On China, Globalization and Wasted Opportunities.

Beijing - February 2010
Beijing – February 2010

An article by Kerry Brown about the future of China’s economy came out a couple of days ago. It explains how the economic strategy of the new Chinese premier Li Keqiang is based on diminishing the exports to Western countries and favouring instead the development of PRC’s internal market, something that Li has been saying for the last 4 years, namely since when the financial crisis in the West started affecting the trade with China.

The idea of the Chinese premier seems to make sense, since China’s economy has until now been overwhelmingly based on exports, thus too dependent on factors she couldn’t control. Nevertheless, the blueprint on which this “going local” strategy is based – if reported correctly by Brown (and normally when dealing with China this guy knows what he’s talking about) – is fatally flawed. Two of its keypoints, as Brown explains, are in fact urbanization and tertiarization of economy, areas in which China is currently well behind Western standards.

But is achieving Western standards in such fields what the PRC really needs and wants for its future? Isn’t the urbanization which has been going on in the last two centuries in the Western world one of the factors contributing to the increase of CO2 in the atmosphere; to the gradual theft of cultivable land from agriculture to make space for factories and warehouses; to the real estate  speculation which has been an integral part of the ongoing financial crisis? Isn’t an economy too dependent on the service sector (like those in the West) as unbalanced as one too export-oriented (as China’s)? Isn’t the West experiencing the shortcomings of its tertiarization such as an increasing dependency on the banking system and the financial world, exaggerated outsourcing to non-Western countries and the consequent rampant domestic unemployment this causes, an almost total negligence in dealing with the already ramshackle agricultural sector… (just to name a few)?

Does the PRC really want to go down that road? Some facts suggest that it is already doing so. PRC government has expressed the intention to invest 40 trillion RMB to urbanize no less than 400 million people in the next decade. As some China experts have already noted, the PRC has also already started to delocalize some of its factories to Southeast Asian countries, taking the same path which led the West to tertiarization a couple of decades ago.

To be fair, I by any means do not intend that industrialization and tertiarization are bad for China. I just believe that they do not necessarily need to achieve Western standards. They instead need to be included in a much wider and elaborated developmental plan, involving balancing factors like the preservation of rural areas for agricultural (and environmental) purposes and the reconversion of the industrial sector for self-consumption, so that the production is equally divided amongst the primary, secondary and tertiary sectors and the territory organized more rationally in urban and rural areas.

Chinese people are normally susceptible when Westerners wear the cloak of the old masters and do their lessons about environmental issues, democracy, politics and a number of other hot topics. In many cases, they are right to be so, especially when Western criticism is not supported by the knowledge of China’s culture and society or when the West isn’t disposed to accept the same compromises it wants to impose to the PRC (exactly what has happened during Copenhagen’s climate change conference). Nevertheless, I believe the case is slightly different when it comes to economic development. In this regard, the West has a lot to teach the PRC not because it is fundamentally better or more developed, but because it has a much longer experience with the process of development, it had the opportunity to enjoy its benefits and suffer its side-effects. Phenomena like the financial crisis, delocalization, unemployment, growing wage-disparity, the economic problems within the EuroZone and movements like “Occupy Wall Street” or “steady-state-economy”, “de-growth” should be observed very closely by China’s decision-makers before embarking in a developmental plan on Western standards.

The need for this socio-economic reconversion is for China a great opportunity. Beijing can decide either to blindly follow the economic path drawn by the West, suffering in the long run from all of its side-effects, or to take instead the much braver decision of inventing China’s own path to development, learning the best from all of the mistakes that Western economies have left behind.

A bonus: to have an idea of the proportion of China’s urbanization have a look to the striking images displayed here.

Beijing - February 2010
Beijing – February 2010
Beijing - February 2010
Beijing – February 2010

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