And So I Go: Yesterday, Today and Tomorrow

>>Will China become the next Economic Superpower? Heritage says not.

Posted on: February 4, 2010

This is an interesting article from Heritage Foundation and certainly makes a lot of sense.  The only problem I see with the conclusions is that this only applies if the United States continues to have an economy.  If however President Obama has his way the United States will cease to be and certainly cease to be productive.  It behooves China therefore to help see that Obama’s agenda does not succeed.  How is that for irony?  We citizens of the United States may end up having a Communist country that suppresses its own people unmercifully to thank for us keeping our freedom!  BB

Heritage article:

Why China is Not an Economic Threat to the United States

Posted February 3rd, 2010 at 8:00pm in Enterprise and Free Markets, Ongoing Priorities with 3 commentsPrint This Post Print This Post

Recent reports of China’s economic growth contrasted with the U.S. economic downturn have left Americans increasingly concerned that China is becoming a new superpower, controls American finances and will surpass the United States as the world’s leading power. The reality is that the fundamentals of the American economy are stronger than China’s, and U.S. prospects are better.

Let’s take exhibit A. It may appear that China contributes the most to world GDP and leads global growth given its 10.7 percent growth last quarter, as well as its 8.7 percent average growth last year. However, that’s not an indicative measure of a strong economy.

Aside from the fact that China’s GDP numbers are illusory (largely because of how the country calculates its GDP), a significant portion of the growth China is experiencing is not creating wealth, it is merely taking it from other countries. In other words, Chinese growth is partly the result of detraction from, not addition to, world GDP, which means much of its success is dependent upon others.

This is because of the way China’s economy is set up. China  relies on its trade surplus with the rest of the world as the lifeblood of its economy. It exports vastly more than it imports. Seen in this light, China sucks GDP from other countries in addition to creating its own. Therefore, while it may be leading the world in GDP growth, to a notable extent these GDP gains are the result of China using the world to boost itself higher.

That does not mean, however, that China does not produce anything. To the contrary, over the last couple of decades, China has contributed to the world economy. While China’s production has historically met consumer demand to keep prices low around the globe, the world-wide recession is now causing China to oversupply due to weak global demand, which could lead to deflation. This is hardly an indication of a sound, robustly-growing economy. If China does not start developing more of its own domestic economy for its people, trouble looms.

Further, China is not America’s banker, as many people believe. President Obama’s  stimulus package was bad policy, but the notion that China is now funding our economy as a result is a fallacy.

America could get by without China funding its debt. What’s largely unknown is that China officially holds less than 7 percent of U.S.  treasuries, and that Chinese bond purchases declined in 2009, to under $100 billion, while our deficit soared to an all-time high of $1.4 trillion.

Moreover, China does not buy our debt for our sake; it does so it because it depends on an economy as large and sound as ours for its own growth propelled through trade:  The same set of rules that keep its currency undervalued means, by law, it can’t spend at home the huge pile of cash that it sits on.

In that respect, China is more directly tied to us than we are to them. If the United States were to discontinue trade with China, it would hurt them more than us.

Finally, China is not going to surpass the United States as the world economic leader any time soon. We control about a fourth of the wealth in the world – more than China, India, Japan and the rest of Asia combined. Other indicators are just as definitive. The average American earns close to fifteen times more than the average person in China. If the  United States keeps tax rates low, shows spending discipline, and brings the deficit down to promote solid economic growth, there is strong reason to believe that China will never surpass the United States as the world’s largest economy.

6 Responses to ">>Will China become the next Economic Superpower? Heritage says not."

Brenda,

Some of the points made in the Heritage article may be technically true, BUT . . .

Depending upon China to be the “trading partner” which will pull our chestnuts out of the fire is a lot like depending upon Jethro Clampett to work the bugs out of the space shuttle. It is an exceedingly immature and “expedient” nation which has no problems with exploiting its workers, its environment and its customers to the max – far more than America ever did.

The U.S. used to be the nation which enhanced its GDP with exports instead of depleting it with imports – and it worked pretty darned well for us for decades. Had it not been for Nixon selling us out to big business interests (which he spun as “exporting capitalism”), the unions’ inflexibility and the enviro-Nazis’ demands to rid America of industry, we would still be that nation and China would still be one or two steps out of the bronze age where it belongs.

Now: what happens when China is inevitably faced with either a civil war (remember Tiananmen Square?), a massive natural disaster or some external geopolitical force beyond its control? Where do you suppose their “trading partners’” well-being will fall on their list of priorities when that happens? Sure, they take whatever “crisis money” we hand out (If we have any Obamabucks left to give) but they will never absolve us of our debt. We will suffer shortages of manufactured goods while they sort out their problems, and then the trade imbalance between the U.S. and China will return to business as usual . . . that is, IF both nations manage to survive.

I foresee no good ending to our alliance with (and dependence upon) an unpredictable, unstable and unprincipled nation which is overtly hostile toward our way of life yet is willing to accommodate it to enrich its own economy. Just call it a hunch.

Thanks for pointing out this “China” entry to me so that I was able to comment upon it. It caused me to notice that the link to your blog from my own has somehow disappeared. Rest assured that it has been restored as it should be.

Jeff Dreibus

Jeff, I think both you and the Heritage report are saying the same thing. China is NOT a reliable trading partner and should never have gotten to the position they are now in even as tentative as it is. Obama however has brought us to the point where they have more power over us than they ever could have if not for Obamanation. Therefore they just may be the instrument of holding our government in check until We the People can elect a new government. BB

Brenda you are so right. The Heritage article is way off base.

The problem with the premise that “China is not, nor will not be a Super Economic Power is based on the “IF” facts in the last paragraph. Bottom line, China is a Super Economic Power already. China is the bank for the USA.

The article says, China won’t become a Super Economic Power “IF” the USA:

1) Keeps tax rates low: Obama wants to raise them
2) Shows spending discipline: Right! We’re spending $1.6 Trillion and counting
3) If the US brings down the deficit and promotes solid Economic growth: You mean like our Stimulus Jobs, where the US government promotes temporary Short term jobs, “Cash for Clunkers” or how about the Census jobs that they Say will put a million temporary workers to work, until July of this year. Wow!
Whats funny about this one is that I have not seen one AD asking for volunteers to take the Census, could it be because ACORN is already lined up to do it??????

Then it says, there is a strong possibility that China will not pass the USA as the World’s largest Economy. That’s a whole hell of a lot of “Ifs”.

Please let’s stop writing articles based on wishful thinking, it’s a disservice to the American people.

Brenda,

What a “choice”: Obamaco or Chinaco! Either one sounds about as appealing as digging a six-foot-deep hole in which to play a spirited game of Russian roulette.

Do you really think that we can elect a new government that is any more honest, responsible and Constitutionally observant than those of the past twenty-plus years — and do so quickly?

I pray that we can, but . . .

Jeff Dreibus

Bravo, Snappysandy! You echo my sentiments precisely!

Jeff Dreibus

Jeff the way I interpret the article is that the United States is indeed China’s economy and only “if” we cease to have an economy will China then surpass us. In other words “if” we become a banana republic which Obama is certainly trying to spend us into then China will move on and of course have a larger economy than ours. “IF” we are nothing then they will be above us.

In the meantime our leaders and their leaders are playing games with each other. I find it ironic that a rotten corrupt communist country is in a battle of wills with a rotten corrupt communist Obama Administration because their goals are diametrically opposed to each other. Obama wants to tear us down while China needs for us to flourish if they are to flourish. So by these two battling it out We the People may have time to pull off a coup.

For this reason I just thought the article was interesting. Maybe I misunderstood it.

********************

Yes I do finally have hope for our having a government that will go back to the way America was meant to be. I have faith in the Tea Party Patriots movement. They have not been able to sway the Washington that is now but they have been able to control three elections now and have gotten the attention of some of the setting Congressmen. In fact they are scaring the Hell out of some of them to the point where they have decided they need to “spend more time with their families” after November. They are not looking to form a third party so they have learned from the past. They are simply looking for honest people to run for office that they can then support. Furthermore they are people who do not drink the kool aid but look closely at what is in the glass. Only deeds will impress them, not words. Tea party Patriots have heard the words before and for too long. Yes, I have hope. BB

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