Tuesday, October 25, 2011

Thinking clearly about China?

The achievements of China within the paradigm they have pursued have been so impressive that it is sometimes easy to be seduced by the numbers.   In his recent thought provoking talk at the LSE, Malcolm Turnbull made the following observations about China:
  • 'Population – 22 to 20 per cent
  • Poverty (< $US1.25/day) – 38 to 15 per cent
  • Manufacturing value added – 5 to 11 per cent
  • Steel production – 12 to 39 per cent
  • Foreign reserves – 3 to 22 per cent
  • Resident-owned patent filings – 1 to 15 per cent
  • Telephone lines – 1 to 29 per cent
  • Internet users – 0 to 15 per cent
  • Carbon emissions – 11 to 20 per cen'
Acknowledging the great achievements of the last 30 years, Turnbull goes on to say:

'Finally, consider the environment. Over millennia floods and famines have seen off many an Emperor – tangible evidence that he had lost the mandate of heaven. China faces some of the most severe environmental challenges in the world. Some are direct consequence of global warming; as the Himalayan glaciers melt more water becomes available when it is not wanted, in winter, and less when it is, in summer.

At the same time, industrial pollution of the air and water is so severe that it’s a political issue – what good is it to have a television or a car if you cannot breathe the air or drink the water?

And China’s ability to feed itself is threatened by diminishing water availability.  Agriculture on the northern plain is largely irrigated using groundwater which has been unsustainably extracted to a point where wells are running dry.  Water can be desalinated or pumped from the south for cities, but that is too expensive for farming.'

Following an excellent analysis Turnbull asks: what is to be done?   Amongst his many suggestions none question the current development trajectory, nor suggest how China, Australia (as a major suppier of environmentally damaging resources) and other resources intensive countries might address the fundamental environmental conundrum that the current trajectory delivers.

So it is hard to get one's thinking straight.  Much, for example, has been said about the BRIC countries. Yet asthey are unlikey to rescue the world from meltdown:

'So with Japan still reeling from its two "lost decades" (drenched in QE), the only hope seems to be the emerging economies, such as China, India, Brazil and South Africa. Yet can they save us from worldwide economic stagnation? The answer is a definite no. Even with three decades of growth and 1.3 billion people, China's economy is still just over 8.5% of the world's (as of 2009), so whatever it does pales in significance compared to what goes on in the rich world. Moreover, it faces the challenges of deflating its huge property bubble without creating a financial crisis and managing its intensifying social conflicts – it experiences thousands of riots and strikes every year. And its dependence on exports makes it vulnerable to crises in the rich world.'

What will emerge?

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