Another Way to Look at China's Growth Besides Just from "Retail."

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While it is obviously true P.R.C. produces a good amount of the world’s manufactured goods, and a good percentage overall of those are produced not only in P.R.C., but have a history of increasing importance in such places as Singapore, the Pacific island countries, Australia, Japan, T’ai wan, South Korea and the region of Southeast Asia and South Asia – the lot of them.  But what makes P.R.C. so important in its own right, with still its relatively low standard of living outside the urban centers after all these years, as a producer and exporter of goods to the U.S. and Western Europe and other presumably wealthy parts of the world?  While P.R.C. holds maybe a little over a trillion U.S. dollars in the bills, notes and bonds issued by the U.S., it also has a very large population, now much over the billion threshold as reached some time ago.  This means P.R.C. indirectly has financed its economic scale and demographic scope through making the decision some time ago to develop major business and commercial ties with the U.S. – the post – Cold War unipolar superpower.  Also, while for P.R.C. as a country from the Third World bounding over into the First World to the extent it fulfills its political and economic mission of transition from a country emphasizing industrialization and renewed centrism overall, there are a small number of major inputs that contribute to the future economic prospects of the country; not of the P.R.C. administration, but of the economic activity in the country apart from government, including continuing to invest at least some of its current account surplus (not all can do that), conducting more reasonable and goal – oriented what we would call open market operations, increasing the scope of the social net at home, especially for aging workers; getting beyond the fluff of places like Shang hai and Bei jing to manage better its intake of foreign direct investment, and then under the guise of what it calls “Chinese characteristics” and a newer doctrine of its administration under the “Represents”, carrying on the business of actively managing its industrial and commercial base, and then economy overall without the ordinary corruption and parasitism that characterizes some growing economies these days. 

P.R.C. might indeed show a much greater percentage G.N.P. growth than, mention France at this point that might be one percent.  The recent estimates of Chinese economists about the sustained growth over eight or nine percent gross of that country’s economy as a whole does take into account the reports and numbers that are submitted to the center, though it does not quantify the actual numbers of what must be the shadow economy in the country that might be yet another significant source of growth, however illicit, to again enrich those who are merchandising unofficial stoves, televisions, handbags, and other goods and contraband at this point.  In the former soviet union, for example, during glasnost, the shadow economy might have been as great as forty percent of the Russian gross national product at that point, and this gives reason for much of the exclusive and private wealth the oligarchs concentrated to themselves at the time (Boris Yeltsin is criticized for having allowed this and even encouraged it though future studies will probably show this vicious process was a Russian version of hastening the arrival of capitalism in the country.)  The grey economy in P.R.C. at this point might be greater than that in Russia in gross terms because in China right now there are more people who need things, especially the aging worker population, and who have ways of raising the cash out of their life’s savings and so forth to put into the consumer economy – this is and has been a source of unofficial and substantive internal commercial growth for their economy since the time of Deng Xiao ping, and the thinking behind it as it touched upon the issues of young people there could have touched off some of the issues of 1989 that resulted in the administrations reactionary measures at the time.  Rest assured that China’s economy being the way it is, and with room to grow in the area of consumer and durable goods, the grey economy has given the country a somewhat easy and unofficial way to deliver on its economic promises internally over the years.  Time will tell if this and related activities actually enriches anyone and by whom it will be easy to see who the responsible people are for it, be they resellers, middlemen, or some type of ‘oligarch’ as has arisen in their neighbor to the West. 

While the Chinese over the years, not unlike the former U.S.S.R., have chased bad investments in the name of entrepreneurship that sometimes have caused financial and other reorganisations, it is possible that the current limits to growth as a macroeconomic issue will call for less official trade inside the country due to slack in world consumerism and in its financial markets as well.  This will be a good thing for anyone who has a lousy economy and who’s lending things to finance growth, and it might be difficult for example, for France in the next few years to have G.N.P. growth that even equals its inflation rate; so France might want to return to the financial well in P.R.C. consistently as long as China continues to purchase its bonds and export goods there.  Remember that debt is not property nor is it a proxy for property and those in the French “patrimoine” stand in line as stakeholders in any problem with its bonds before the debtholders do.  The rights of debtors and bondholders when in dispute can get quite technical, though it is clear that no matter how much of France’s debt bought by the Chinese, France will always be free of any specious claims on its assets or national treasures due to the character of its own open market operations and its international rights as a debtor.  Outside the P.R.C., international trade rules, and this despite the slackening of some trade at this point in recent reports, maintain the status quo as far as practices and the production of goods and services in exchange for moneys are concerned.  P.R.C. might be greatly concerned by slackening trade as it’s a major producer of goods at this point, but trumpeting the day – to – day problems of this is a way of calling undue attention to oneself, and while there are ups and downs every day, one has to wonder at the same time what the daily figures are highlighted for unless there are some practices driving the trade and commerce from P.R.C. that are questionable.  Ordinary economic systems, capitalism being one of them, have very wisely built in features to absorb the everyday chaos of the marketplace and those angered or upset by ordinary ups and downs might be judged to not being able to see beyond their noses.  These days, so many merchants and traders everywhere are concerned with quick scoring due to an incorrect sensation that’s how money is made these days – by a kind of high – pressure cooker tactics – based business climate.  This is only so true as ordinary people want a basic standard of living, to have a place on the food chain and the like – this is the same in every country with wise leaders or fools alike at the helm.  The current concerns about China as an economic engine that’s slackening are frightful to “Chicken Little” and because most of the world has market – psychology – based trade these days (they count what’s in their pocket books at the end of the day and decide if they’ve fared well or poorly, etc.,) it’s important that daily and monthly indicators (markets and CPI aside, maybe) be given time to return to their general patterns. 

Related Becker – Posner Blog postings on the subject.