Short China?



China is highly unlikely to suffer a currency crisis like what happen to Indonesia and South Korea during the 1997-8 asian financial crisis due to their massive US treasury holding. But i am concern about their unemployment rate, its potential for social unrest and subsequent implications is very scary.

Conversation with History is Back

Aside


Conversation With History is back with few months backlog of videos of interview with characteristically eminent scholars and people of insight uploaded to a refurbished site. Listened to Adam Segal’s interview yesterday, it was a great overview of the US-China-India political economy landscape, from an American perspective. Should check it out. Its layperson friendly. [Youtube=http://www.youtube.com/watch?v=vSAoOMgNLpQ]

This time United States really is declining



During the 70s and 80s, Vietnam War, the oil check, economic stagnation and the supposedly superior political economy system of Japan were prompting eminent scholars to write books title “Japan as Number One” and “The Rise and Fall of the Great Powers” prophesying the decline of American superpower. But it was not meant to be. In the early 90s, America’s biggest military rival and economic rival, respectively the Soviet Union dissolved, and Japan went into a decade of very low growth. While America rebounded to the longest continued economic growth in its history and just as its military seems invincible in the Gulf War, taking less than 150 casualties during the entire war. American preeminence, let to books title “The End of History” and articles like “The Unipolar Moment“. The declaration of American decline was premature, until now. Continue reading

Thoughts on China’s Political Development


The end of history
Starting with The End of History, where it is argued that variation of liberal democracy will be the final form of government. One key premise in that thesis is: successful industrialization will inevitably create an educated middle class that demands democracy. An indicator of when they will happen, as noted by Francis Fukuyama is when the country have around USD6,000 purchasing power (in 1992 PPP USD). This premise has largely been correct since its pronouncement, with the exception of Singapore and a handful of resources-rich states where purchasing power could increase purchasing power without actual industrialization. As of now China is at USD7,400 per capita PPP which is the equivalent of about USD4,700 in 1992, the index base of the USD6,000 figure. While there is some low-level movement towards democracy, its has largely been negligible. Freedom house gave China the exactly the same score in 2002 and 2010: political rights 7 and civil liberty 6 (7 being least free, 1 most free). Some have suggested (as have Fukuyama) instead of democracy, Chinese communist party (CCP) might push towards a soft-authoritarian political system akin to Singapore, the only industrialized exception to the stated premise. Continue reading

Ending China’s trade surplus will be great for the world


From Martin Feldstein’s The End of China’s Surplus:

The policies that China will adopt as part of its new five-year plan will shrink its trade and current-account surpluses. It is possible that, before the end of the decade, China’s current-account surplus will move into deficit, as the country imports more than it exports and spends its foreign-investment income on imports rather than on foreign securities. If that happens, China will no longer be a net buyer of US and other foreign bonds, putting upward pressure on interest rates in those countries.

Although this scenario might now seem implausible, it is actually quite likely to occur. After all, the policies that China will implement in the next few years target the country’s enormous saving rate – the cause of its large current-account surplus.

The plan calls for a shift to higher real wages so that household income will rise as a share of GDP. Moreover, state-owned enterprises will be required to pay out a larger portion of their earnings as dividends. And the government will increase its spending on consumption services like health care, education, and housing.

These policies are motivated by domestic considerations, as the Chinese government seeks to raise living standards more rapidly than the moderating growth rate of GDP. Their net effect will be to raise consumption as a share of GDP and to reduce the national saving rate. And with that lower saving rate will come a smaller current-account surplus.

This is the right policy direction for China (i suggested it in the past here and here) and the world economy will benefit from it.

Another report from a China based economist: China’s shrinking surplus.

Redemption of the Tiger Mother


Amy Chua’s Battle Hymn of the Tiger Mother: The Audio Book Club discusses. – By Ann Hulbert, Hanna Rosin, and Nina Shen Rastogi – Slate Magazine.

First, i know very little of the subject i am about to write about. All my knowledge of the book came from the Slate podcast review of the book, and i only know Amy Chua via her interview with Colbert and Conversation with History (2004: the myths of globalization and 2007: the moment of empire).

The girls at Slate dissected the book very well and very comprehensively. Other than just talking about the book, they spent half of the podcast discussing the book’s literally genre and its relation and impact to the culture climate of parenting and American anxiety over the rise of China. Their view of the book was overall favorable.

I just want to add two points to their review: I couldn’t help but to notice the book’s redemptive quality. As if the book is Amy’s way to apologizes to her kids for her sometime overzealous methods, while also publicly telling them how proud she is of their accomplishment and maturity. This book will mend some wound and prepare her kids next level of gruesomer education. This book have injected a favorable view of her kids into the public consciousness, which will probably result in easier university entrance and employment opportunities, all according to the grand scheme of the tiger mother.

And about parenting in general: There is perhaps a middle road between tiger mother’s way and the “american” laissez faire way. Maybe kids can be subject to tiger mother’s training and retain 10-20% of personal project/fun time, depending on kids’ performance during the tiger mother’s. Call it the google way if you well.

ps. Amy looked hot in the Colbert interview.