I agree with basically everything you said. I think the PRC is really going out of its way to bend backwards for the Taiwanese people by giving Taiwan such a long leash on political autonomy - by implicitly agreeing to attack Taiwan only if Taiwan formally declares independence. Some people just can’t see a good thing even when it is shoved right under their nose!
Monday, 13 October 2008
. . . Allen from over at Fool's Mountain:
Posted by Gilman Grundy at 12:16
Sunday, 5 October 2008
Posted this as a comment over at CLB as a reply to gloomy predictions of a 20-30 year slump in the China market from China Vortex's Paul Denlinger, but I thought I'd put it up here as well just so I can look at it a few years down the line and see how much of it is true:
The best way of seeing the effect of a recession in the US/EU on Chinese growth is to look at the effect that previous Euro-American recessions have had on boom economies like Taiwan, South Korea, and Japan. A review of the period 1971-1991 (that is, covering both the world energy crisis, the recession of the early eighties, and the crash of '87) shows two years in which real per capita GDP declined in western Europe (1974-75, 1980-81), with the US, Canada, Australia and New Zealand also suffering two periods of decline (1973-75 and 1980-83). In the same period, the Taiwan suffered only one decline (1973-75), South Korean per capita GDP also only saw decline in 1980-81, Japan declined only in 1973-74. What does all this show us? Mainly that while export-led growth economies are sensitive to world economic crises like the oil shortage, they aren't very sensitive to financial crises in the west. In the period 1987-91 Western European per capita GDP grew by only 4.3%, and US GDP grew by only 4.7%, but in the same period Taiwanese per capita GDP grew by 16.2%, Japan by 19% and South Korea by a whopping 36%.
Paul Denlinger's analysis seems to presume that the Chinese economy is especially sensitive to a US slowdown, but I'm not exactly sure why he should think this. The US is actually a smaller market for Chinese exports than the EU, and tighter money is likely to increase sales of cheaply manufactured goods - at least relative to more expensive high-quality goods. China also has big pockets with which the government can make up for any economic slowdown through public spending on infrastructure etc. The only thing that could damage the Chinese economy is greater protectionism in the west (say, a re-play of the 1930 Smoot-Hawley tariffs), however the WTO and other trade agreements stand in the way of this.
Put simply, China's exports to the west would continue to increase even if western economies stood still for the next ten years, because these exports are driven mainly by western consumers switching from more expensive sources to cheaper Chinese ones.
Finally, if back in 1978 we had all sat around and tried to suss out how the world economy would be doing in the distant year of 2008, we would surely have gotten a lot of things dead wrong - 30 year predictions aren't worth much.
Posted by Gilman Grundy at 00:13