On one hand, it's very easy to be frightened by China's seemingly endless growth in political and economic power.
Why on earth are the Chinese playing military games with Japan, threatening Southeast Asia, or entering politics at all? When they stay silent, we ignore them. When they threaten boycotts or use nationalist language, we get scared and react. We still haven't realized that the scariest thing about China is not the size of its navy or the arrogance of its diplomats. The scariest thing is the power China has already accumulated without ever deploying its military or its diplomats at all.
And some of China's expensive, high-cost expenditures put current long-term American infrastructure coordination to shame.
China is doing moon shots. Yes, that’s plural. When I say “moon shots” I mean big, multibillion-dollar, 25-year-horizon, game-changing investments. China has at least four going now: one is building a network of ultramodern airports; another is building a web of high-speed trains connecting major cities; a third is in bioscience, where the Beijing Genomics Institute this year ordered 128 DNA sequencers — from America — giving China the largest number in the world in one institute to launch its own stem cell/genetic engineering industry; and, finally, Beijing just announced that it was providing $15 billion in seed money for the country’s leading auto and battery companies to create an electric car industry, starting in 20 pilot cities. In essence, China Inc. just named its dream team of 16-state-owned enterprises to move China off oil and into the next industrial growth engine: electric cars.
On the other hand, perhaps China may be more fragile than most people realize.
Beyond economic output, more than three-fifths of China’s overall exports and nearly all its high-tech exports are made by non-Chinese, foreign companies. Foreign companies take advantage of low Chinese wages to reprocess imports of semi-manufactured goods that are then shipped to Europe and the U.S. China remains, in essence, a subcontractor to the West, says Will Hutton, British political analyst and author of an influential book on China, “The Writing on the Wall.” Despite China’s export success, there are few great Chinese brands or companies. China needs to build them, says Hutton, but doing that in a one-party authoritarian state, where the party second-guesses business strategy for ideological and political ends, is impossible.”
Because of China’s climate of corruption and authoritarian secrecy, even the volume of industrial output has been questioned. Some doubt China’s numbers and official reports. Investment guru James Chanos, who rose to prominence when he predicted the Enron meltdown (and pocketed a billion dollars shorting Enron stock), is shorting China now.
Says Chanos, “China is cooking its books. State-run companies are buying fleets of cars and storing them in parking lots and warehouses” to pump up state-mandated production figures. As evidence of this, experts point out that while car sales have been rising by a huge 20 percent per month, auto fuel usage seems to be rising by only 3-5 percent per month. Chanos also says China is plagued by an ominously growing real estate bubble in high-rise buildings, offices and condos. Much of China’s high growth originally came from decades-long heavy investment in infrastructure, but increasingly it has been coming from construction. Chanos estimates that 50 percent to 60 percent of China’s GDP now comes from alarming levels of overbuilding, virtually none of which is affordable to the average Chinese. “This is not affordable housing for the middle class; this is high-end condos in major urban areas and high-end office buildings, which no one is buying,” says Chanos.So modern China is driven by rapid spending and building and consuming for the sake of rapid growth, with some useful public infrastructure investments here and there.
Clearly, nothing the Chinese government is doing is sustainable, or factors in a Plan B in case the growth paradigm abruptly shifts (due to war, famine, natural disaster, global pandemic, societal collapse, etc.) but I don't think anyone influential cares while there's money to be made, and yachts to be sailed.