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        20070108   

Michael considered fate at 11:55   |   Permalink   |   Post a Comment

Good article 
British journalist and economist, Will Hutton, with much better prose and more statistical numbers in hand, argues what I've said a few times on this blog over this past year: China is weaker than we think and the west has misunderstood the threat.
But the closer you get to what is happening on the ground in China, its so-called capitalism looks nothing like any form of capitalism the west has known and the transition from communism remains fundamentally problematic. The alpha and omega of China's political economy is that the Communist party remains firmly in the driving seat not just of government, but of the economy - a control that goes into the very marrow of how ownership rights are conceived and business strategies devised..
Nevermind the civil rights issues, the stunted rural growth, the lack of females, or the inability of a Chinese person to use Wikipedia.
.. Absolute power corrupts, and the Chinese Communist party has become one of the most corrupt organisations the world has ever witnessed..

.. The Chinese economist Hu Angang, in his trailblazing book Great Transformations in China: Challenges and Opportunities, calculates that over the late 90s the cumulative annual cost of corruption was between 13.3% and 16.9% of GDP and is still around that level today..
Even the Iraq war doesn't cost anything close to that much. At an estimated $354 billion at the time of this post it is roughly 0.7% of the US GDP over the last four years. Read that again - less than one percent of the GDP, whereas the Chinese government can't keep itself under 13% - over 18 times 0.7% - in corruption churn.
.. As a potential watchdog to correct any of this, the media is crippled. China now has more than 2,000 newspapers, 2,000 television channels, 9,000 magazines and 450 radio stations, but they are all under the watchful eye of the party in Beijing or provincial propaganda departments. These authorities issue daily instructions on what may and may not be reported; journalists who digress will be suspended from working or even imprisoned.
This year has seen plenty of Chinese journalists imprisoned, including bloggers.
.. The cumulative result of all this is economic weakness, despite the eye-catching growth figures. Innovation is poor; half of China's patents come from foreign companies. Its growth depends on huge investment, representing an unsustainable 40% or more of GDP financed by peasant savings. But China now needs $5.4 of extra investment to produce an extra $1 of output, a proportion vastly higher than that in economies such as Britain or the US. But 20 years ago, China needed just $4 to deliver the same result.
Ouch.


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