A sponsored Quartz post from the Lee Kuan Yew School of Public Policy: “Asia will soon be the world’s economic center—if it isn’t already” looks at the rise of nationalism:
In the wake of Brexit, ascendant European nationalism, and the US elections, much has been written about populism’s threat to global trade growth and the international economic institutions established after the Second World War. There are a number of explanations for the turn inward. Many have blamed growing economic inequality within developed economies—some blame outsourcing or technological transition.
The post then notes falling income inequality may be a challenge for the U.S. and Europe:
Others posit that a decline in inequality may be a motivating factor. Danny Quah, Professor of Economics at Singapore’s Lee Kuan Yew School of Public Policy, and Kishore Mahbubani, the school’s Dean, blame populism’s rise on improved income equality across all nations. During the 1990s, a 70% income gap stood between emerging economies and the G7. That gap shrunk to under 14% in 2016 and will disappear by 2020.
For those born in the 1940s, experiences in the U.S. labor force in the 1960s and 1970s framed their worldview. The United States was the world’s powerhouse economy after World War II, especially as the world’s number 2 and 3 economies Germany and Japan had been bombed flat, as had France, England, and Italy. In 1950 the U.S. produced 80% of all automobiles in the world, by 1960s US auto manufacturing was about half world production, and by 2000 the US produced 4 million more cars a year than in 1980, but that was one-fifth of world production. By 2015 twice as many cars were manufactured in China than in the U.S. and some 90 million were produced worldwide (according to Wikipedia page).
If you look at 1950 in the Infogr.am chart at right from you can see how dominate the US (green line) economy was from the 1950s to 1980s.
It should be no surprise that everyday Americans along with politicians and military leaders growing up and living through those decades believed the U.S. to be the world’s major economy and society. Though the US economy continued to expand, faster economic growth in China led many to believe something had gone wrong with the U.S> economy, and many blamed “unfair” trade deals.
The chart seems to show the US economy declining after the 1950s, but that is an illusion. Instead, the US economy has expanded since the 1950s and 60s, with occasional recessions and slowdowns. From the 1960s on, Germany, Italy, and Japan grew rapidly, then later Taiwan, Hong Kong, South Korea, and the UK expanded (and Italy slowed down). The economies of China since 1980s reforms and India since 1990s reforms took off as well. International investment and trade were major drivers of rapid economic expansion.
In a presentation some years ago Michael Cox of Southern Methodist University asked teachers to imagine five people dropped in a jungle, and just one had a machete. The machete, a tool analogous to industrial revolution in the U.K. and U.S.–enables the lucky owner to cut a path through the jungle. But when the others pick up that trail, they can run faster and catch up. The complex technologies and factories developed in the UK, Western Europe, and the U.S. can and were duplicated for production in Mexico, South Korea, and China.
The blue line of China in the chart above soars from hundreds of millions of Chinese working long hours in “duplicate” Chinese factories, but also from new firms and factories developed by Asian entrepreneurs with new technologies and innovations (which then benefit consumers in China and around the world).
The Quartz article continues:
Whether US or Asian, industries that succeed will be those that don’t pit humans against machines but use the latter’s speed and precision to let humans perform better. Asia has learned that lesson—it’s the global hub for advanced manufacturing and sophisticated logistics.
What’s more, China is now the world’s largest consumer market for smartphones and other gadgets. And regardless of East or West, shrewd businesses will always look to capitalize on the opportunities available to them. Asia holds many.
The diffusion of manufacturing and agriculture technology have helped raise hundreds of millions out of extreme poverty over the last few decades. The people of Peru in South America have more recently found the trail and are advancing rapidly, exporting goods to the U.S., China and other Asian consumers. “Peru Leads Region in Putting New Faith in Global Trade” (Wall Street Journal, February 8, 2017), notes:
In Peru, which has emerged as South America’s strongest free trade proponent, thousands of workers are planting asparagus, mangos and peppers for export as part of a diversification effort to lessen reliance on mining. China is a key consumer. …
Increased trade and foreign investments have been central to Peru’s economic growth, allowing 9 million Peruvians, about a third of the population, to escape poverty since 2004. In recent years, Peru implemented free trade accords with the U.S., China and the EU. …
“Our big bet is on Asia,” said Luis Torres, the head of exports at government agency, PromPeru. “Blueberries are going to be the next star export, along with asparagus, avocados, citrus fruits and grapes.”
Juan José Gal’Lino, the executive director of Delaware-based Agro Vision Corp., said his workers at Olmos will ship the larger blueberries to China, where he says consumers pay a 30% premium for the bigger fruit. Smaller berries will continue to be exported to North America, where consumers don’t care so much about the size.
Peru is following the successful path opened by Chile since the 1990s. Chile was among the poorest country in South America after trying protectionist and socialist policies. A few decades after reducing trade barriers and welcoming foreign investment , Chile is South America’s wealthiest country, continues to expand agricultural exports (“Chile aims to double agricultural exports in a decade,” AgPro, November 5, 2015):
Chile, the world’s top exporter of fresh grapes and blueberries, posted record exports of food, including fruit, livestock, wine and salmon, of just over $16 billion last year. That was about three times what it shipped abroad 10 years ago.
According to Fred Landis (Investigative Reporter) on Quora: Chile has fallen from “one of the most egalitarian countries in Latin America to one of the most unequal.” He argues that President John F. Kennedy promoted egalitarian reforms which Chile’s socialist government expanded, but that President Nixon the villain, directing the CIA to help overthrow the Chilean government. But economic policies matter apart from political turmoil, Though income inequality is likely far higher in Chile now than it was in 1960, average income is far higher too. For everyday people in Chile, average income per person in 1960 was just $550 per year. Yet by 2013 people in Chile enjoyed average income of $16,000 per year, according the the World Bank. Inequality can be far higher in a market economy, but even the very poor in Chile have higher incomes than people did on average in 1960.
The story so far: reducing trade barriers and welcoming foreign investment helped Chile’s economy grow rapidly, raising average per-person income from $550 a year in 1960 to $2,400 in 1990, to near $13,000 a year in 2010. Earlier posts discussed similar rapid economic growth in China after the economy was opened to private enterprise, international trade and investment
Average income per person in China rose from $70/year in 1960 to $330/year in 1990, to $940 in 2000, to $4,340 in 2010, and to $7,930 by 2015. Income inequality in China increased a some grew wealthy far faster than average. But income inequality between Chinese and U.S. workers decreased, as productivity in China’s textile mills and factories rose thanks to access to modern technologies.
In Chile, Peru, and China before market reforms, incomes of everyday people were more equal but also far, far lower.
Rapid industrialization spilled pollution across China’s cities, rivers, and skies. Market-reforms in the 1989s opened first agriculture and Special Economic Zones (SEZs) like Shenzhen to local enterprise and overseas investors. Market reforms and factories then expanded across China, bringing prosperity but also pollution from mining and manufacturing. Through the first decades of reform, pollution seems far less important than jobs when wage rates even in 1990 average income per person (GNI) was just $330 a year. By 2000 average income had nearly tripled, but was still just $940 a year, and by 2015, average income was nearly eight times higher to $7,930.
Hundreds of millions migrated from rural China to new assembly plants and textile mills. An estimated 200 million migrant workers still form the “floating population” of informal labor.
China’s astonishing economic progress has been uneven but lifted these hundreds of millions out of extreme poverty. As incomes pass $6,000 a year, empirical research shows countries invest in reducing pollution (the environmental Kuznets curve) even when it slows economic output. See, for example, “Does the Environmental Kuznets Curve for coal consumption in China exist? New evidence from spatial econometric analysis,” (Energy, Volume 114, 1 November 2016, Pages 1214–1223) From Abstract:
The estimation results verify the existence of the spatial correlations in coal consumption across provinces, and there is strong evidence for the “inverted-U” shaped EKC relationship between per capita coal consumption and the GDP per capita. Besides, the GDP per capita corresponding to the peak of coal consumption per capita is estimated to be higher when the spatial effects are fully accounted for.
Rapid industrialization in countries with weak rule-of-law institutions brings costs, including heavy pollution of the air and water. Early on, pollution was seen by most as a good thing, a sign of industrial progress, production, and rising wages and job opportunities.
In Nevil Shute’s novel, Ruined City, a shipbuilding town on the English coast, whose companies had gone bankrupt in the Great Depression, is described to be: “as clean as a sepulcher,” (a small room or monument, cut in rock or built of stone, in which a dead person is laid or buried).
The factories were closed so no more smoke and noise in the air, but also no more jobs and income. Laid-off shipbuilders and others were out of work, out of income, out of hope, and mortality rates soared (in the novel, a hospitalized financier arranges new orders to bring shipbuilding, and the city, back to life).
The 1995-1996 national high school debate topic was similar to this year’s topic:
Resolved: That the United States government should substantially change its foreign policy toward the People’s Republic of China.
Attending an economics conference in Beijing in 1995, I had time between sessions to walk city streets and shopping areas. One street with vendors in small stalls offered books, movies on VHS tape, shivering dogs, and one stall with just a pile of coal. For maybe fifteen minutes I watched shoppers filling bags with coal to cook and heat their nearby Beijing homes.
Most people of Beijing are far wealthier now and incomes higher. Average income in China is approaching $10,000 a year, but in 1995 average income was just $540. People in the cities are far wealthier, but not far from Beijing, households still burn coal to heat their homes. Increasing incomes and expanding access to inexpensive electricity is key to reducing Beijing pollution.
“Beijing’s Plan for Cleaner Heat Leaves Villagers Cold,” (WSJ, Jan. 25, 2017) reports the continued problem of burning coal for home heating in communities near Beijing:
Reducing emissions from heating would be among the most effective ways to limit winter smog besides cleaning up industry… Coal-burning by households is particularly dirty because it often happens without the emissions filtering required in power plants. …
But Ms. Gao, whose husband earns about $500 a month at an auto plant, soon noticed a downside.
“Electric heating has become our family’s biggest expense,” Ms. Gao said. She said she may seek a job to help pay the bill.
Despite electricity subsidies for residential consumers, villagers interviewed about their state-supplied heaters said their overall costs had risen substantially. Several said it costs around $300 to heat their homes for the winter, compared with about $200 with coal.
The income divergence between city and rural families is extreme across China. “Here’s What China’s Middle Classes Really Earn — and Spend,” (Bloomberg News, March 9, 2016) shows in an income chart of China’s 770 million workers, just 19% are middle-income earning $11,733 a year. Another 31% are migrant workers earning an average of just $5,858 a year, and the rest are rural people earning an average of $2,000 (plus a .2% slice of the very rich at $500,000 a year).
China’s migrant workers, the”floating population,” migrated informally (illegally) to cities for factory jobs. They earn more than they could in their rural villages, but Bloomberg reports: “food and clothing make up nearly half their personal spending” which is just $7 a day.
Anything that adds to the cost of electricity pushes poor workers living around Chinese cities to shift to burning coal in their homes for heat.
And this challenge highlights government spending and subsidies for expanding wind and solar power. Electricity from new natural gas and new cleaner coal power plants emit little air pollution (especially compared to families burning coal or wood at home). But both natural gas and new coal plants emit carbon dioxide as they generate electricity (burning natural gas emits about half as much CO2 as burning coal).
“China Aims to Spend at Least $360 Billion on Renewable Energy by 2020,” (New York Times, Jan. 5, 2017) reports on Chinese government plans for expanding wind and solar power, and also notes problems delivering power to consumers:
…Thursday’s announcement was missing any language on curtailment, or the amount of electricity generated by wind and solar that never finds its way to the country’s power grid. In China, wind power curtailment was 19 percent in the first nine months 2016, Mr. Myllyvirta said, many times higher than in the United States, where curtailment levels are often negligible.
The main reason for curtailment, he said, is that China is plagued by overcapacity in electricity generation and operators of China’s grid often favor electricity generated from coal.
A 2016 report, “China Scales Back Solar, Wind Ambitions as Renewables Cool,” (Bloomberg News, Nov. 7, 2016) noted problems connecting new wind and solar, often at distant locations, to China’s existing grid:
…lowered its solar and wind power targets for 2020, a reflection of how record installations of renewables have overwhelmed the ability of the nation’s grid to absorb the new electricity …
The rapid growth in capacity has left China struggling to integrate power supplies from renewable sources even as the government continues to promote clean energy as an alternative to more polluting fuels like coal and natural gas.
China idled 33.9 billion kilowatt-hours of wind power last year, up 69 percent from a year earlier, the NEA said in August. Idled capacity at solar farms has also begun to appear, especially in the nation’s northwest, it said.
[Update, see also “It Can Power a Small Nation. But This Wind Farm in China Is Mostly Idle,” New York Times, Jan 15, 2017)]
See also Bjorn Lomborg’s op-ed “A ‘Green Leap Forward’ in China? What a Load of Biomass,” critical of China’s spending on solar and wind energy, even as coal use expands:
It is peculiar—though unsurprising given the sensibilities of Western environmentalists—that those who celebrate China’s “Green Leap Forward” almost always focus on wind and solar technology. By far the largest source of renewable energy used in China is traditional biomass—that is, people burning charcoal, firewood and dung, as China’s poor do to stay warm. Biomass is the biggest source of killer air pollution in the world.
The Chinese government energy policy goals aim to reduce air pollution around Chinese cities, and also to reduce CO2 emissions to address climate change. These goals overlap, but are not the same. Wind farms and solar installations don’t emit air pollution, but neither does less-expensive natural gas combined-cycle power, which can be located closer to cities and customers. New coal power plants emit less air pollution, especially compared to the dense pollution from antiquated coal-fired power and home coal burning.
China’s push to lead the world in wind and solar power combined a push for promoting domestic companies making and exporting solar panels and windmills, with a strategy to appeal to environmental organizations upset that China had become far and away the largest emitter of CO2.
U.S. CO2 emissions have dropped 12% since 2005, according to the U.S. Energy Information Administration, but China’s CO2 emissions increased significantly over the same time.
Though China’s CO2 emissions are estimated to have fallen 3% in 2015, but China’s Carbon Emissions Report 2015 (Belfer Center, Harvard Kennedy Center pdf) notes:
Total carbon emissions in China already equal the emissions from the U.S. and the E.U. combined, however, the per capita emissions are still significantly lower than that of the U.S., but are approaching the average level of the E.U. countries. (p. 1)
The Belfer Center report cover and first pages have images of heavily-polluted Chinese cities, but these show air pollution not CO2 emissions. China’s business and government leaders have long feared that influential environmental organization could join with US and EU labor unions, and protectionist manufacturers associations to enact new tariffs on Chinese exports, including carbon taxes (taxes on CO2 emissions), which would hit Chinese manufactured goods hardest.
Now the new Administration and Republican-controlled Congress are dialing back on CO2 emissions concerns and regulations and at the same time threatening new tariffs on Chinese goods. So China’s strategy of major spending on wind and solar power to address CO2 emissions loses traction as a strategy to persuade environmental groups not to join US and EU protectionists.
China may shift focus to expanding less-expensive electric natural gas power sources to deliver lower-cost electricity to the many still-poor households surrounding China’s cities and factories.
In April, 2016 China’s government launched a new effort to restrict and control its society. “Clampdown in China Restricts 7,000 Foreign Organizations,” (New York Times, April 28, 2016) begins:
China took a major step on Thursday in President Xi Jinping’s drive to impose greater control and limit Western influences on Chinese society, as it passed a new law restricting the work of foreign organizations and their local partners, mainly through police supervision.
The 7,000 foreign NGOs have until the end of the year to take steps required by the new law, but these steps were unclear until this week.
“China Unveils List of Activities Permitted for Foreign Nonprofits, ” (Wall Street Journal, December 21, 2016) reports the latest developments:
BEIJING—After months of uncertainty for foreign nonprofits, China released a list of activities the groups will be allowed to pursue under a controversial new law, with a surprising number of activities falling in potentially sensitive areas such as legal services.
Civil society institution are central to US/China engagement, and include international debate societies, educational associations, and thousands of international environmental, business, religious, and cultural associations.
These non-government organizations (NGOs), along with tens of thousands of international businesses operating in China, build personal and cultural connections between people and societies that are fully or partially independent of governments.
Rotary Clubs meet weekly in communities around the world, including China. Rotary China explains:
Rotary is a global movement of business and community leaders from different walks of life – who come together to have fun, network and do good in our communities. …
Rotary encourages like-minded business and community leaders to share ideas, about how to build our clubs and expand our service project impact.
Rotary has just 15 chartered clubs in China. Yet there are over 100 Rotary Clubs in Washington State and 15 clubs in or within 100 miles of Bucharest, Romania.
Another business and community service organization, the Lions Club, has a long history in China, and by 2015 “there were 26,000 members in 758 clubs.”
Lions Clubs of China were shut down by the communist government in 1949, but returned in 2002, leading with a signature international program to restore eyesight, SightFirst.
SightFirst is working with its partners in China to increase low-vision services, including pilot centers in Liaoning and Guangdong provinces, to assess if blinding trachoma is a public health problem in China. SightFirst in China is also working to develop a regional training program model in Liaoning Province that better links eye care services in urban areas to those in rural areas.
With these spectacular results, the formation of new Lions clubs in China was not long in coming. In 2002, with the full support and endorsement of the Chinese government, Lions Clubs International issued charters to new clubs in Guangdong and Shenzhen with about 60 members each. Lions have grown rapidly in China. By 2015, there were 26,000 members in 758 clubs, ranking China among Lions’ fastest growing regions worldwide.
Kiwanis International, the third major business service organization, similarly leads an international health initiative:
Ganzu, China: For the past 10 years, salt manufacturers and health workers such as Dr. Ray Yip have worked together to solve the problem of iodine deficiency in China. Thanks to support from UNICEF and Kiwanis International, 95 percent of the population has access to iodized salt.
Kiwanis International also runs a Key Clubs program for high school students:
Key Club is the oldest and largest service program for high school students. What makes Key Club so successful is the fact that it is a student-led organization
We’re excited to announce a new Key Club nation: China! This takes our “international status” to a whopping 33 countries!The first chartered Key Club in China, which is located in Nanjing, already has more than 90 members!
So far, the club has organized several activities, such as charity fundraisers and performances, and tutors English to children from low-income families.
Apart from service clubs are educational organizations, like China high school debate supporter Sunrise International Education, whose goals are:
Sunrise is a social enterprise dedicated to reforming global education, in middle schools, high schools and universities, through experiential learning. Founded by two American education entrepreneurs in 2011, Sunrise pioneered an innovative model of student engagement, cultivating grassroots student communities and creating a bridge between them and institutions worldwide.
The National High School Debate League of China (NHSDLC) is a Sunrise program offering experiential learning:
The NHSDLC is a project of Sunrise International Education, a social enterprise dedicated to promoting American style extra-curricular education and cross cultural exchange in China and East Asia. Sunrise International Education also organizes the Association for Global Debate, the China Youth Business League, Yale Model UN China and InterPLAY China. [More links at website.]
The National High School Debate League of China (NHSDLC), for example lists its civil society activities:
We organise over 75 tournaments a year in cities all over China with 10,000 students competing. Our regionals vary in size from around one hundred students in smaller cities to more than 300 in the largest cities. The best students from each city qualify to compete at our yearly National Championship in Beijing; this year’s Championship had over 400 students participating, making it the largest ever in China
So… here is hoping that high school debate societies continue to flourish in China, along hundreds of other international education, and business service clubs, and associations.
The Nov/Dec, 2016 Lincoln-Douglas Debate topic is controversial: “Resolved: The United States ought to limit qualified immunity for police officers.”
Lincoln-Douglas debaters should read widely on the police/citizen clashes over the last year, and consider values including, of course, justice and safety.
Police working in high-crime neighborhoods are under pressure and deal with many difficult situations. But life can be difficult and tense too for the people who live day-to-day in high-crime neighborhoods.
But just as most property crime and violence in high-crime neighborhoods is caused by a small minority of young men, most incidents of police misbehavior is caused by a small minority. (Link to 2015 Brooking Institution post.)
Shikha Dalmia in “How police unions actually hurt police officers,” (The Week, July 18, 2016) argues these “bad apples” are protected by union procedures designed for other purposes. Part of the challenge, Dalmia writes is lack of reported data on police/citizen incidents:
The Crime Control Act of 1994 asked the FBI to annually compile and publish data about the use of police force in all instances so that the country could keep track of trends of police violence, identify problematic precincts, or catch enforcement bias. But union representatives of law enforcement agencies successfully lobbied the feds to make reporting optional. So most departments now simply plead poverty and refuse to comply.
This is a huge problem. In the absence of good data, it is impossible to say definitively if racism is driving police abuse in black communities. And because it is impossible to identify the size and scope of this problem, it is impossible to craft and enact a solution to it — a solution, mind you, that would not only better serve and protect minority communities, but also keep police safer, too.
This is but one example of police unions going to eye-popping lengths to protect rogue cops at the expense of citizens (and the many decent cops who are tainted as well). Consider the binding arbitration that has become a standard feature of virtually all police contracts, which are often negotiated in secrecy. Binding arbitration allows cops to appeal any disciplinary action taken by their superiors to outside arbitrators such as retired judges. In theory, these folks are supposed to be neutral third parties. In reality, they are usually in the pockets of unions and dismiss or roll back a striking two-thirds of all actions, even against cops with a history of abuse and excessive violence. The upshot is that police chiefs are powerless to clean house, even as community complaints pile up. This is exactly what was happening in Baltimore when Freddie Gray died during his ride to the police station last year.
Students are encouraged to read the article for more on Dalmia’s argument on the role police unions play in protecting the minority of police involved in violent or aggressive incidents with the public that appear unjustified after review.
For more, see Conor Friedersdorf, “How Police Unions and Arbitrators Keep Abusive Cops on the Street,” in The Atlantic (December 2, 2014)
Police institutional procedures like binding arbitration clauses and procedures in union contracts should allow fair evaluation of complaints about violent incidents between police officers and the public.
And more directly on the LD topic, Evan Bernick, Assistant Director of the Center for Judicial Engagement at the Institute for Justice, has this May 6, 2015 article in The Freeman, “To Hold Police Accountable, Don’t Give Them Immunity,” drawn from his April, 2015 remarks to the US Commission on Civil Rights.
Critics of these reform proposal and the focus on police misconduct point to dramatically increasing violence in many inner-cities, and police pull back. (Murder Rates Rising Sharply in Many U.S. Cities (New York Times, August 31, 2015.) Murders have increased through 2016 in Chicago and other cities.
Economist Thomas Sowell draws from The War on Cops for his National Review article: “The Race War No One Can Win” (National Review, July 13, 2016)
Reason magazine’s critical review of the book: “There Is No War on Cops: A new book from a prominent right-wing commentator fails to make the case.”
And New York Times review article of “The Problem With Modern Policing, as Seen From the Right and From the Left” (June 27, 2016).
Chinese firms marketing goods and services in the United States focus on customers and the cities they live in, rather than Congress, the President, or the Department of Commerce.
Both Americans and foreign businesses benefit from known and predictable legal institutions protecting property rights and contracts. Both the Chinese and U.S. central governments disrupt and distort trade relations between U.S. and Chinese firms and consumers.
U.S. firms investing in and marketing goods and services in China work with provincial and cities leaders and with local businesses. If local government officials have a reputation for corruption or incompetence, international businesses invest instead in other regions with better governance.
Similarly, economic growth is strongest in those U.S. cities and states with less corrupt and heavy-handed government.
Though many politicians and pundits blame China for America’s slow recovery since the 2008-2009 “Great Recession,” Texas and other states with lower taxes and lighter regulation have flourished. It is the high-tax states where the recovery has been unusually slow.
Texas, Florida, and other states across the south have seen steady economic growth, seemingly unhampered by imports from China. (This April 29, 2015 Brookings Institution article and paper looks at recent research on the influence of tax policy and state-level economic growth.)
In “The Texas Miracle Isn’t All About Oil” (The Federalist, June 9, 2016), Vance Ginn writes:
Since the last national recession started in December 2007, Texas has created 36 percent of all civilian jobs added nationwide in a state with less than 10 percent of the country’s population.
Just as Dallas/Ft. Worth, Houston, Austin, and San Antonio lead the robust Texas economy (see “Fastest growing U.S. cities: Texas is king“), so in China it is dynamic major cities, not the central government, that are engaging the world economy.
In “China’s Key Cities: From Local Places to Global Players” (December 1, 2015), Xiangming Chen notes Shanghai (population estimate: 24 million!) is “the country’s financial and trade centre, largest port… and gateway to China’s huge domestic market.” Xiangming continues:
Besides Shanghai, a variety of other cities have become more important for China, and the world economy, for that matter. A number of these cities are well known for their significant historic and contemporary economic and cultural roles such as Guangzhou and Xi’an. Other cities have risen from unknown origins to prominent economic centres like Shenzhen.
In “Globalization Goes National,” (BloombergView, September 15, 2016) economist Tyler Cowen writes:
The Chinese economy has had a tendency to cluster around megacities, such as the Beijing-Tianjen-Hebei, Shanghai-Nanjing, or Guangzhou/Shenzhen/Hong Kong clusters. In the past, a Chinese port might have had better trade connections to Korea or California than to many parts of the Chinese interior. But these days the story in China is the rise and extension of national brands. The internet is bringing the whole country’s economy together through Alibaba, WeChat, and other services that ease the online purchase, shipping, and advertising of goods at the national level.
Cowen argues that as Chinese brands improve, Chinese consumers purchase more locally and this may register as a decrease in globalization:
The more economically integrated China becomes, the more it may retreat from some kinds of global trade. If a Chinese customer can buy a smartphone or pharmaceutical from the domestic market, she may stop looking for foreign imports. That will register statistically as a decline in globalization, but actually it is an increase in efficient economic integration. Some parts of the Chinese economy were prematurely hyper-globalized at the same time domestic economic integration lagged, and now that state of affairs is being remedied.
As people in China continue to prosper, demand for name-brand U.S. goods and services will also continue to grow. Americans might not think of McDonald’s or Pizza Hut as high-end dining, for hundreds of millions of Chinese just joining middle income levels, these American restaurants will long be popular.
By 2022, our research suggests, more than 75 percent of China’s urban consumers will earn 60,000 to 229,000 renminbi ($9,000 to $34,000) a year.
In purchasing-power-parity terms, that range is between the average income of Brazil and Italy. Just 4 percent of urban Chinese households were within it in 2000—but 68 percent were in 2012.
China’s middle class is already bigger than the U.S. middle class (“China has a bigger middle class than America,” (CNN Money, October 14, 2015)
Still, China has a long way to go, and is still both a developed and developing economy. “Here’s What China’s Middle Classes Really Earn — and Spend,” (Bloomberg, March 9, 2016), reports:
China’s average annual wage was 56,360 yuan ($8,655) in 2014, and Goldman Sachs estimates that 387 million rural workers — half the working population — earn about $2,000 a year.
The average Chinese consumer spends $7 a day, according to Goldman Sachs. Food and clothing make up nearly half of all personal spending, with 9.2 percent allocated to recreational activities like travel, dining out, sports and video games. The average American spends $97 a day, 17.3 percent of it on recreation.
Though U.S. politicians often blame Chinese firms for U.S. job losses and income stagnation, and paint China as an opponent of the U.S., Chinese consumers with fast-growing disposable income mean surging sales of international goods and services.
New trade barriers on Chinese goods would not only disrupt global supply chains key to U.S. manufacturing, but would also disrupt demand of U.S. goods and services in China.