China resembles U.S.A.?

China is making a phenomenal leap to the top of the global economic hierarchy. It now has even outpaced Japan to become the second largest economy in the world. China sceptics think that a giant bubble is forming in China, but that bubble will soon burst to become equivalent to Japan's lost decade in the 1990's. Looking at the daunting challenges China faces, namely endemic corruption, their rapidly aging workforce and ever-increasing energy needs, they think that China's bubble will burst soon, plunging it into a crisis similar to that faced by Japan in the 1990's.

However, Stephen Mihm and Jeffrey Wasserstrom disagree with the critics in a commentary in a recent issue of the Times magazine. They think that contemporary China is much like 1850's America. For instance, both are predominantly rural countries that were undergoing a massive shift towards an urban, industrial economy. In the 1850's, U.S. rapidly churned out cheap yet high quality goods, such as textiles, clocks guns and other goods and earned the reputation of being the "workshop-of-the-world". China has also earned their and admiration from other countries for producing seemingly endless quantities of cheap goods.

Other countries have been complaining about China manipulating the Yuan, for having dubious business practices and wanton disregard for copyrights. These countries are actually echoing things British commentator said about the rise of America's rise1 some authors even complained about earning no money from the sales of pirated copies of their books being sold in the e country. As the U.S. rised, numerous speculative property bubbles grew and burst, but each time, the economy recovered and continued its steep climb upwards. So too, might China's economy.

Some of the sceptics think that the contradiction between China's political structure (which is nominally communist) and its economical structure (which is largely capitalist) might cause its downfall. However, America did not lack its contradictions in the 1850's. It was proud to say that it was devoted to freedom and equality, yet slavery played an important role in the economy, women lacked basic rights and Native Americans were grossly mistreated. Just as the U.S. had struggled throughout the 19^th century to resolve its contradictions, so will China in coming years.

China sceptics think that China is sure to fall when their property bubbles burst. What makes them think that China's economy would not recover and continue growing? Stephen and Jeffrey think that Americans need to stop seeing China as an exotic case and expect that its economy grows, just as theirs had, in the 1850's.