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Wednesday, December 15, 2010

THE FUTURE OF CHINA

Until the end of the Cold War, the Soviet Union served as the spur to maximize spending on war (some call it defense).  On 9Nov89 communism collapsed, and the world became safe from mutually assured destruction, also known as MAD.

But the military-industrial complex (hear President Eisenhower on the MIC) remains dominant and continues to control much of spending in our country.  Mind you, the fossil industry and farm lobby, plus host of other interests, also do well.  Our system needs overhaul, but that is the responsibility of Congress, and lobbyists largely determine policy, so don't count on any viable enlightened legislation.  

But look at this from the other side of the coin:  the USA is the greatest country ever, and we are the envy of humanity today.  Life in general is full of compromises, and you optimize within existing constraints.

So all the above leaves China as the common challenge: militarily, economically and environmentally.  The future can steer this country to be a deadly enemy, or, for the mutual benefit of all, as a supreme global partner.

The situation today, though, is on the borderline of ominous.  China's reaction to the Nobel Prize award to Liu Xiaobo is immature, and only shows how threatened they feel.  

I remember more than half a century ago when a high school classmate of mine traveled to Moscow.  He came back with an incredible tale.  The people of the Soviet Union are not at all interested in gaining world dominance, they are AFRAID that the USA will attack them!  Of course, we know that what the populace thinks is not what the leaders necessarily want, but, in this case, I am of the opinion that the MIC feeds juicy stories to the media (certainly in China, too),  that we continue to be taken in by all this propaganda.  The result is that China actually feels there is an international conspiracy to derail their future.

Forget about China conquering the world by war, for they spend one-sixth on defense compared to the U.S.; become concerned about their economic surge, but understand that there are limits, remembering Japan as #1, for example; and look for a major shift in their concern for the environment, as they have every reason to want to become greener.  You need to travel through the country to witness all this.

I have recently written two Huffington Post articles regarding China (messages to Hu Jintao, left, and Xi Jinping, right), not expecting any response, as such, but sufficiently stressed to worry if I would be able to leave the country when I visited the Shanghai Expo a couple of months ago.

So here is my take on the future of China:

1.  China will remain #3 with respect to Gross Domestic Product for a long time to come, but this is easy to predict, for the European Union is at $16.5 trillion, USA $15 trillion and China $5 trillion.  The U.S. is not even in the top 5 in terms of GDP/capita.  We are #9 and China is #94.

CountryGDP per capita
1.

Liechtenstein
$118,000
2.

Qatar
$101,000
3.

Luxembourg
$85,100
4.

Kuwait
$60,800
5.

Norway
$57,500


2.  China will most probably get old before it gets rich.  I qualify because, when I stopped through Shanghai, I learned that the one-child policy in this city is being lifted to a two-child option.  Nothing much, though, will change, as children are a burden in a sprawling metropolis.  Japan is a good example of generous benefits to have more children not working too well because economy and lifestyle rule.  The next worldwide Population Bomb, apologies to Paul Ehrlich, is the explosion in the numbers of old people.  India is the country to worry about, because population demographers report they will have more people than China around 2030.  By the way, an old country will begin to lag because one worker cannot support too many people.  In the U.S. this ratio (worker to retired) was 5:1 in 1950, 3.5:1 today and will be 2:1 in 2060.  China today is a comfortable 5:1, but this ratio was 30:1 in 1978 and the slide is continuing, rapidly.  Soon one worker will support three or four parents, a wife and a child.  The Chinese social security system is spotty.  Yes, a ratio of 1:5 could prevail for some.

3.  China will increase its military budget sufficiently so as to effectively intimidate  and posture nearby countries to gain control of marginal property, but has already decided to cool defense spending.  In other words, China has smartly decided that it makes no sense to challenge America at war.  They will prioritize the economy and environment.  

4.  China will not implode like the Soviet Union, where half the people consisted of various minorities.  Ninety-two (and might well be 96%, depending on your definition) percent of Chinese are Han and even in the western territories, there is an ongoing plan to increase Han dominance (Uighurs were 90% the population in 1949, but this region is now more than half Han).  However, remember that China initiated this same policy in Cambodia with Pol Pot, but pulled back.

Then, again, there are those who believe that China will rule the world, including a few close friends of mine.



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The Dow Jones Industrials dropped 19 to 11,457, with major world markets also all declining.  Gold sunk $15/toz to $1389 and oil remained steady at $88/barrel.

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