The Chinese growth rate during the past thirty years has been truly astonishing. It is amazing such a country could switch almost suddenly from a centrally communist regimented economy to a nearly free capitalistic one.
This rapid growth has been welcomed on one hand — since it aided the world economy. On the other hand, it also frightened the West, as it's considered coming from a potential competitor.
The recently announced decrease in the percentage of growth of the Chinese economy, has alarmed most economist and pundits. They need not be. The Chinese gross domestic product (GDP) grew between 2013 and 2014, from $12.1 trillion to $ 13 trillion, a growth of $ 900 Billion. That amounts to an increase of about 7.5 percent of GDP.
Lately, the Chinese announced that for 2015, they would project a lower GDP increase of only 7.1 percent. This upset some economists, as they fretted about the slowdown in China, causing commodity prices to fall. They need not worry, if you consider that 7 percent of $ 13 trillion (the 2014 GDP) is 923 billion dollars, it not only matches last year’s growth in real dollars but may even exceeding it, making the 2015 GDP grow from $ 13 trillion to 13.923 trillion. I wish, economists would know something about mathematics before alarming people.
Yet, China does face a future of serious economic problems. No country can grow forever. The growth will stop; the question is only when?
I see a disturbing parallel to the Japanese economy. Starting in about 1956, Japan’s economy grew at a record pace as well, and there was talk about a Japanese Miracle.
Why was this happening?
First of all, Japan had to rebuild their factories destroyed during World War II. This rapid rate of industrialization is akin of what happened during the last 30 years in China.
Secondly, and most importantly, the Japanese embraced all the new technologies from the West, mainly from the United States. Be it automobiles, television, or electronics. They not only adopted those technologies, but, in some cases, improved them. It is easy to fill your factories if you don’t have to invent or develop new products, you can simply copy them. We see exactly the same thing happening in China..
Yet, around 1984, the Japanese miracle faded and the country slid into a recession. It has still not recovered. What happened?
Well, the simple truth is, there was nothing new coming from the U.S. pipeline, which would fill Japanese factories (electronics excluded which are not labor intensive). Take cameras for example, here digital cameras replaced optical cameras, yet no additional workers were needed to produce them; hence no growth.
I can see China sliding into the same road block, the question is only when?
There is an additional problem, common to Japan and China. Both adhere to Confucian philosophy originally, espoused 2500 years ago, which preaches group adhesion and discouraging individualism The ultimate team work when it comes to doing things. This is the reason why almost all new technology came from the West, at least during the last 400 years.
While this philosophy works great, keeping such a humongous country like China together, it does nothing when it comes to inventing things. Basically all great discoveries, may they be medicine, electronics, transportation, and so on, were the result of individual thinking.
I have yet to see an opera composed by a team. This is why the West excels. Let’s keep it that way.
Hans Baumann is a licensed engineer in four states and a member of Sigma Xi, the Scientific Research Society. He is an adviser to the dean of the University of New Hampshire Business School. Baumann has published manuals on valves and was a contributor to many works including the "Instrument Engineers' Handbook" and the "Control Valves Handbook." He has also self-published several books on business management and German history. His book "Hitler's Fate," suggests that Adolf Hitler did not commit suicide and survived World War II. For more of his reports, Go Here Now.
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