What Is Happening to China?
Since the end of WWII, China has taken a path very different than the other countries. Once a US ally against the Japanese, they are now an adversary/competitor to the US and its allies. Many originally thought that China would naturally turn into a free democracy like the US However, that has not happened, even with the Chinese economy opening up. Today China has a unique blend of Communist Party rule and state capitalism. Although the state monitors and often controls business, it is much closer to capitalism now than it ever was before.
Yet, even with a free market component, China is not similar to the US, Europe and other democracies with elected leaders. Because of a single party government, China can get away with doing things that would never be allowed in the EU or US. The leader of China, Xi Jinping, carries out actions daily that would result in the impeachment of a US president. Under Mr. Xi, Beijing has carried out genocide against China’s Uyghur minority, threatened Taiwan with invasion, shut down a pro-democracy newspaper in Hong Kong, covered up the origins of Covid-19, and so on. Even so, China’s economy continues to boom—it grew more than 18% in the first quarter from a year earlier.
Many economists and political analysts have said that a free economy could not exist without political freedom. Although this is the general rule for almost all countries of the world, China is doing the exact opposite. While China has the second largest GDP in terms of size, it does abysmally with GDP per capita, or the average wealth per person in China. The real key for Chinese economic success is not the Communist government but the fact that the population has more than 1.4 billion people. They have over a billion more people than the US does, yet not a larger GDP. The US dominates with technology markets and automation has removed the need for the US to have a billion people to run the economy. As technology continues to dominate all aspects of life, China’s population will inevitably become more of a liability than an asset.
But for now, the huge population is strictly an asset. When the Chinese slap tariffs on countries like Australia, it can devastate the economy of the smaller nation. Especially given that Australia is an export-led country, that depends on access to Chinese markets. The United States faces a similar dilemma but with a different type of export. Hollywood dominates world entertainment in a way never before seen. Yet, Hollywood stars are constantly apologizing to Beijing when they say something that offends the Communist Party. For example, John Cena who is a professional wrestler and movie star, apologized to China because he had previously said Taiwan was a “country”. For stars that are already super rich, it is puzzling why they are so afraid of Beijing cancelling their movies that are sold in nearly every other country in the world.
President Biden definitely should not follow the cowardice of these Hollywood stars. Joe Biden has said many times that he wants to beat China and overtake them economically. His best course of action is to improve the US private sector which has beaten state-managed economies throughout history. Only through the free markets will the US beat China.