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The Party's Over: China's Endgame
How did this notion of Chinese supremacy gain hold? The answer is nothing more profound than statistical extrapolation. China was destitute when Deng Xiaoping grabbed power in December 1978. Since then, the country has averaged, according to official statistics, a spectacular annual growth of 9.9 percent. This rate, if carried forward, gives China the world's largest economy in a few decades—2027, to be exact, according to a now-famous Goldman Sachs estimate.
But it's never straight-line. It's always an asymptotic curve, fastest growth at the beginning, flattening off as natural limits are approached. The question then becomes, the length of time of the fast growth, and the height of the natural limit. It seems to me we've seen at least two signs that the flattening of international sales growth has begun: revelations of deadly product being shipped leading to revulsion, and increased establishment of manufacturing contractors outside of China, in Vietnam, Malaysia, Indonesia, and elsewhere. The next big push for the Chinese economy is going to have to come from servicing local customers, not international ones.
So will ours be the Chinese century? Probably not. China has just about reached high tide, and will soon begin a long painful process of falling back. The most recent period of China's fast growth began with Deng's Southern Tour in early 1992, the event that signaled the restarting of reforms after the 1989 Tiananmen Square massacre.

And as a result of its manufacturing strength, the Chinese central government accumulated foreign currency reserves that have been aptly called “the greatest fortune ever assembled'—$2.399 trillion, at last count. No country has a bigger stash. And no wonder analysts believe that China, having grown so large so quickly, has now acquired unstoppable momentum.

But the analysts and the conventional wisdom they peddle are wrong. China's economic model, which allowed the Chinese to take maximum advantage of boom times, is particularly ill suited to current global conditions. About 38 percent of the country's economy is attributable to exports—some say the figure is higher—but global demand at this moment is slumping. (Last March, the normally optimistic World Bank said the global economy would contract in 2009 for the first time since World War II and that global trade would decline the most it had in eighty years.) Globalization, which looked like an inevitable trend in early 2008, is now obviously going into reverse as economies are delinking from each other. So China is now held hostage to events far beyond the country's borders.

As we saw in the Great Depression, the exporting countries had the hardest time adjusting to deteriorating economic conditions. That is proving to be the case now as well. China's exports fell 16.0 percent last year, and forecasts show a weak export sector for at least the remainder of this year. As a result of declining exports and other factors, Beijing presided over the world's fastest slowing economy. China's economy, in fact, grew by about 15 percent in 2007, but fell to negative growth at the end of 2008.
Posted by: tipper 2010-04-15
http://www.rantburg.com/poparticle.php?ID=294688