Is China the Next Superpower?
The Chinese have long seen themselves as superior to every other race and the center of the world. It’s because they were so confident of this, that historically they never ventured out much or as often as the Europeans did.
Well, that is with a brief exception during the 15th, Century (from 1405 to 1433) when they had a fleet of gigantic ships, vastly superior to those of Europe and they ventured as far as Africa and India and some say they even went as far as America, before Columbus. The Chinese had long been a nation of seafarers and had invented the mariner’s compass in the 11th century.
Then They Shut The Door
But then the Emperor reversed the policy of open exploration and by 1500, it became a capital offence to build a seagoing junk with more than two masts. It is said they burned the large sea going ships, which abruptly ended further exploration and potential global conquest or at least exporting their culture. They shut the door to foreigners and isolated themselves from the world for the next three hundred years.
It was the Europeans that came to China looking for opportunities and as a latter consequence it was the Chinese who were on the receiving end of whatever Europe dished out.
The Chinese were happy to sell too, (but not buy from the European traders). They demanded payment in silver for their tea, silk and ceramics and eventually this imbalance of trade caused resentment from the Europeans (especially the British) who wanted reciprocal trading.
A market was initially found for narcotics (Opium) that resulted in the infamous Opium Wars, of the late 1800s’ that resulted in the humiliation of having foreign soldiers running around the Chinese countryside. But it was also the beginning of international markets being established for many port side cities in China.
The Chinese have historically valued the importance of ‘saving face‘ (it’s culturally important to them) And just as they have a deep-seated resentment of the (“foreign devil“) for the humiliation suffered by occupying places like Hong Kong, Macau, Shanghai, and numerous other enclaves.
The Chinese today, also resent the U.S government interference in its global expansion plans and it dislikes immensely the U.S parading its aircraft carriers, in and around the South China Sea. A body of water that they claim belongs to them.
The U.S government may feel like it can call the shots, because it has a dozen aircraft carriers and a couple of thousand fighter planes. But times have changed since the early nineteenth-century, and the U.S government might actually be antagonising what could turn out to be a sleeping dragon.
It could be making a serious enemy with a country that now has serious wealth and a lot more modern technology. Unlike the China of early times which was isolated and insular, modern day China is vibrant and relatively advanced, and at the end of the day, any war will go to the country with the most wealth. Not the one that has the most expensive military hardware. A modern day war with a country like China would certainly bankrupt America.
Putting thoughts of war aside, there are dozens of likely scenarios as to what might happen in China over the next few decades and although I am not going to pretend I can predict which one is the most likely to occur.
However, the trend that seems the most credible is the rapid rate of wealth increase in China.
I would never credit any official government figures with any accuracy, (because all Government lie – some more than others) but if we were to assume them to be correct, then the U.S. economy is growing at 2%, and China’s at about 7%.
Now add to that China has about four times the population, then this means that the largest economy on the planet may soon no longer be the U.S.A, but China. (For more on this you may wish to view my other post here)
While the country has remained steadfastly a one party communistic state they have whole heartily embraced capitalism (at least economically) since the Nixon era of the 1970s’ when they opened the door to doing business with the ‘west’.
There has been, and continues to be reforms to its economic model and unlike America they are quietly unapologetic about making money. The Government of course still owns and controls many of the major businesses, it restricts wholly owned foreign competition and it still owns all the land in the country. The people pay ‘for everything’ and nothing is free!
Even the Panda is loaned out to other nations on a ten-year contract that includes a fee of $1,000,000 per year and a provision that any cubs born during the loan period are the property of Chinese Government. This has been the arrangement ever since 1984.
So, it’s really no surprise that their GDP has shot up nearly 10,000%, since 1972 from $113 Billion, to $11.2 Trillion, today. One thing is for certain they know how to make money.
China vs. the U.S.A
The US has been the worlds largest economy in terms of GDP since the 1920’s overtaking Britain and is currently 22.4% of Global GDP. But China is quickly closing the gap. The USA exports to China account for 7.7% of total exports and its imports account for 21.5% with Canada and Mexico both tying at second with 13.2%.
Other statistics are below;
- Cash Reserves: China has US$3.2Trillion vs. America US$434Billion
- Total GDP: China US$11.26Trillion vs. America US$18.42Trillion
- GDP per Person: China US$14,600 vs. America US$49,888
- Average Income: China US$7,593 vs. America US$54,629
Of course, the average American will still be living far more comfortably than the average Chinese in that he’ll still have a bigger house, more gadgets, cars, and consumer goods.
But if look at China vs the U.S.A, he will have considerably less investment capital and savings, and there will be far more Chinese, with substantially more wealth than many wealthy Americans.
The Chinese people save over half their income and invest in real estate, even though they don’t own the actual land (since 1949 it’s been leased for 70 years from the government)
Nevertheless home ‘ownership‘ is high (at 90%) compared to the U.S where it is just 64%.
Also, most Chinese households have a major proportion of their assets in real estate vs. 27.9% in the U.S.
As the incomes in China have increased so has real estate values have gone up. In Shanghai, for example, it has increased 560% since 2000.
Also, the Chinese are buying up expensive real estate all around the world and as a result, have become the leading buyers in cities like Sydney, Singapore, L.A., San Francisco, New York, Vancouver, and London.
In 2014, they accounted for around $22 billion or some 24% of the total real estate purchases in the U.S.
Why China Has More Growth
It has nothing to do with the Chinese Government, which has actually hindered the Chinese economy. (Apart from Deng’s liberalization of the economy, in the 1980s’) Doing business and trading with the West and opening up its markets is the prime reason for the last three decades of incredible growth. There are also other reasons for its economic expansion.
One is that Chinese culture is ingrained with the Confucian work ethic, which is exploited by the Chinese government in its efforts to grow the economy, but nevertheless, this work ethic is similar to the ‘Protestant work ethic’ that helped the West get where it is now.
Another, is the sheer number of people that share a common culture and language. Upwardly mobile Chinese are now learning English, the world’s Business, Science, and technology language. So they can access everything from the West.
Also, just as other people, from a given culture tend to prefer associating and doing business with themselves, for example, the Jews, blacks, Arabs, Irish, Italians, etc., the same is true of the Chinese.
And they a much larger than any other cultural grouping so from a financial point of view this means that business opportunities are largest within this group.
They are Smarter
Also, the Chinese on average are smarter than Westerners and have a higher I.Q (105 vs.100) As an example Chinese children need to learn 3000-5000 different characters to write and read Chinese and spend much more time is school.
Whereas western children only need to know 26 letters of the alphabet to read and write and some even struggle to do that. So perhaps that explains why the Chinese tend to do better academically and prosper in business all over the world, once they get out from under the Chinese Governments control over them.
Take an American and a Chinese, each with a dollar. Say both are equally smart and hardworking, and each can double his dollar every year, 2, 4, 8, 16…
The only difference is that the American pays 35% – 50% in taxes and the Chinese pays far less by comparison because the state provides almost nothing.
In China, you pay for almost everything, education, medical care, to use the roads, to visit a park. There is no sense of entitlement, they are brought up to pay their own way through life, nothing is free, and credit is not easy to get.
Whereas the average American has been so brainwashed that he thinks he has a moral obligation pay taxes to the government at whatever rate it asks for; he thinks it’s dishonest or it’s cheating if someone doesn’t pay or if someone puts their own family’s welfare above the demands of the State.
He also thinks the State has a moral obligation to provide for his health, education, welfare, and retirement. He actually believes that these things are ‘entitlements’ that are his by right.