China's Economy Booming while US Stagnates

Well the doomsayers and naysayers regarding China's ability to withstand the economic downturn have been proved wrong again. The latest stats show that China's measured response to changing economic realities has been a resounding success. This once again proves that China's pragmatic approach to socialist economic development is a net plus for its citizens. The AP reports as follows:

An index of China's manufacturing rose in December, expanding at its fastest rate in 20 months amid heavy government economic stimulus, an industry group reported Friday.

The state-sanctioned China Federation of Logistics and Purchasing said its monthly purchasing managers index, or PMI, rose to 56.6 on a 100-point scale, compared with 55.2 in November. Numbers above 50 show manufacturing activity expanding. It was the biggest month-to-month expansion since last March, when the PMI rose to 52.4 from 49 in the previous month.

The rising index "shows the situation of China's economy is stable and the recovery has been further consolidated," a government economist, Zhang Liqun, said in a statement issued by the federation.

China is attempting to shift its manufacturing from an export-oriented strategy to one that emphasizes increased domestic consumption. This has the potential to make China the new economic engine of the world not only in manufacturing goods and supplying services but also in consumption, The US consumer has been the economic engine of the world economy for 50 years, soon to be replaced by the burgeoning middle class Chinese consumer. The hundreds of millions of Chinese who still live in relative rural poverty will be a boon to the Chinese economy as their incomes and expectations rise. They are the new consumers that will serve as a reserve for Chinese economic expansion for decades to come.

The AP story goes on :

Beijing's 4 trillion yuan ($586 billion) stimulus program has helped boost growth by pumping money into the economy through spending on public works projects. Economic growth rose to 8.9 percent from a year earlier in the quarter ending in September and the World Bank is forecasting 8.4 percent growth for all of 2009. Premier Wen Jiabao, the country's top economic official, told the government's Xinhua News Agency on Sunday that Beijing will continue its relaxed monetary policies in 2010 rather than drastically withdraw its stimulus.

Jing Ulrich, head of China equities at J.P. Morgan, said in a report that "we expect China's strong economic growth momentum to continue in 2010, with the major source of growth coming from a broad-based improvement in private consumption, and further strengthening in private housing investment, and a solid recovery in exports."
China's PMI index hit 59.2 in April 2008.

Economists see the PMI as a better measure of future economic activity than gross domestic product because it contains forward-looking information such as new orders. The Chinese federation's survey is based on responses from managers who oversee purchasing for some 700 Chinese companies.

So its clear that the Chinese economy is booming, wages are higher and living standards are rising. They are good socialists using capitalist economic tactics to integrate into the world market. The Soviet Union failed because they tried to go it alone and produce an alternative world market (the Soviet Bloc). Their strategy was ahistorical and doomed to failure. A socialist economy afloat in a capitalist sea must accommodate to economic reality and engage in world trade to succeed, so why not use capitalistic techniques in competing with your capitalist rivals while building your internal economy along socialist lines. Of course capitalist economic levers also need to be employed domestically for the length of the transition period to developed socialism all within the context of socialist economic development. The Chinese are employing a pragmatic versus ideological approach to Marxism.

China is, however, not immune to the ills of capitalist economic development. If you decide to use capitalist economic techniques and levers to spur socialist construction (a la the NEP and Bukharinism in the Soviet Union) you have to accept the downside as well. The Chinese have had many such bubbles and know how to deal with them by manipulating the banking system, interest rates and lending. They are not naive when it comes to regulating real estate booms and busts. There is a degree of over construction as is to be expected. But over the last decade China has built and continues to build a super highway system like our interstate highways, they are expanding their high speed rail network and doing many other capital improvements. There is plenty of work to be done in China for decades to come to raise living standards, improve environmental protections, etc., etc., etc. starting in the big coastal urban ares, spreading inward to the big industrial centers like Wuhan and then permeating into small and medium sized cities and rural communities

So all you China bashers - don’t cry your alligator tears. Just because China is doing what’s right for its continued economic and social development and we’re not doesn’t give us cause to criticize. It should give us pause to reflect on our own shortcomings.