July 19, 2013, by Tony Hong
The future belongs to those who believe in the beauty of their dreams
By Finbar Edmond Hughes,
Studying American and Canadian Studies with English at the University of Birmingham.
The title of this blog comes from a quote from Eleanor Roosevelt, the longest serving First Lady of the United States of America and in the words of President Harry S. Truman the ‘First Lady of the World’. Therefore it seems appropriate to use the words of a first lady at pivotal point in America’s rise to being a superpower during the 20th Century, as the ‘Chinese Dream’ looks to become a symbol phrase of China’s rise and potential dominance of a Sino-centric 21st Century.
When experiencing China, the unprecedented economic (re)rise of the Chinese economy is emphatically present; permeating daily life from the rise of ‘netizens’ to the city skylines that span the high reaches of the sky. The emergence of the global era has seen the rise of superpowers that have dominated international relations, global discourse and the development of humanity itself. The 19th Century was defined by a British world order, one in which the “empire on which the sun never sets” engendered an anglicised world that (to an extent) exists to this day. “The American Dream” epitomised the romantic notions of American prosperity that dominated the Americentric 20th Century. So as we journey through into the early 21st Century, a century that has already shown itself to be highly defined by the incredulous economic performance of China, the question of whether the “Chinese Dream” will epitomise a Sino-centric century becomes more prevalent.
Notably President Xi Jinping’s presidential and governmental slogan of the “Chinese Dream” (first coined by the British publication The Economist) is a syntactic play on the “American Dream”. Note that the “Chinese Dream” drops the direct address, epitomising the notion that China is an emphatic alternative to the American model to the world. Before you even consider whether the “American Dream” itself has been successful (seventy million Americans don’t have basic health care), the notion of China’s ability to copy such success is highly questionable. The nation faces a multifaceted cadre of potential and arising crises, will it be able to dominate global relations in the century and meet expectations of being a great Eastern superpower?
One of the core problems facing China is the potential to become a victim of its own success, in which its ability to sell cheap exports will be challenged by weakened Western markets and its own rising wage rates. Indeed a 2011 study estimates a yearly increase of between 15% and 20% in wages (Boston Consulting Group, 2011), a change which could see an end to the historic ‘Made in China’ trend; as transnational companies flee to cheaper labour markets and even back to developed countries such as the United States. Moreover increases in the value of the Yuan will provide further challenges to China’s export driven economy. As result China could fall into the “middle-income trap” in which its economy is stuck between having lifted its populace out of poverty but unable to move to the income levels of a more sophisticated economy.
Such a “middle-income trap” has become characteristic of developing economies (with only a few graduating to the high-income level economies in the past 50 years) using an investment led-economic model. Indeed even Japan and South Korea faced crises when moving from investment-led to consumption-led economies, both occurring around 30 years after each nation’s implementation of debt spurred GDP growth. Thus China itself is reaching its own 30 year “deadline”, at the same time as the nation’s housing and building bubble dwarfs that of the housing bubble that caused the 2007-2008 market crash in America.
Another major potential crisis is one that has become almost universal within the West, that of exponential demographic change; in which longer life expectancy and lower fertility rates are the catalysts to demographic disaster. China’s level of demographic change will result in such a crisis (but on steroids), indeed the IMF points to a potential labour shortage within the near future due to an aging population; a shortage of more than 100 million. The nations 20 to 24 year olds will shrink to 58% of the nation’s current levels (in 2010) by the year 2030 (116 million vs. 67 million). Indeed China holds the lowest fertility rate in the world, with a rate of just 1.4; in comparison the developed world average is 1.7. Consequently the nation faces the prospect that the elderly will grow to 30% of the population by the 2040s. Thus the nation will need to produce the infrastructure able to support such demographic change, along with the rising demand for benefits from an emerging Middle Class. However in contrast to Western developed nations, China does not have the advanced and sustained forms of welfare infrastructure to cope with such demographic change.
Another major crisis that China faces is in the potential next great industrial revolution, seen as the rise automated labour. The prime leader of such technological change is the 3D Printer, which with its ability to completely reshape (if not near remove) labour within manufacturing. The ability to personalise and individualise the manufacturing with 3D Printers will mean that intellectual property will become even more valuable to economies than today. As result the natural resource poor and human capital rich China will be placed in a very fragile position, its cheap human capital will be made potentially redundant by the change in manufacturing. However such a change will no doubt produce such a universal shift in the structure of global commerce that trying to see its effect on China, when faced with a number of potential other variables will be near impossible.
In conclusion China faces a number of potential future crises which could derail the “Chinese Dream” and even a Sino-centric century, however the scale of China in comparison to every other nation within economic history show the nation to have the potential to defy economic norms. Indeed economically problems can become places for innovation and even profit (such as catering for the “Grey Yuan” of an older consumer population). Moreover the crises faces China are often simply similar to those that face the Western World, such as the limitation of world resources and the rise of world obesity (with the industrialisation of farming). Yet the sheer scale of China’s economic development points to a speed of borrowing and building that will hit hard and fast, whilst given the nation’s scale responding to such a crisis will no doubt prove extremely difficult.