Friday, 15 May 2009

"Manchurian Paradox" - Can China see the wood for the trees?

Thanks to a comment on this blog directing me to an article by Stephen Roach who is the chairman of Morgan Stanley Asia.

It raises some interesting points. This is a long article. Highlights only below.

I agree entirely - I do not think that China sees the danger it is getting itself into. They are simply too optimistic. Having not experienced how ugly capitalism can get they are walking into a whole pile of trouble.

It is reassuring to read that I am not the only one who is calling that the emperor has no clothes.

Manchurian Paradox [The National Interest Online]

THE CHINESE word for crisis, weiji, includes elements of both danger and opportunity. This symbolic meaning has taken on especially great significance in recent years. The emergence of modern China as a global economic power can, in fact, be dated to the nation’s willingness to seize critical moments of adversity. That was very much the case during the Asian financial crisis of 1997–98, which marked a critical turning point in the ascendance of China as a major economic power. And it could also be the case today.

But there is an important catch: unlike earlier crises, it is not altogether clear that China senses the gravity of the current danger. That leaves it caught in something much closer to denial—making it difficult to seize the opportunity that peril can provide.


There is nothing wrong with China’s gathering sense of self-confidence and its concomitant contribution to the global debate. In fact, it is to be encouraged. China has earned its place at the table. For a nation steeped in five thousand years of inward-looking experience, China is looking outward as never before. The world can only benefit from this sea change. But that underscores the biggest danger of all—the risk that China takes its newfound external dependence too far and ignores the lasting and serious pitfalls of a postcrisis world. If it fails to rebalance its unbalanced economy, China’s power play could be surprisingly fleeting.



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Anonymous said...

It would be worthwhile to explore how (and when) that would play out.

With 2 trillion or so in foreign reserves, still positive net-exports, and price deflation... I'm not so sure China rise to the top relative new normal.

Bill Rich said...

When will the misrepresentation of "weiji" end ? Weiji is "Risk of Danger", not "Opportunity and Danger". Ji is risk, opportunity, OR chance. Wei is purely danger. When they are used together, one qualifies the other, and not joined by an "AND". Since a "Wei" of "Ji" - the danger of having an opportunity doesn't work, it must be "Ji" of "Wei", and not "Ji and Wei".

Anonymous said...

The only reason why we haven’t had major riots in Canada/USA is because we have a social safety net that is now collapsing. Will Canadians/Americans stand up and take their freedom back like their American cousins did from the British East India Company? As Econo Christian dot com writes, the British East India Company forced opium on the Chinese. It also just so happens that the British East India Company funded Adam Smith to write his “wealth of nations” and develop the theory of “free trade.” Indeed, that is all “free trade” is: a theory that doesn’t stand up to the real world. “Free trade” is not so in places like China that keep their currency illegally low and dump their products on our markets to the detriment of American and Canadian jobs. Manufacturing jobs are not bolt-turning positions as some simpletons think. They are engineering, development, and research jobs, as well as skilled trades jobs. Don’t you people see that the middle class is being wiped off the face of the map here?

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