Fearing (for) China

For a while, it was convenient to focus on the "threat from China" in military and economic terms.  These days, not as much, in spite of the occasional Drudge headline.  Consider this:

• Even though it may be making some progress, China is the world's worst polluter.  It will take time effort and wealth to remedy the situation.
• China's working age population is declining, putting upward pressure on wages.
• Already China is experiencing high wage inflation, making it less competitive in manufacturing exports.  Meanwhile, U.S. manufacturing is enjoying a resurgence due to higher productivity and cheap natural gas.
• China's infrastructure is crumbling, and not because it is old, but because corruption pervades the building process.
• The official banking system in China is heavily dependent on government directed loans to favored industries.  I always found it laughable that some conservatives would claim that Chinese investment was causing them to overtake the U.S. while criticizing U.S. government involvement in the auto industry.  Both sets of polices are bad for the economy of their respective countries.
• Small businesses in China are served by a gray-market banking system that lacks transparency and lacks safeguards.  A collapse of this system could threaten the whole economy.

Every story I cited is both recent and slow moving.  There is almost nothing that Chinese leadership can accomplish in the short run to solve these problems.  China doesn't have long, perhaps a decade, before its demographic curve pushes it towards Japanese levels of growth.  Unfortunately, because of these problems, it will not have the store of wealth that Japan has drawn against to prevent social unrest.  (Hint to opponents of greater legal immigration, population growth drives economic growth.)  I think that it is more realistic and worrisome to consider what a Chinese economic collapse would do to the world, rather than worrying about an economically dominant China.  A collapse would send the consequences around the globe.

I leave you with this admittedly older picture of Chinese pollution heading east.

What You Should Be Reading

• One more piece of evidence that the Obama administration has been lying about Benghazi.
• The IRS might still be targeting conservative groups; there is no way of knowing, since they keep stonewalling.
• The Bob Filner recall petition, and signing it as well, because he is hurting our city economically.
• Nice little newspaper you got there, it would be a shame if something happened to it.