The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power, and Your Job [Paperback]

He is clear about the parallel: "China's rise has more in common with the rise of the United States a century earlier than with the progress of its modern-day predecessors and followers." (Read: Japan and the Asian "tigers": South Korea, Singapore, Taiwan, and Hong Kong.) (p. 1) He adds, "If current trends continue, China will surpass the US to become the world's largest economy (in purchasing-power parity terms) in two decades--possibly sooner." (p. 161)

However, as for China dominating the world in the 21st century the way the US has in the 20th--well, I think we can say the crystal ball remains cloudy, maybe even downright muddy. Consider that prior to the assent of Deng Xiaoping as the Chinese leader, China was floundering under the weight of a Soviet-style economy, and had gone through the disastrous "Great Leap Forward" and the horrific "Cultural Revolution." When Deng Xiaoping goes the way of all leaders, what makes anyone think that his replacement will be any better than a host of Soviet leaders or equal even to Mao Zedong, whose political and military genius did not preclude his having a disastrous effect on China similar to that of Stalin on Russia?

Deng had the genius to free the Chinese economy from the shackles of communism in his famous "one country, two systems" vision. Whether such a hybrid vision can long endure is a very good question, and whether Deng's successors will continue his policies is also problematic. My guess is they will be so focused on gaining and maintaining power that they will allow the country to regress economically. Furthermore, should China somehow throw off the communist mantle entirely, who is to say it will not--as Russia has done--revert to a corrupt, bandit sort of economy?

What this book is mainly about is the way China does business today and how that affects the global marketplace, and in particular what it is doing to the US economy. Some interesting points:

"...between 10 and 30 percent of China's GDP comes from piracy and counterfeiting." (p.86) The question is, how does the rest of the world meet this challenge?

"A key reason behind the remarkably fast penetration of Chinese products into the US market is a retail landscape increasingly dominated by large retailers." (p. 149) The largest of these is Wal-Mart "which accounts for more than 10 percent of the US imports from China." (p. 150) Shenkar notes that the Chinese "need...large retailers to take their growing production capacity... Thus, the fates of Wal-Mart and the Chinese industry will remain closely intertwined for years to come." (p. 151)

Right now China leads the world in the manufacturing of toys. It is now or soon will be the number one manufacturer of furniture, and as Shenkar points out, not just low-end furniture, but top-end as well. Shenkar speculates, "Given the general overcapacity in industry and the technological edge of the newer China plants, it is difficult to see how automotive manufacturing in the developed markets such as the United States and Europe will not be affected." (p. 114) Furthermore, most TVs made today are made in China, and that includes plasma and high definition models. The reason for this real "great leap forward" in manufacturing is first the leadership of Deng Xiaoping and incentives from the Chinese government, and second the vast amount of cheap Chinese labor.

But Japan once made the cheapest goods in the world, and then made (as China is now doing) better and better products, and still sold them for less. However, today, the Japanese economy is stagnate and the reasons are mostly cultural. From the evidence that Shenkar presents, I think it is easy to guess that China's economy will eventually stagnate as well, and also for cultural and political reasons.

There is much to chew on and think about in this book, but what I found myself wondering about was the future of the US as a service economy. Obviously, even if China relinquishes some of its dominance in manufacturing, it won't be the US with its expensive labor that will take up the slack. What the US is doing, as Shenkar notes, is becoming more and more dependent on services, especially in technology and education, to maintain its economic supremacy. He warns that "we have no precedent of a major economy that is predominantly dependent on services," noting that successful service economies tend to be small, e.g., "Luxembourg, Hong Kong, and Hawaii." (p. 164)

What I thought about when reading this is that the US can work as a service economy if it continues to (1) have the best universities in the world; (2) be a great tourist destination (with relatively clean air and water); and (3) be a great place to live (freedom and security can make for some very lofty real estate values!).

One thing that Shenkar does not address (although he mentions it in passing) is the horrendous pollution problem that the Chinese already face. Their great cities are looking more and more like London during the Industrial Revolution. What will be the health cost to China in the long run? And will the Chinese people continue to be so productive or will they leave the polluted cities, or worse, revolt?