is pretty outrageous. 

The things people complain about in the US, such as the influence of "special interests" are the very nature of the regime in China. The government of China *is* a special interest! 

panasian
panasian

 Maybe it's the other way around. It seems to me  the liberal democracy  in the West doesn't work. Just look at the partisan fighting  in Washington D.C.   The democratic process has been hijacked by the very powerful but corrupt special interest groups at the expense of the general welfare of America.  Because of this, nothing important gets done at all or in a timely manner.   Therefore  further decline of America is guaranteed.

aditya rajveer singh
aditya rajveer singh

hey you short nosed mouse,as i said you are just picking up one story that any world media does in praise of china and you put it up here,read some other articles in the economist,then you will come to know,what they really say about china.you foolish closed minded intolerant communist.

panasian
panasian

 You sound like an ignorant monkey who can not even read things correctly.

panasian
panasian

 Hey dumb mocaca,   you are nothing but a low-iq wog who  doesn't know from his big mouth to his stinking ass.

qyna
qyna

@panasia  I would not count out the US just yet. If I had to place bets on either the US or China, it would be with the US any day. What this article has failed to mention is the myriad of other problems that China faces - endemic poverty in the rural areas of China, where a large percentage of the population still resides; an educational system that does not develop critical thought,  innovation, or creativity - all necessary for more advanced research and development, and entrepreneurship; a university system that still lags far behind those found in the West; crushing environmental problems that are only beginning to interrupt long term growth and will result in long term problems; institutionalized corruption that permeates the culture from bottom to top; an absence of any legal infrastructure whatsoever; and an aging population that is growing at a rapid rate (an increase of 100 million in the number of people over 60 in a 15 year period). The US may have problems with its own form of legalized corruption, but they also have something called elections, whereby politicians can be held responsible for their failures, a legal system that can address wrong doing, and a right to protest. Furthermore, China is overwhelmingly a manufacturing economy, dependent on economies in the West, as is evidenced by their recent slowdown while the Western economies falter. As the article correctly points out, China has made it into the "middle class status", and we should applaud them for that. However, going from middle class status to high income status will require much more than a low cost labor pool from the most populous country in the world and vast manufacturing resources. It's going to require that they address the problems I've mentioned above, and more. Much easier said than done.

panasian
panasian

You are talking a lot of nonsense.  Environmental degradation, political corruption, etc are not unique to China. When America was a developing country in the 19th and early 20th centuries, America suffered from terrible environmemtal degradation and a lot of political corruption. Do you remember Boss Tweed and Tammany Hall machine?  How about very corrupt politics in modern-day Chicago, New Orleans?  At last China has  moved to correct it's environmenmtal problems.  It's going to be a slow  and expensive process. I'm very confident China will accompish it's environmental goals in due time. According to the Transparency International, Italy is almost as corrupt as China and Greece is  more corrupt than  China. So as  you can see  having democracy is no guarantee against corruption. What good is having elections, if not much is accomplished? Do you really think Obama is better than Bush and vice versa?  Also you are harping on the tired old false refrain that Chinese students are not  creative. There is an article titled, THE CREATIVITY CRISIS(in America) on Jul 10.2010 NEWSWEEK.  In  this article you will find  out   China went through an education reform about 10 years ago  moving away from strict rote learning to stressing critical thinking which is essential to creativity. The positive results of the reform were reflected very well on the 2009 PISA test in which the Chinese students from Shanghai and 9 other regions  took the test  and did extrmely well. On the other hand American students did very poorly. According to Dr. Andreas Schleicher who was in charge of the PISA test, if stucents lack creative thinking, they can not do well on the test. I'm going to quote Dr. Schleicher " for me  the real significance of these results is that they REFUTE the commonly held hypothesis that China just  produces rote learning"  " large fractions of these(Chinese) students demonstrate their ability to extrapolate  from what they know  and apply  their knowledge  very CREATIVELY  in novel situations".  And I fully agree with him.   Since 2007,    China has a DEFACTO  two- child policy which permits a person from one child family marries a   person from another one child family, they can have two children and rural people can have two children as usual. Fertility rate and gender imbalance have been improving since then. China's economy DOES NOT depend on exports for growth. About 50% of it's economy comes from investment and roughly 40% from domestic consumption and 10% from domestically value added exports( this is the sum you get, when you subtract the value of the imported parts and materials that went into making Chinese exports from the gross value of the total exports. About 50% Chinese exports are composed of process trading that is just assembling foreign parts for export. The idea that Chinese economy depends on exports is one of the biggest misconceptions about the Chinese economy. America has a big probem in it's lousy k-12 education that has miserably failed teaching it's kids the basics. What good is having the best colleges in the world, if less and less American students take advantage of them, specially in science,technology, engineering, math? On the other hand, more and more foreign students are enrolling in the American colleges. Also America will have a demographic change. By the middle of the century, there is a good chance that the academically very underachieving hispanics and blacks will be a majority in America. Unless America brings up their academic levels, America's future is doomed.

Cthulhu Shrugged
Cthulhu Shrugged

That, though, is not an indictment of the idea of liberal democracy.  That is an indictment of corporate authoritarianism aping democracy... substitute the "corporate" with "state" and... well, you've got China.

The Chinese infrastructure is terrible, inefficient, and corrupt to its core.  Any real substantive change to that truth would have to be so fundamental that you'd hardly call it a "change" so much as a "revolution."  China's growth is great, yes, and amazing to watch/be a part of, but it's not due to some magical formula derived from authoritarian capitalism.  It's due to the natural process of growth that happens whenever the one party states loosens its grip on the people's throats.

And my oh my, what a palate of doom and gloom you are painting with with sentences like "Because of this, nothing important gets done at all or in a timely manner.   Therefore  further decline of America is guaranteed."  Yes, democracy is messy, time consuming, and inefficient.  Yes, authoritarianism certainly does tend to move things along faster - in that it silences opposition or opposing viewpoint.  But I sure as heck wouldn't trade the former for the latter for all the percentage points of growth in the world.

America and the West are recovering, slowly and in fits and starts... but recovering.  Asia's flying high on it's own fumes, and thinks that fuel supply is infinite... we'll see.  I have my doubts.  Give my regards to the other 五毛党 members surely trolling around.

Cthulhu Shrugged
Cthulhu Shrugged

"You sound like a jealous Westerner who can not stand the rise of China."

Sweetheart, I live in China (Shanghai, specifically) and directly benefit from its continued prosperity.  As it thrives, so do I.  I simply refuse to close my eyes, cover my ears, and say "lalalalala I can't hear you" to the readily apparent facts in front of my face like you can.  But please, continue to grasp at your silly little racial straws.  It's cute, in a really pathetic kind of way.

You clearly have some kind of coal in this fire.  You many not be employed by the CCP (you do seem too eloquent for most of them), but you've obviously got some sort of drive to show that the Asian model is superior, and the inferior, Western dogs are on the road to oblivion.  Forgive me if I don't buy into such nonsense in either case.

Chinese property - whether "bought" (it's only ever actually leased from the govt) or rented - is valuated on a massive bubble.  Credit or cash, the fact remains that most Chinese property owner bought their units on the notion of making "infinite profit forever."  The harbinger of doom has already arrived, though.  In Wenzhou - someone of your knowledgeability of all things "pan-Asia" should be familiar with the economic import of that city - multiple construction company owners, real estate investors, and the like have already jumped ship with a mountain of investor money.  It's happening in Shanghai, too.  They know something you apparently have a vested interest in denying: that it is unsustainable - that anyone who knows anything will take the cash in hand and board the next flight out of the country, because the whole charade is living on borrowed time.

panasian
panasian

You are talking a lot of  garbage.  The reason why the 2008 financial crisis did not affect China that much is that   property bubble was controllable in China and also massive investment in infrastructure. Yes, property values went up very much from 2009 to 2011 but in percentage terms, wages went up a lot more than property prices over the last 10 years.  I know there are a lot of many empty housing units. By and large  most of  these empty units were  bought with cash so that there  was  no concern for foreclosure. Property values went down only  about 2% year on year, therefore unlike American homeowners, Chinese   homeowners still have a lot of equity in their homes In other words,  basically  Chinese  bought their properties mostly using their own money.  On the other hand, A lot  of  Americans bought their homes  borrowing heavily from banks. This is the reason why many American homeowners went under when home prices went down a lot. According to GINI INDEX, America is as bad as China when it comes to wealth gap.  In my opinion,  America is worse than China in the wealth gap situation, because after all, America is a fully developed country but China is still a developing country. You sound like a jealous Westerner who can not stand the rise of China. That's just too bad.

Cthulhu Shrugged
Cthulhu Shrugged

What I'm saying, panasian, is that while yes the West has serious problems... so does Asia.  Right on the horizon.  Closing your eyes and wishing it not to be won't do much other than blinding you to the scope of the storm coming.

And while the West in general has had the wind knocked out of it, it is in a much better position to recover from such a blow than even the most successful Asian economies.  Imagine a market crash on the scale of 2008 in China (and whether or not you're Chinese, you're lauding its policies just like one)... there would be no recovery, because there is no system in place to even deal with routine problems, much less financial collapse.

The housing bubble on the Chinese coast/T1 cities is ludicrous, and the wealth distribution even more so.  The only reason it has held out this long is media/govt control of information to the majority of the population.  Those who know don't care, and those who would care are not allowed to know.  Bubbles pop.  It's what they do.  Yet somehow everyone gets it into their minds that somehow this one is different and will just go on forever into the sunny morning light.... Greece, Ireland, the US, Japan, the US again, Germany.... all tell very different stories.

panasian
panasian

You sound like a paid  propagandist for the Tea Party or a sourgrapping Westerner with his head stuck in his rear end.. For your information I 'm not even Chinese.   Just look at America.  The American political process has been hijacked by the powerful but corrupt special interest groups at the expense of the general good of the country.  How many times do we hear about corrupt American or Western bankers or politicians? You must be joking by saying that America and the West are recovering. Europe is on the verge of financial ruin because of it's  huge govenment and bank debts.  Also Europe's economy is  in or near recession and lucky to grow 1% for  the next few years and beyond.  How about America?   It's govenment debt is about 100% of it's GDP, and the economy will grow less than 2% this year and things are not better for next year either.  The jobs numbers are horrible.  The administration and the Congress can not come to terms on tax cuts and spending so that the economy will be facing a fiscal-cliff pretty soon.  It looks like nothing can be done  in the America's corrupt political system that is dominated by powerful but  selfish special interest groups.  How about the America's terrible k-12 education that has miserably failed  in teaching the kids  the basics?  How about the  impending demographic change in America?  By the middle of this century there is a good chance  that the academically very underachieving  hispanics and blacks will be a majority in America.   America's future is doomed unless it brings up their academic levels.  But I'm not optimistic about   America's chance of pulling it off.

Carlos Murillo
Carlos Murillo

I think it is necessary to differentiate among the Asian economies. This month I visited Taiwan and Japan and I can observe a dynamic economy. For that reason  I think that some economies, as China, are going to stall, however, this situation can not generalize.

NStat
NStat

japan has been in stagnation for quite some time now

Evangelina
Evangelina

the absolute numbers are very comparable, CAshLazy.com

LoudRambler
LoudRambler

 In absolute terms, the growth rates of US and China are actually very similar: while the 7% figure may look more impressive than 2.5% figure, given the fact that US GDP per capita is about 4 times higher, the absolute numbers are very comparable, if not higher on US side.

 I think that Americans should take a deep breath, count to 10 and have a second hard, long look at Asian story, keeping in mind the fact that Romney corporate types actually want them to believe that Asia is a miracle, since taxes are typically lower here, even though property rights and rule of law are a lot weaker (however, which they don't see as a problem, since they view themselves above these problems for mere mortals).

panasian
panasian

According to The Economist magazine, China's GDP(not per capita GDP) will be bigger than that of America by 2018. In my opinion, the per capita income  gap between the U.S and China will keep shirinking as it has been in the past, because the U.S growh rate will be stuck at around 2% while China will be still growing at 7-8% for the next 20 years.   By 2040, there is a good chance China will overtake the U.S in the per capita income.

aditya rajveer singh
aditya rajveer singh

Have you been paid by the ccp,you are just ignoring all the facts and quoting from almost every article written in praise of china in the past 20 years.The education system in china is just too  much inferior compared to the one in America.For all your praise of china just tell me one company ,or even one product ,or for that matter one software made in china or by a chinese company that has got the world to take notice.

Also i agree democracy might sometimes be messy but it's still the more sustainable route to development .No country can ever hope to lead the world 

when it's people itself don't have the choice to choose their leader,where power is in the hands of a select few.

Also talking about corruption in china,check out the facts ,do some research on the internet and you will find out,i will tell you just one example,just find out about the politicians sons and their families in china,they are just enormously rich,No other company can ever hope to win a contract or a bid when those silver spoon sons are bidding for the same contract.Can you tell me something like this in America.

Check your facts buddy.Many more facts like these are out there,keep an open mind friend.

panasian
panasian

You are talking a lot of garbage as usual.

panasian
panasian

My commets have been deleted .

panasian
panasian

 My   comments have been deleted  for  no good reason at all.

panasian
panasian

 Nobody is denying  China has a seerious corrution problem. How about America?   America has legalized-corruptin called lobbying. The corrupt but powerful special interest groups bribe money -hungry politicians for their selfish gains at the expense of the geneal welfare of America. You tell me how much public funds in Medicare and defense procument are wasted, because of corrution brought on by the collusion of  selfish American special interest groups and corrupt politicians.

panasian
panasian

It seems like America is the one that has a lousy k-12 education. It has been proven over and over that the American k-12 education has failed miserably to teach American kids the basics.  As the result of this malfunctioning education system, the American students are very deficient in reading, math, science.  The poor performance of the American students  are  very well shown on PISA tests and SAP tests.    On the other hand Chinese students from Shanghai and 9 other regions did extremely well on the 2009 PISA  test.

panasian
panasian

 For your information, I'm not even Chinese.  Paid by the CCP?  Man, you have a pretty lousy sense of  humor.

panasian
panasian

I' m not condoning the corruption in  China.  But on the other hand  America has  legalizd- corruptin called, lobbying  which is used by powerful but corrupt special interest groups to control the money- hungry American politicians for their selfish reasons at the expense of  the  general welfare of America.  You just tell me  how much public funds  are misused  in Medicare, defense procurement , because of the collusion between corrupt American politicians  and selfish interest groups.   Yes, America provides good universities  but it's k-12 education is a disastar.  In any country k-12 education is the foundation of it's educational system.  But American  pblic education system  has faild  miserably  to teach the basics to it's children.  American students are very deficient in reading, math, scientific knowledge.   The  glaring deficiency of  American students  shows up regularly in  PISA tests   and SAP tests.   Right now, HUAWEI, LENOVO, HAIER are world class Chinese companies. It will take a lot of time and efforts for China to come up with more  top  brands.  Slowly but  surely China is getting there.   America used to be  the copycat capital of the world when Ameica was a developing country in the 19th and early 20th centuries. There is an article titled, A NATION OF OUTLAWS,  A CENTURY AGO, THAT WASN'T CHINA------ IT WAS US  in Aug 26, 2007 Boston Globe.  According to this article America  stole and copied  the ideas and inventions of other countries without regard to  copyright,trademark, patent .     I  suggest you read the  article  before belittling       China.  I'm not saying China is pefect---  far from it.    But  we have to give China  credit  for bringing  a lot of people out of  abject poverty in the last 20 years.   I know there is a lot of corruption   and lack of rule of law in China.  I hope China finds  it's own    unique   solutions to all these problems in due time.

Mr.Vikas Kshemakalyani
Mr.Vikas Kshemakalyani

Mr.Singh you seems to be wrongly informed about the capabilities of China and the various produces developed in China.  It is true that though all could not be termed to be the best product of China, and it is also not true that everything which is produced in China is bad in all terms.  The true fact is that most of the products now sold in indian markets are products from China.  I am an indian and a proudful indian.  I agree that in terms of comparison between China and USA the as you are discussing about quality education, all is not well in USA too.

omegafrontier
omegafrontier

1.3 billion, of course, a typo.  Your division is still wrong.  So how much you know about it.

Hold on to your faith, I hold on to my rationalization.  The problem is your number is OUTRAGEOUSLY off, there is no chance in hell a 150 trillion economy can ever happen in 28 years, not even 65 trillion as I said before, much less 150 trillion.  No economists anywhere have ever suggested this trend, so don't make it like you have any backings. 

panasian
panasian

Hey genius,  instead of  saying my figures are outrageously off, why don't you come up with your own figures?  or tell  me  why my figures are  impossible. All  those future figures for China  are within   the capability of the Chinese economy.   The  150 trillion dollar figure is entirely possible. According to Dr. Robert Fogel, a well-respected Nobel Prize winning economist, the China's economy will be about 123 trillion dollars and will make up  40% of the world GDP  by 2040.  In my opinion, he is underestimating the size of the future Chinese economy a little.

omegafrontier
omegafrontier

Um, no.  You have a division problem.  A 157 trillion economy with 1.3 trillion people is 120,000 per capita.  Your number is even more outrageous.

There are several things you need to know.  You cannot use current growth rate to forecast 28 years in the future.  You cannot use current inflation to predict inflation 28 years in the future.  It can't be done with the next 5 years, much less nearly three decades.

A 150 trillion economy in 28 years.  Just wow.  It doesn't sound stupid at all...

panasian
panasian

1.3  trillion people?   Hey man, I was right. You have a reading comprehension problem.   I said at the end of my previous comment, it might not happen exactly like that. but  it's a good possibility.  I was making an educated estimate based on the most probable numbers for the growth rate, inflation rate, yuan appreciation rate. According to The Economist, Chinese economy in nominal terms will be bigger than that of the U.S by 2018. That's a 6 year prediction, my man. After reading your comments, I have more faith in The Economist than in you.

omegafrontier
omegafrontier

The current world GDP(norminal) is 70 trillion.  For China, assuming its population will stay constant at 1.3 billion people in the next 28 years, to reach 50,000 GDP/capita, it must boost an economy of 65 trillion GDP(norminal).  You're asserting that China economy will reach 65 trillion in the next 28 years.  Now, does it sound really stupid?

FYI, China is closing in term of GDP(PPP), while it's still far off in term of nominal GDP.

panasian
panasian

To me, it's your calculation that sounds stupid. I think you have a reading comprehension problem. The $50,000 per capita income  in nominal terms for America  is  the figure for 2012. The  American per capita figure for 2040 will be about $ 11,5000 in nominal terms. This figure is based  on 2%  annual growth and 2% inflation a year and the U.S population of about 410 million  in 2040.  When you  want to figure out nominal GDP, you must add both growth rate and inflation rate( in case of China you must add the yuan appreciation rate too).  At the end of 2012, the U.S. GDP will be about 16 trillion dollars.  So it means the American economy will grow about 4% (2% economic growth plus 2% of annual inflation)  a year in nominal terms   so that every 19 years the U.S. economy will  double.   It means by 2031 the American economy will be about $32 trillion dollars and 9 years later in 2040 it will be around 47 trillion dollars.  On the other hand the Chinese economy at  the end of 2012 will be about 8.5 trillion dollars in nominal terms (in PPP terms it will be about 12 trillion dollars).   According to Robert Mondale, a Nobel prize winning economist, Fan Gang, a former advisor to the People's Bank Of China, Justin Lin, a former World Bank chief economist, China' economy  wouldn't have any trouble growing 7-8 a year for the next 20 years.  I reasonably assume that China's economy will grow about 7.5% a year  with  about 3% annual  inflation and about 1.5% YUAN appreciation( it is well known that the YUAN is about 40% undervalued and over the long  term it will appreciate).  This means the Chinese economy will grow about 12%( 7.5% growth plus 3% annual inflation rate plus 1.5% Yuan annual appreciation) in nominal terms.  It means  the Chinese economy will double every 6.25 years.  Starting with 8.5 trillion dollars in 2012 and in 2018 it will be 17 trillion dollars and 34 trillion dollars in 2024 and 68 trillon dollars in 2030.   After 2030, I assume the Chinese economy will grow only at 5.5% a year but I left the Inflation rate of  3% and YUAN appreciation rate of 1.5% unchanged. This means from 2030 to 2040  the Chinese economy will grow at 9%( 5.5% growth plus 3% infration rate plus 1.5% Yuan appreciation rate) a year.  By this calculation, in 2040  the Chinese economy will be around 157 trillion dollars  in nominal  terms  with a population of  about 1.35 billion. That means the nominal per capita income for China will be  about 11,6000 dollars compared to 11,5000  dollars for America.   I don't mean things will work out exactly like this,but there is a good chance it can happen.

LoudRambler
LoudRambler

 BTW, all PPP numbers should be taken with a big grain of salt, since the "PPP" formula is actually rather questionable.

 I.e. nominal GDP puts US and European countries like Sweden or Netherlands on the same footing, while after adjusting things to PPP US miraculously gets ahead - which is a bit counterintuitive if one ever lived in either of those.