Mr. China Comes to America – James Fallows – The Atlantic
For the past 30 years, all of the largest forces have pushed in favor of China’s manufacturing expansion, from very low labor costs and a deliberate policy of welcoming foreign investment, to ever faster and cheaper global cargo-shipment networks, to a deliberately undervalued Chinese currency. Within the past two years, nearly all of those advantages have become more complicated. (In his accompanying article for this issue, Charles Fishman explains some of the large forces pushing in favor of America’s manufacturing renewal.) In China, wages are rising, workers are becoming choosier, public resistance to environmental devastation is growing, and the Chinese “investment led” model is showing strain.
That model has involved a kind of hyper-Keynesianism far beyond what the United States experienced even during the most government-run periods of the New Deal. China has created jobs by building factories, highways, railroads, and dams—and airports where there are no cities, and cities where there are no people. “Americans are used to thinking of ‘savings’ and ‘investment’ as absolute goods, because we’ve done too little” of both, Michael Pettis, of the Guanghua School of Business in Beijing, told me. “But there is such a thing as too much savings and investment and infrastructure, and too little consumption, all of which we see in China.” If the American public challenge is “reinvestment” of all varieties—in education, in infrastructure, in a sense of community, in everything but houses—the Chinese counterpart is a need for a comprehensive rebalancing. Indeed, Pettis’s forthcoming book on the Chinese economy is called The Great Rebalancing. Reliance on exports needs to come into better balance with domestic consumption; economic growth with environmental sustainability; political liberties with the new level of economic prosperity; and on down a long list.
Some observers inside and outside China think that the strains are too great and the system too rigid to allow the necessary rebalancing in time for the party to maintain political control. For instance, Minxin Pei, a native of Shanghai who now teaches at Claremont McKenna College in California, has been warning for more than a decade that the economic, social, and political imbalances of the Chinese system would reach a breaking point just about now—and that Communist rule would have to give way to a multiparty system. Many others contend that, on the contrary, the Communist leaders will manage somehow to address each of today’s problems just before any one becomes an outright emergency, as they have done time and again for 30 years. Whichever view proves correct, the relevant point for Americans is a convergence of trends that make operations here more attractive and feasible, just as the cost and friction of operating in China are increasing.