Why China is hard to figure out

by on May 18, 2015 at 12:31 am in Economics, History | Permalink

It’s not just the differences of language, history, and culture.  It’s not just the (sometimes) questionable economic data, or the paucity of good Chinese academic research until very recent times.

Today’s China is sui generis.  The country has grown so quickly that every decade or so there is a very new China.  And so we cannot easily look to the past as a guide.  In economic terms, China seven years ago is equally removed from China today as the United States about thirty-five years ago is removed from the United States today, putting recent cyclical factors aside.

You could say that China’s recent past is relatively thin in terms of information.   For a more extreme example, how well would we understand an economy which went from zero to fully grown in the span of a week?  When do the diagnostics get to be run and how well would we understand its resiliency?  Arguably we also would not understand the resiliency of an economy which never grew and never changed in our sample…which raises the question of which rate of economic growth makes recent history “thickest” in terms of information and instructiveness?

Economics aside, China’s political system also has changed much more than ours, and it is less predictable than ours.

So for any question about contemporary China, it is n = 1, if that.

1 Mark Thorson May 18, 2015 at 1:07 am

It’s a civilization that has been continuous for thousands of years. Surely, that counts for something.

2 AIG May 18, 2015 at 1:21 am

“Most” civilizations have been continuous for thousands of years. It only depends on what you consider “continuous”.

3 dearieme May 18, 2015 at 6:29 am

And what you consider civilisations

4 The Devil's Dictionary May 18, 2015 at 11:07 am

Sorry to say that, but the old China ceased to exist in the 1960’s under Mao Zedong’s tyranny. Almost nothing of the old culture has been preserved. Whatever has remained has been destroyed in the recent decades.

5 Adrian Ratnapala May 18, 2015 at 1:35 pm

The odd thing when I read about chinese history, even legendary history from the Xia, is how modern it sounds. It pretends there were emperors concerned with beaurocracy and flood prevention etc. Now in part this can be blamed on 19th century European translators transplanting their own terminology on the mandarins.

But I suspect more of it can be blamed on 16th century Chinese doing much the same trick. They had some justification, whatever might be true of the Xia, Confucianism and (ancient chinese) legalism are more relevant to the modern world than communism. And even where they were just making stuff up, it still means the Chinese were pretty modern by 16th century.

6 Nathan W May 19, 2015 at 9:49 pm

There were thousands of kilometers of complex canal systems connecting together trade. Why should it be so surprising that in Roman times there was a civilization in Asia whose administrators dealt with flood prevention?

7 Nathan W May 19, 2015 at 10:01 pm

There are tens of thousands of expressions and stories, and not to mention dishes, which persist.

Anyways, you could also say the same of the “old culture” just about anywhere, in the face of modernization and all.

8 AIG May 18, 2015 at 1:20 am

China is actually…pretty boring.

What’s not to get about China? I think it’s only “hard to figure out” by American academician standards. By the standards of anyone from a developing country, its the same story repeated ad nauseum 1,000 times. Just a lot bigger.

It’s boring because it’s so much a copy of everything that has happened elsewhere before. China is an inch deep and 1,000 miles wide. Same as with every other developing country before it (and still now). It’s the same story of corruption, chaotic political process guided by powerful interests, transitional economic chaos, the old institutions competing with the new…and the usual nouveau riche silliness. So, what’s not to get?

I hope MR isn’t going to turn into a “China blog” (given the increased frequency of China posts recently), because, as I said…that’s so boring.

Or put in another way: systems which are chaotic, unpredictable and with no stable component or pattern…are not interesting.

PS: I hold the same opinion of the flood of “China” articles in my field. They are all so boring and pointless. Nothing found has any generalizability outside of the very specific context, and even that particular year it was studied. Not to mention its all done on highly suspect data which very likely is fabricated. So…who cares?

9 Ray Lopez May 18, 2015 at 8:36 am

@AIG – Living in the Third World (Philippines) the only part of your post that resonated with me was the “mile wide and inch deep” part. It seems true, in that a lot of influence in developing countries is pretty recent. For example the Spanish colonized the Philippines but hardly anybody still speaks Spanish here a mere 100 years after the Spanish left, even though there are lots of Spanish loan words in Tagalog, but English is widely spoken due to US WWII presence. However, the younger generation speaks less fluent English than their parents (apparently there was a ‘back to your roots’ movement about 20 years ago that de-emphasized teaching English, and it shows). That said, a study in Potasi, Peru / Bolivia showed that the ill-effects of these silver mines on children was still observed 200 years after they closed (see, Melissa Dell. “The Persistent Effects of Peru’s Mining Mita.” Econometrica 78(2010): 1863–1903). (I speculate that since Ag and Pb are found together, it could well be lead poisoning in the well H2O, but that’s a guess). Another study found that King Leopold’s ghost is forgotten in the Congo, where he did his worse work, by the hapless inhabitants there (who barely know any history), however, you don’t have to be Adam Hochschild to see that surely there must be a lingering effect between natural rubber extraction and poor growth in the former Zaire. The heavy hand of history as Fernand Braudel of the Annales School once wrote. N=0 to paraphrase TC…

10 Das May 18, 2015 at 8:57 am

“Due to english WWII presence” ?!

Shortly after the Phillipines became independet of Spain the US declared war upon the young republic and after a bloody conflict that killed about a million Phillipines the US added the Islands as a colony to their growing empire. The spanish language was actively suppressed while at the same time the colonial institutions where enforcing the use of the english language (something the spanish hadn’t done by the way in the 300 years before).

Whitwashing much today?

11 Art Deco May 18, 2015 at 10:38 am

that killed about a million Phillipines the US

No clue where this meme started. The actual figures bruited about in academic literature are a fraction of that.

12 prior_approval May 18, 2015 at 12:40 pm

Yep, only a few hundred thousand – ‘After its defeat in the Spanish-American War of 1898, Spain ceded its longstanding colony of the Philippines to the United States in the Treaty of Paris. On February 4, 1899, just two days before the U.S. Senate ratified the treaty, fighting broke out between American forces and Filipino nationalists led by Emilio Aguinaldo who sought independence rather than a change in colonial rulers. The ensuing Philippine-American War lasted three years and resulted in the death of over 4,200 American and over 20,000 Filipino combatants. As many as 200,000 Filipino civilians died from violence, famine, and disease.’ https://history.state.gov/milestones/1899-1913/war

According to the victor, that is.

The Moros have a different version, mainly since the U.S. was just a minor player in four centuries of armed resistance – ‘During the Moro Rebellion, the Americans suffered clear cut losses, amounting to 130 killed and 323 wounded. Another 500 or so died of disease. The Philippine Scouts who augmented American forces during the campaign suffered 116 killed and 189 wounded. The Philippine Constabulary suffered heavily as well, more than 1,500 losses sustained, half of which were fatalities.

On the Moro side, losses were remarkably high, with several thousand killed and wounded. Estimates range from 10,000 to well over 20,000 killed, with an unknown number of wounded.’ http://en.wikipedia.org/wiki/Moro_Rebellion#Casualties

Not that the U.S. has stopped engaging in killing Moros – http://en.wikipedia.org/wiki/Operation_Enduring_Freedom_–_Philippines

It is just we don’t seem to bother even counting who we kill anymore.

13 E. Harding May 18, 2015 at 6:50 pm

So the southern Philippines would have been better off under Islamic rule, then?

14 anon May 18, 2015 at 12:53 pm

The former Zaire region wasn’t exactly the center of civiliation before European colonization. China, on the other hand, was.

15 Ed May 18, 2015 at 10:32 am

“Developing” countries actually have fascinating histories, but its hard to find English language histories that don’t focus (in some cases exclusively) on the part that happened after contact with Europeans and that tends to be the least interesting part. This is true of China as well.

16 AIG May 18, 2015 at 5:53 pm

Fascinating histories, yes. All countries have fascinating histories.

But that’s only if history is your thing. From an economics, institutional perspective…they are all pretty boring precisely because there is only 1 constant in all of them: the government is corrupt, and ties to the government matter.

17 The Devil's Dictionary May 18, 2015 at 11:11 am

Emerging Markets: Countries which have been in deep trouble for many years, and certainly not without reason.

18 Nathan W May 19, 2015 at 9:59 pm

The last 30 years in China have in many ways been a list of doing second (with regard to economic development), in the space of a short 30 years, what many countries have failed to do yet. Not only it size, but evolution of macroeconomic and average economic indicators puts it way up there as a heavy hitting did-it-seconder. No one ever did it second as big or as fast as China, and no one will have the chance to do so again.

19 Phil H May 18, 2015 at 1:51 am

This all seems pretty much correct, but it’s interesting how much some aspects of Chinese policy haven’t changed. From 1978 to 2015, growth has been “the bottom line” pretty much continuously, despite some cosmetic attempts to alter that situation. Contrast this with the UK, where I would say both of the main political parties have goals which they regard as more important than maintaining growth (roughly: shrinking the state for one, redistributing for the other). That consistency again makes China sui generis, but in many ways easier to understand.

20 v May 18, 2015 at 2:36 am

1. Statistics are a state secret and are used like a weapon. The US thinks this period is a war on terror. China thinks this period is an economic war. The information you receive is information that the Chinese government hopes you will use to help it in its struggle.

2. China has been in continual revolution since 1911. Almost none of the models used for society and economy have been domestically generated but are brought in from overseas and modified. China tomorrow will resemble countries overseas more than it resembles China today. The main models today are probably South Korea and the US. China is not interested in reflecting on itself but on understanding where it is going, which means understanding other countries. It is less predictable because everything in the country is disposable and will be replaced when something better is worked out.

21 AIG May 18, 2015 at 4:04 am

Yes, I agree. But there in lies the problem: we have already seen what works, and hence we already know what will happen in China. That’s precisely China’s route for the past 100+ years: copy other countries. So it’s not interesting precisely because we’ve seen this played out numerous times before.

I find it amusing when one speaks to many Chinese who have nationalistic tendencies. Their take is the opposite: everything in China is “unique” and “different” and “the Chinese way”. They don’t seem to realize that China’s history for the past 100+ years has been precisely the opposite: abandon “the Chinese way” and copy someone else’s way. Sometimes they copied the worst of others (communism), sometimes the best (capitalism). But in every respect, it is far from unique. There’s nothing different about it. It is mundane.

Not that that is a bad thing. It’s not. It’s just that one isn’t going to get any interesting insights from a society which is always copying.

The only interesting thing to see if China will eventually be able to overcome the hurdle of government corruption and government-tied interests and achieve truly “developed” institutions, like many others have done (Korea, Japan, Taiwan)…or whether it will remain this hybrid where most developing countries get stuck in.

I suspect, it will be another several decades before this question in answered.

22 Kris May 18, 2015 at 6:24 am

Aren’t the speed and scale of changes occurring in China interesting? Similar changes in Western Europe happened over a few centuries in a gradual enough manner that the people had time to mentally adjust to those changes. Also, the speed of change in China is not being replicated in other large poor countries (like India); isn’t that interesting?

23 Horhe May 18, 2015 at 6:38 am

That’s because Western Europe had to develop technology, institutions, science, modes of organization from scratch, with some painful trial and error and dead ends.

24 Kris May 18, 2015 at 8:11 am

Many people think it’s Western cultural history and religion that primed them for the changes that led to an industrial/capitalist economy. If China has been successfully replicating the result without copying the cultural foundations of the West, I would find that interesting.

25 AIG May 18, 2015 at 6:06 pm

“If China has been successfully replicating the result without copying the cultural foundations of the West, I would find that interesting”

But China hasn’t replicated them without replicating Western institutions. Not at all. China has been replicating Western institutions for over 100 years now.

That’s what’s so boring about it: every other developing country in the world has gone through the same trajectory, whether it be Japan or Korea or Taiwan or Brazil. You name it. Everyone of them started off chaotic and with poor, but increasingly improving copies of Western institutions. They all had great speed of growth and advancement, as one would expect.

So if there’s one thing we can say about China, is that it is the least “unique” example in recent history.

The interesting thing about developing countries is why some fail and some succeed…even if they all follow the same path. But the path they follow, is mundane by now.

26 Kris May 19, 2015 at 5:06 am


I think you misunderstood my point. Many Westerners think that liberalism, capitalism, the Enlightenment, etc. came out of the Christian heritage that Europeans possessed. China never had a Christian heritage, nor does Christianity have any discernible impact on the country today. Yet, it has been able to replicate Western institutions to achieve similar results. If you don’t believe religious heritage has an impact, then of course recent Chinese achievements will seem banal to you.

27 AIG May 19, 2015 at 9:03 am

Those traits you describe were the only places where such institutions were developed indigenously. But others have copied the end result. That much is self-evident. It doesn’t detract from the fact that they are still copies.

There’s nothing wrong with copying.

28 Ed May 18, 2015 at 10:38 am

For about two thousand years before the industrial revolution, China was usually (not always, and often not by much) ahead of Europe as a society on whatever criteria for development you want to use. Even afterwards, finding something made outside of China that the Chinese want to buy has been a recurring problem.

So yes, after Cixi crushed all attempts at reform using internal models, Chinese who wanted to rebuild their country all turned to copying Western models. But given the history before the eighteenth century, one senses that this was both not needed and will turn out to be a giant blind alley.

29 AIG May 18, 2015 at 5:56 pm

Virtually no country has been able to achieve “capitalist” modes of organizing society without resorting to copying Western institutions. More precisely, Anglo-Saxon institutions.

None that I can think of.

Hence, there is no way that China would have been able to develop into anything, had it continued down the road of the “Chinese way”.

30 E. Harding May 18, 2015 at 7:01 pm

“The accounts of all travellers, inconsistent in many other
respects, agree in the low wages of labour, and in the difficulty which
a labourer finds in bringing up a family in China. If by digging the
ground a whole day he can get what will purchase a small quantity of
rice in the evening, he is contented. The condition of artificers is,
if possible, still worse. Instead of waiting indolently in their
work-houses for the calls of their customers, as in Europe, they are
continually running about the streets with the tools of their respective
trades, offering their services, and, as it were, begging employment.
The poverty of the lower ranks of people in China far surpasses that
of the most beggarly nations in Europe. In the neighbourhood of Canton,
many hundred, it is commonly said, many thousand families have no
habitation on the land, but live constantly in little fishing-boats
upon the rivers and canals. The subsistence which they find there is
so scanty, that they are eager to fish up the nastiest garbage thrown
overboard from any European ship. Any carrion, the carcase of a dead dog
or cat, for example, though half putrid and stinking, is as welcome
to them as the most wholesome food to the people of other countries.”

“The difference between the money price of labour in China and in Europe,
is still greater than that between the money price of subsistence;
because the real recompence of labour is higher in Europe than in China,
the greater part of Europe being in an improving state, while China
seems to be standing still.”

-Smith, Wealth of Nations

31 AIG May 18, 2015 at 7:08 pm

Right. This “myth” that somehow China was more “advanced” than European countries until recent times is often repeated, but never substantiated other than through suspect reconstructed “GDP” estimates.

This, while we have plenty of first-hand accounts of what a horrible place it was for the average person.

The same mythology is repeated about most other third world countries, for example India…where many Indians today claim that India was “very rich” prior to the British, but somehow the British plundered all of it.

These myths develop because people look at the ruins of the ruling classes in those societies as representative of the whole society. The ruling classes in China or India may indeed have been very rich, but the average person in Europe was far richer than the average person in China or India.

32 E. Harding May 18, 2015 at 8:45 pm

There is some evidence India was almost as rich as England before the early 18th century, though it’s fairly scanty:
(Different links to different scans of the same paper.)
The decline of Indian economic power was due to the decline of the Mughal Empire. India generally did poorly under British rule. Smith also claimed famines in Bengal were due to the despotism of East India Company rule, though I’m not sure whether British-controlled India had more or fewer famines than the rest of India.

33 Kris May 19, 2015 at 4:59 am


Economic historians seem to agree that India had the second largest GDP among all “nations” in the early 18th century (China had the largest). That doesn’t, of course, mean that the average Indian was rich. It does mean that the elite of India were (as you so rightly point out.) And they had access to a variety of tradeable goods, access to which was the purpose of establishing the English East India Company (and the VOC, and other East India Companies.) But I don’t know that the average person/peasant was as destitute as he/she became during the course of British rule (and still is today). During EEC rule, there definitely was a net transfer of wealth from the Indian elite to the British elite (merchants and administrators of the EEC count as elite). Some economic historians argue that the Industrial Revolution in Britain was spurred on by this influx of wealth (though I am in no position to validate that theory). The general reduction in wealth in India may not have directly affected those who were already low down the totem pole, but it must have completely ruined societal relations between the native elite and lower classes (after all, whenever the former spent money or even gave largesse, it would have to go to the latter; where else could it go?); the new British elite in India did not start feeling any such responsibility towards the Indian masses until the liberals caught the imperial bug about a century later.

@E. Harding,

The British most definitely can’t be blamed for crop failures and famines, but it seems their perverse taxing and administrative policies (which worked in England, but were unsuited to Bengal) made a bad situation infinitely worse. Where a native ruler might have provided tax relief to his subjects, the merchants of the EEC insisted on prompt tax payments that were not adjusted on the basis of current conditions. Under native administration, farmers could have tolerated a few bad monsoons; under EEC administration, they lost everything and starved to death.

34 Kris May 19, 2015 at 5:00 am

I keep saying EEC where I should say EIC (East India Company). Apologies for the typos.

35 AIG May 19, 2015 at 9:10 am

I really don’t buy these reconstructed numbers. saying that India with a population many times greater than England had a “higher GDP” is one thing. It may have indeed, but that’s because of size.

If we use a modern equivalent of “GDP per capita” which is adjusted for size, the differences are likely to have been very large.

A nation that constantly suffered from famines can’t be claimed to be a “rich” nation or a “developed” nations, regardless how large its overall “GDP” was.

36 Kris May 19, 2015 at 1:57 pm


Right, I ought to have been more clear about what the numbers meant. According to economic historians, India had roughly a quarter of the world’s GDP in the mid-18th century, but that share fell to about 3% by 1900; during this entire period, India was mostly under British control. I agree with you that GDP per capita is a much better measure of a country’s prosperity (plus the Gini coefficient), but given the above numbers, the prosperity of the average Indian in 1750 cannot have been as starkly different from the average Briton as it became by the beginning of the 20th century. As for famines, can you point to references that suggest India had periodic famines prior to the British takeover? All the famines I have read about occurred after Plassey (1757).

Don’t take my above comment to assume that I consider India a great and just country in the early 1700s. Far from it; it was a feudal country dominated by a small elite for its benefit. Really, the last time India had a claim to being a great and prosperous country was probably during the Gupta Empire, when visiting Chinese travelers attested to said prosperity and general satisfaction among the people.

37 v May 19, 2015 at 2:13 am

China has always been a paradox for Europeans. In the age of exploration it was the only region that was unknown to the ancients that rivaled Europe (India, Persia etc were well known, Mexico and Peru collapsed on contact). The big question then was, who did civilization better? Between 600 and 1600 it was China. 1600-1800 it was even. China had a large empire/free market with good but old ideas vs Europe with new ideas but small scale. 1800-2000 Europe and its colonies had a clear lead.

The Chinese government knew about Europe from 1600 – there were Jesuits in the court telling the emperor everything. The Chinese took some ideas from Europe but rejected a lot because they thought it would cause Chinese society to collapse if they took more on, which it did from about 1860-1970. Now they take ideas from everywhere. Black cat, white cat, just so long as it works. These ideas are not really European any more because people from all around the world are adding to them, and in order to make them your own, all you have to do is implement them.

South Korea is an attractive model because it is modern, growing economically and yet socially traditional. It fits in with Xi Jinping’s China dream. The idea is to make China more Chinese, although ironically, this means making it more like what South Korea is like and less like what China is like today.

38 Axa May 19, 2015 at 9:02 am

@AIG: perhaps what I try to say will be lost in translation. Anyway, there’s a reason why “to be surprised” and “being interesting” are two different concepts. They were invented because you needed to express two different ideas. As you said, China may not surprise anyone but you can still be interested in what’s going on.

There’s no surprise in the sun setting every day, but you can still be fascinated by a sunset.

39 AIG May 19, 2015 at 9:11 am

Well, I’m sure there’s people interested in China.

But that’s also different from what I’m saying: the path of development and the process of development in China isn’t interesting because it’s formulaic.

40 JS May 18, 2015 at 2:46 am

China might be a blur. It might not care either way on the state-market debate or any such theories which leave us breathless and anxious. It might just care in getting it right and leapfrogging into safety of greatpower before GreatPowers can even realise what happened and rush in alarm to check it. And it might be boring! But it is consequential. If its combination of [infrastructure-based skills & investments & dev. policy guidelines] – via AIIB & NDB & Silk Route Fund – work rapidly & effectively to ramp up Third World economies as against the decades of WB-IMF efforts…. If its investments in innovation start kicking even if partially… If its consumption engine starts ticking even if partially… If it shows even some ability to start climbing productivity ladder.. If it shows even just a tiny ability ability to begin doing in finance what it has managed in manufacturing…. So many times in the past decades, it has managed to stay just ahead of the curve and avoided doomsday. And it has size on its side! Even tiny per capita effects get amplified into substantial national power advantages.
We sold the positive chaos and bustle and even corruption of 20th century New York as “Happening”! Maybe China to has graduated into similar positive chaos and parts of it are Happening right now. But maybe because “we know everything” and have figured out the world, and so we are just getting bored with the world.
But perhaps we do need to stay cool and focused and be able to decipher chaotic messy blurs and their magnitudes ? It could end up mattering to us?

41 ladderff May 18, 2015 at 2:58 am

I find grimly hilarious all this concern over China’s statistical mendacity.

42 dearieme May 18, 2015 at 6:30 am

Well said.

43 Chip May 18, 2015 at 3:10 am

I met an entrepreneur and sometimes-trade representative from a western country last week who has worked in and with China for the last 20 years.

His take:

– everyone with money is corrupt. Everyone.
– everyone with money is finding an exit overseas
– automation will shred China’s economy
– the CCP will start a military conflict to establish control over an increasingly restless population

44 RoyL May 18, 2015 at 5:07 am

That is the view of a large number of educated Chinese professionals I know, especially after about a decade in the US. The key additional point they make is that the one child policy will make Chinese military adventurism a disaster because the societal ability to withstand casualties is going to be nonexistent. This will result in terrible internal unrest and encourage PLA leadership to escalate any conflict incredibly quickly once actual casualties are taken.

My hopeful interpretation of this is that the leadership is aware of this and it will restrain them from adventurism if they have any reason to suspect actual resistance.

45 ET May 18, 2015 at 6:17 am

If China drops the one-child policy, I’ll take that as a sign to expect a war in twenty years then.

46 Horhe May 18, 2015 at 6:41 am

The damage is done. The policy has been relaxed in significant avenues, and people are not having extra children. They have new standards of living and they judge it best to focus all their investment in one child, who has to manage to be upwardly mobile in a very competitive country.

47 RoyL May 18, 2015 at 6:51 am

Overseas Chinese do not have tons of kids either, and look at Taiwan’s birthrate. Almost all demographic research using family registers, the only actual data, have shown that China has had repressed fertility for five hundred tears at least in non frontier areas. Only in Mao’s China did population growth surge and that was after a half century of warand famine led to actual depopulation in some areas and with specific state encouragement.

A very large number of traditional Chinese family practices serve to reduce fertility. This is not particularly supeising since contra malthus manu societies have addressed these issues in the past. France actually made its demographic transition in the early 18th century for example.

48 Sid May 18, 2015 at 9:22 am

He couldn’t be any more possibly far from the ground reality.

-everyone with money is corrupt
This is true in almost all of the countries in the world. If you have money, you get better access to things. If we look at the meaning of corruption itself, it is anything but quantifiable. How’s rent seeking any different from airlines demanding more money for better seats? The latter is an example of a perfectly accepted, and indeed one of the few profitable strategies in an industry with horrible economics. This isn’t a criticism of airlines’ behavior BTW. I am just pointing out at the fact that making distinctions between what gets to be corruption and what gets to be legally accepted practice is very, very difficult.

-everyone with money is finding an exit overseas
If you know a little bit of history, specifically Chinese history, you’ll see how wrong the negative interpretation of this is. Chinese have been forming diaspora throughout their history. Under the increasingly brutal Ming dynasty, huge number of Chinese, especially Hakka Chinese left for kingdoms in South Eastern Asia. This is also happening in India too, Indians are only 2nd in number when looked at immigration. Millions of Irish, British, German and Italians immigrated to seek greener pastures in North America. Was this a symptom of upcoming doom in their original homes? No it wasn’t. We have been doing this throughout our existence. The Out of Africa hypothesis is members of our species seeking resources (wealth) and colonizing the whole world. Modern Chinese are not the sole ones doing this.

-automation will shred China’s economy
No it will not. The underlying assumptions seems to be that automation will replace the major chunk of China’s workforce and also destroy China’s biggest competitive edge. This is wrong. China’s per capita wages have gone up tremendously along with the rising GDP, so much so that some Chinese manufacturers have moved production to even lower wage countries like Vietnam and Bangladesh. So for China to continue to maintain its leverage over manufacturing and yet grow its consumption levels, it needs to automate. Hence the big push towards automation.

-military conflict
Sigh. Such misguided views. The Party’s chief objective, something which it always drubs on about is to maintain stability in China. All the ruling dynasties in the past were thrown out because of raging instability in their fiefdoms. And if you’re a disciple of game theory, then you very well know what will instability do to Party’s own survival in power. This is also the main reason why it maintains a tight control over the media.

Maybe I should write a book or start a blog about how wrong much of the analysis of China and other countries do most of the Western people get.

49 Tyler May 19, 2015 at 6:19 am

When the poor leave (as in most of the examples you gave) it most often leaves the country of origin better off – Europe was lucky to have a valve in North America for 400 years. Those emigrants also send or bring back skills and money, which also helps.

When the rich leave (as is the case with China as well as other countries at the moment) it most often leaves the country of origin worse off. Less talent, less capital, etc.

Nobody would ever see the migration of poor Hokkien men in shipping containers to work in North Carolina Chinese restaurants as a sign of bad things in China’s future – in fact the Toishanese did the same in the 1800s and brought tremendous wealth back from California. But when the richest are buying up foreign passports like they’re Furbies in 1998 and taking their money with them, that is not a good thing or a good sign.

50 Bob from Ohio May 18, 2015 at 10:34 am

“a military conflict”

Who with?

51 Nathan W May 19, 2015 at 9:55 pm

Some will assume that this sort of statement would reflect some combination of jealousy, wishing thinking and attempted self-fulling prophesying, but all the same it also sounds plausible.

52 rayward May 18, 2015 at 6:30 am

Of course, rapid economic development requires a robust public sector, if for no other reason than to put in place the infrastructure necessary to facilitate economic development. And so it was with the U.S. and its early years of economic development. That’s not to suggest that a robust public sector is perfect: to paraphrase Jefferson, when public funds are gathered, hucksters and crooks can’t be far. Saturday I attended a high school graduation. The commencement address was given by our first term Congressman, who informed those present that his model for good government is the small pharmacy that he owned and operated. America today thinks small, while China today thinks large. I suppose the virtue of thinking small is that mistakes are likewise small. My best friends’ son is a rising senior in high school. He speaks fluent Mandarin. He will be spending this summer in China. I will be spending a week with him and his family at the end of the summer, and I’m curious whether he will be thinking large or small, the local pharmacy or the Tianjin Econ-City.

53 MOFO. May 18, 2015 at 8:41 am

Id say another advantage of thinking small is that there are always small things to be done. There isnt always another Tianjin Eco-City to be built, but if your thinking big you might build one anyway.

54 Cliff May 18, 2015 at 9:12 am

“And so it was with the U.S….” wut?

55 rayward May 18, 2015 at 6:31 am

Tianjin Eco-City

56 Tom T. May 18, 2015 at 8:14 am

Of course China’s political system is unpredictable. It is opaque to public scrutiny and largely unconnected to any sort of rule of law.

57 ladderff May 18, 2015 at 12:05 pm

Of course America’s political system is unpredictable. It is transparent to journalistic and academic corruption and largely unconnected to any sort of rule of law. Just ask Libya et al.

58 B Cole May 18, 2015 at 9:07 am

China may break apart like a ceramic plate. Or, thanks to an aggressive central bank, it may hold together like a plastic plate.
But remember: you cannot put a metal plate in the microwave. But you can put a ceramic plate in the microwave.

Think deep and hard before making conclusions about China and china or china substitutes.

59 Ricardo May 18, 2015 at 2:06 pm

“Proof by analogy is fraud.” – B. Stroustrup

60 HL May 18, 2015 at 6:00 pm

an extra large buffet plate, alan partridge would approve

61 Noumenon72 May 19, 2015 at 1:21 am

Hey guys, look, it’s Thomas Friedman!

62 rayward May 18, 2015 at 3:50 pm

Megan McArdle, Cowen’s fellow traveler, published an essay in today’s Bloomberg View based on this quote from Mark Twain: The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one. McArdle doesn’t understand Twain’s point, stating that it must mean a preference for the methodical, the plodding, much like the model preferred here at this web site, which is to avoid getting started, at least not until all risks and options have been considered and the proof established beyond a reasonable doubt. So McArdle concludes that the quote must be a fake quote, because Twain was mercurial not methodical. The first step, getting started, is the most difficult and challenging step. What if I’m wrong? What if my first step challenges all that which I know is truth? Yes, it’s a challenge to hold two views at once, the first and primary which is to hold certain truths to be self-evident, and the second is to take risks that may challenge those self-evident truths. Twain would challenge those truths. I must say that McArdle is the most popular contributor at Bloomberg View, the most popular if it’s based on the number of comments to her essays. I seldom read her essays. Why? Last year she published a book, called The Upside of Down, and she and Cowen participated in a dialogue about the book, moderated by someone from AEI. The moderator asked the two how the upside of down applied to the bankers. Cowen waved away the question (both figuratively and actually). McArdle gave a long and confusing response (much like her essays) that had nothing to do with bankers. That’s the problem with getting started.

63 Kris May 18, 2015 at 4:13 pm

Do you happen to know if the Twain quote is authentic? Can you provide a source?

64 carlospln May 18, 2015 at 10:40 pm

I don’t think I’ve ever read a post by Cowen on America’s Brobdingnagian banking sector, nor the dozens of control frauds of its banks.

The entire sector is off-limits.

When one googles ‘Tyler Cowen bank control frauds’ this post is returned first:

http://neweconomicperspectives.org/2013/10/cowen-condemns-corporations-comes-praise.html [snicker..

65 Douglas Levene May 18, 2015 at 8:59 pm

I have a question for all the economists here. Suppose the US were to adopt (as China has) a policy of economic growth, first, last and foremost. Any rule or regulation that might hamper economic growth – EPA, OHSA, Dodd Frank, Anti-Discrimination laws, minimum wage, NLRB, etc. etc.- would be repealed. What do you think the economic consequences would be?

66 Nathan W May 19, 2015 at 9:51 pm

First you would have to install a dictatorship with no objective other than to maximize growth. People have other objectives and we live in a (at least nominally) democratic society.

67 TallDave May 19, 2015 at 4:52 am

The Communist leadership structure has not changed all that much, though — heck, they still have Five Year Plans.

There are some rapidly evolving problems, though. Here’s a scary chart. http://kotaku.com/compare-how-awful-chinas-pollution-is-to-where-you-liv-1552652798

68 Nathan W May 20, 2015 at 12:07 pm

Half the world has five year plans. They provide direction.

69 Nathan W May 19, 2015 at 9:49 pm

I think the most useful thing to know about China, and which is worth knowing whether you know next to nothing about China or whether you’re practically an expert on the place, is that China is not monolithic. Yeah, there is a party line, but there are diverse inputs, many cultures and regions, and varying degrees of autonomy in implementation of whatever line is being towed.

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