Why China Won’t Take Over

Now that China has emerged from the chaos of the economic tsunami, with again close to double-digit growth, the first and only among major economies. Though China’s figures are doubtful in the eyes of the outside world, the Harvard-educated economist Guo Kai claims that, if anything, the true growth figure in China should be even higher. The theory of China dominating the world seems more and more indisputable. But is it true?

First we should understand what has been the compeller of China’s recent growth. The China of the past under planned economy concealed its potentials. With no incentive system and established property right, China was left with an entirely underemployed working force. There were the natural resources; there were the talented mathematicians; but the energy sources and mines were left unexploited and the scientist were either growing rice or grazing cows. No matter you worked or not, everyone was kept almost equally poor under the redistribution system. What development can you expect from such utilization of resources?

After Deng Xiaoping placed China on the road to market economy, everything changed drastically. The previously fettered forces of this potentially huge economy were eventually freed. People finally had a reason to work. Starting from then, people all over the world awed the breathtaking growth of a nation with a population constituting one fifth of that of the world.

It should have come with no surprise at all – after all it was merely that the power of this machine had been artificially hampered, and now it could finally run at full speed. The growth of China was nothing like that of Europe after the Industrial Revolution. The majority of the technology utilized during the growth of China were already there at least half a century ago, given that China’s growth were mainly driven by low-value-added manufacturing of products such as toys and textile, and with such a huge population, even under a comparatively good institution, it took China more than thirty years at least to warm up to function at maximum speed. To sum, the growth of China was not powered by innovation, it was just the sequela of the inefficiencies of the pre- Reform and Opening Up era.

So with the freed work force and the capital accumulated in the past few decades, China should be ready to conduct true innovation, which is the primary way any country can sustain long-term development. But that is not as easy as it may seem. We now know that real growth is motivated by improvement in cutting-edge technology, but this is also the very thing that is difficult to materialize in China.

For example, the cloud computing technology that is gradually becoming the center of attention in the scientific realm requires the collaboration of hundreds of thousands of personal computers across vast geographical areas. Google, among several multinationals centered about information technology, is currently investing heavily in this. However, with the Internet censorship in China, I do not see how cloud computing is ever going to work out in China. (Actually, with the withdrawal of Google China, the prospect of cloud computing in China seems remote at best.)

Another obvious constructive force to development is education and research. Good education is the indication of future growth, and research is the engine to every development at the cutting edge. However, according to personal experience in top high schools in China, and my former classmates in top universities, education in China is still mainly controlled by bureaucratic school officials and rigid military-type school regulations – far from the ideal ground to encourage innovation. In fact, even in the very top universities, students are mostly only allowed to access the “educational sites” on the Internet while on campus. That means not only BBC and Reuters are not available, even the Bureau of Economic Analysis is blocked. I wonder how economics majors there can conduct any meaningful research without all those important sources of data. Also, a significant percentage of those top students in high school, e.g. the former president of our Student Union back then, are now studying and living in the U.S. or other advanced countries. Without these students, who shall shoulder the responsibility to lead China twenty years from now?

We have seen Japan; we have seen Germany. They are excellent examples as successful economies, but they never had a chance to surpass the U.S., let alone taking over the world. Now I heard that free distribution of newspapers in Beijing subway stations are recently banned, while government officials claim that “reading newspapers while on board is not safe for passengers”. With these internal disturbances, I do not see where this country is going.

Here is an unverified story happened in ancient China I heard from a friend, quoted here just for fun: During the Warring States Era, a government official went back to his hometown after three years of duty in the capital. To his dismay, he found his wife pregnant when he arrived. He returned to the capital and sought justice from the King, who told him that it was probably because “his wife loved him so deeply that she got pregnant thousands of miles apart”.