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Tuesday, 14 February 2012

China Checks Out the USA

Xi Jinping, the man tipped to be the next President of China, is to spend the best part of this week inspecting the USA. Having been a member of a trade delegation a couple of decades ago, he is sensibly retracing his steps to see what has visibly changed and what is the same: including a small-town sample of middle America.

With the possible exception of Australian Labour's rejected Kevin Rudd, no party leader in the 'western' states would have a chance of making an equivalent comparison in middle China on the basis of personal experience.

The significance of such an occasion is easily underestimated. Simplistic westerners still think of China as having only recently and partially emerged from centuries of dormancy, followed by decades of communist isolation: if they think about such things at all. The emergence of China as an industrial exporter has been sufficiently blatant for a majority of newspaper readers to have some awareness of the point: and perhaps 20% of Europeans and 10% of Americans [but at least 50% of Australians] know that China has recently become recognised as the second-biggest economy - by turnover - in the world. Speculation is rife among the chattering classes as to when China will overtake the USA in Gross National Product: which will occur several decades before most forecasters reckon that income per capita in China comes close to equality with that of the USA. It is to be expected that this week's Chinese visitors will be interested to check out these perceptions while they gain a visual impression of the conditions in the fourth year of the Obama presidency. They will have done more preparatory study than their American hosts will have devoted to them: and they will be looking for hard evidence; while the Americans will be primed on the finer detail - so far as it can be ascertained - of the visitor's curricula vitarum. A dozen US agencies will record what the Chinese say, and where they go, what they eat and drink, and what they appear to be looking at; but they don't yet have any technology that enables the hosts to see actually what the visitors are seeing.

The disparities between the USA and China are increasingly significant. Today it has become known that NASA is withdrawing from a planned series of visits by unmanned spacecraft to Mars, leaving the exercise to the Europeans, because of financial stringency which is becoming greater despite Obama's profligate deficit spending. China is constantly expanding its advanced programme of space exploration. As the USA continues the withdrawal of 'advisers' from Iraq and prepares to withdraw its fighting forces from Afghanistan, China is continuing its peaceful capture of resources in Africa. The pundits reckon that there is a diminishing chance of China contributing to any bailout of the Euro, while Chinese interests are taking over European firms especially in fields of advanced technology. The sophistication of Chinese policy on all fronts is of the highest importance.

The Chinese are not technologically backward. They do not need to buy foreign firms to access technology; but they sometimes find it convenient to acquire comparators from the USA and Europe and to have the experience of marketing advanced products to the world's most sophisticated consumers. The best British universities had significant cohorts of students from 'mainland China' back in the nineteen-sixties. I have a clear recollection of Chinese students waving the 'Little Red Book' of Mao's 'philosophy' as they disrupted a lecture by Professor Bernard Crick to announce that they were abandoning their 'corrupt' and 'decadent' academic study of Politics in a doomed system, to return to China to participate in the Cultural Revolution. As soon as the trauma was over, Chinese names again appeared in the class registers of British science and technology - and social sciences - departments. Chinese students also appeared in increasing numbers in American, Australian and European universities. Chinese graduates have been taking western best practice into higher education back home for more than forty years as the student cohort within China has expanded dramatically.

Observation of the relatively poor domestic circumstances in which the great majority of the Chinese live should be balanced against the fact that millions of modern flats have been bought by consumers who have had access to credit in the past decade. Tens of millions more flats and houses are needed: and will be constructed. Financing and managing such a massive construction and sales programme in a liberalising economy is bound to be uneven: there will be an alternation of relatively easy money with hardening rates of interest, and sometimes control of monetary and credit expansion is bound to be less than perfectly efficient. In rural areas there is constant regeneration of the housing stock as village families vie with each other to ugrade or replace their houses and this process seems to be less dependant on the banks' ability to lend. Outside commentators who optimistically see calamity emerging from each adjustment in this area of policy will have a long wait for fulfilment of their direst prophesies.

Even more importantly the typical Chinese consumer who has not yet been rehoused has already moved beyond the stage of just acquiring necessities. The near-universality of mobile phones and the spread of the internet have a much greater impact in empowering consumerism than they do in fostering democracy: there is not an inevitable equivalence of rising access to mobile media and an increase in political dissent. The limited means that dissident groups had of communicating with each other in earlier generations were much more susceptible to maintain secrecy than are tweets, blogs, texts and phone calls. The most serious political and social dissentients will continue to be the most cautious users of the new media for theuir secret purposes; and they may well be heavy users of games, marketing sites and music downloaders to sustain a deceptive profile.

Consumers need to be told what is available for them before they begin to work out whether they want it and - if so - how they could afford it. The web as an advertising medium, as a proponent of fashion and a source of information on the availability for preferred brands is immeasurably powerful; and it can sweep to prominence in China way ahead of commercial television, wall posters and advertising in the press. The ability of millions of interested readers to check for consumers' comments on products and services that the potential buyers have not yet even seen - although many posts are set-up by the providers - gives the individual an unprecedented freedom of information on the basis of which she or he can decide how to spend a small surplus on wages. It is only a matter of time and learning before the squalid underground lending market is transformed into a regulated nexus of credit unions and savings-and-loans firms that can advance cash to reliable employees who will thus be able to pay for expensive quons by instalments over many months.
The spread of high level consumption - of quons [in terms of PPE: see the link from the blog] - will be far more profound and extensive in China in the next few years than any consumer enfranchisement has been in the past, anywhere in the world. China will shift from an emphasis on simple manufacturing to the assembly and marketing of sophisticated quons, not primarily for export but to enhance the standard of living of the domestic population. Those Chinese  quons that compare with the best on the world market will be bought wherever free trade is permitted: and in the period while that situation is being prepared China will continue to export simple mass-produced goods around the world and thus maintain a balance of payments notwithstanding the country's voracious demands for commodity imports.

The visitors to the White House this week will be lionised by the man whom a consensus of Chinese pundits are reported to regard as a lame-duck president: in response they will be polite, reflective and cautious. There is not much that their hosts can teach them: and the reassurance that they will get for themselves from their own observation of the condition of the United States will influence China's approach to global Political Economy through the next decade.

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