Interesting China discussion (from Aspen)

(This item resurrected from original posting on somewhat-insiderish Aspen Ideas Festival blog site.)


As noted earlier today, a very interesting panel discussion on prospects for the Chinese economy featured a moment of unbelievable crudity from an audience member. Back to the high road now: a mention of some of the points that made it interesting in a more wholesome way.


Panelists were Minxin Pei, of the Carnegie Endowment (and the recent book China's Trapped Transition); David Dollar, director of the World Bank's Beijing office; and Clive Crook, of my own Atlantic Monthly magazine. Moderator was David Bradley, again of my own -- technically, his own -- Atlantic Monthly. Terms of the discussion were: for Pei to make the skeptic's case about China's economic future; Dollar to make the more optimistic case; and Crook to talk about the state of US-China relations.


Highlights (as opposed to summary of the discussion):

* No one was either all that optimistic or all that pessimistic. Pei's case for gloom started by assuming that the next "seven to ten years" would still see China on the way up economically. There were enough positive trends underway whose momentum would carry China at least that long, he said. These included: the continuing flow of young, healthy workers from the countryside into the factory zones, the savings surplus, the markets opening up worldwide with increasing global integration. Only after that -- starting sometime between 2015 and 2020 -- would China start to hit the wall. (By the way, I'm going to have start making predictions for 7-to-10 years out: chances are nobody will remember them when that time comes.) The last word of Pei's "pessimistic" introductory pitch was that China would not be able to keep growing at 10 per cent per year. It might fall all the way to seven per cent!


Dollar's more positive case said that the favorable trends would last for probably the next 15 years, but that there were lots of risks in the meantime. In fact, he listed almost all the same perils that Pei did -- environmental carnage, a "social deficit" (shortchanging medical care, schools, etc), China's imbalanced role in the world economy, etc. The main difference is that he thought the Chinese government would be able to deal with them, and had already started to.


* Comment I was personally most skeptical about: David Dollar's reassurance that the corner was being turned on air pollution problems. He has been there a lot longer than I have, but if what I see is improvement....


* On the other hand: Dollar had a "what to do" suggestion that made very good sense. It was a three-cushion shot intended to deal with environmental, trade, and inequality issues all at the same time. Step one: China would raise its internal prices for energy and water, resources that are now abused in part because they are artificially cheap. This would tend to make most Chinese people poorer. So step two: letting the RMB appreciate a little faster than it is doing. This would make most Chinese richer, but would slow down the export machine. Thus step three: increasing internal spending on health, schools, etc, which could (in a macro sense) offset the export slowdown and also redress the Dickensian-to-the-extreme social problems inside China. Makes sense -- in principle.


* Nice illustration from Dollar about the oddity of China's huge hoard of US-dollar assets. The 1.3 billion Chinese people collectively control about $1.3 trillion in dollar assets. "Thus, on average each Chinese peasant owns $1,000 in US Treasury bonds. He may not have a tractor and his kids may not have schools, but he has that bond." This situation can't last.


* Deceptively important point by Minxin Pei:"The economy is growing fast but people's complaints are growing faster. They are not complaining about the lack of democracy and human rights. They are complaining about the lack of health care and access to education." The second sentence is the crucial one. Maybe half of what the foreign media report out of China is news about the latest crackdown on dissidents and the latest assertion of censorship and one-party control. Those reports are accurate, and they are important. But they're nothing like half the dynamic of what is going on in China now. This is a subject for another time, but that passage by Pei really caught my attention.


Much more to report, from Crook, Bradley, and various questioners, but not any more time now.