Tuesday, March 17, 2009

China's Warning

As IBD wonders - is China now to the right of the US when it comes to markets? A few apt notes courtesy of IBD:

  • "As former British Governor of Hong Kong Chris Patten has noted, 'China has been the world's largest economy for 18 of the past 20 centuries.'"
  • "Reduced economic freedom can break a superpower."


shanghai said...

"world's largest economy"

What does that mean "world's largest"? What does it quantify?

Clement Wan said...

Quantifies GDP - which shouldn't be surprising only given the population mass and the fact that China used to be the most technologically advanced in the world until a period of protectionism that ended in 1979. The fall was brought about particularly following the industrial revolution when protectionism was well under way. Imagine the world if China had industrialized along with the rest of the West. Of course this was in hindsight also impossible to do with the governments they had at the time.

There are many Chinese who believe that China is poor today because Western powers suppressed them. The reality is closer to the fact that they did much of it to themselves.

shanghai said...

So if I understand correctly, what you're saying is that China's had the most overall GDP until the time of the industrial revolution in the west? What about per capita at the time? Where was India?

Clement Wan said...

I did a bit of quick googling... I don't know if you can open this:


I also cannot vouch for the authenticity of the stats in there but they do a comparison of the Chinese and Indian economies over time. I'm not exactly sure how they track the size of economies given obvious problems but I don't think it's too difficult to believe either - given the technological advantages China had at the time - not to mention the trade advantages of such things as ceramics.

Based on data here (that I would assume to be more reliable): http://seekingalpha.com/article/21505-investing-in-china-rapid-gdp-growth-rates-indicate-prosperous-future - it would seem on a per capita basis China's wealth was substantially larger at one time (and India's larger than China's). What of course differentiated China was its sheer population size. It's remarkable when you think about it how wealth has diverged so dramatically in the last hundred years.

shanghai said...

Thinking about the USA as a super power often brings talks about its innovation and financial power.

Here's a reminder what makes a real super power:

"America accounted for 45% of the world's military spending—$1.2 trillion in 2007—more than the next 14 biggest countries combined."

Amazing, isn't it? 45%...

Clement Wan said...

I think that being an economic and military superpower are two relatively exclusive ideas (e.g. HK has punched far above the average per capita income weight relative to its regional peers). However, if you're the former without the latter you definitely become a target.

The irony is that where the US has attempted to impose military power (some say for economic gain but I am far more charitable with my view) - at least in the decades that it's been recognized as a super power post WWII, have ended up being huge economic sink holes.

I should note further that military spending is under 10% of GDP in years that it has been far more active than the past.