China Boom CMS

<p>There is a social theorist named Giovanni Arrighi, he is teaching at Johns Hopkins. He has a book that was recently published; the title is very interesting, it is &ldquo;Adam Smith in Beijing.&rdquo; And he says Western Europe benefited from China and India in the past, benefited from the world system centered in Asia in the last millennium. But, now, the current world system is built and protected by America that China is part of this system. China benefits from this system. I think he&rsquo;s very right, he&rsquo;s a true thinker on that. He realizes, not a single country can escape from globalization, it&rsquo;s a fact you have to take. Now of course, it&rsquo;s upon yourself [to decide] how to utilize the chances and opportunities that presented by globalization, and China, somehow, has taken full advantage of this round of globalization. So, my opinion is that China benefits from the current world system, and the US and China, the world, is in the same boat. I do not like the idea of delinking China from the world system. Of course, there&rsquo;s a strong voice in China trying to say that China should delink from the world system. I think that&rsquo;s a very short-sighted view.</p>

<p>What happened after 2001, and the big surprise, if I may so, is that the world economic growth was based on this extraordinary symbiotic relationship between China and the United States. The US was able to sustain high growth, with the exception of the post-September 11 recession, which was short and shallow recession. But, it was highly leveraged growth, and now, with the hindsight, we can say that this growth was fueled by very, very lax monetary policy, low interest rates, an almost irresponsible abundance of credit, a lot of debt, a highly leveraged economy, and cheap consumer goods provided by China, together with the financing for these imports of Made-in-China goods. So, China began accumulating huge trade surpluses, with the US even more than with the European Union. The trade surpluses became important with the European Union only later on, but with the US, almost immediately. At the same time, these surpluses were recycled through the reinvestment of currency reserves into US dollar-denominated securities, mainly Treasury bonds. So, this was rather extraordinary. You don&rsquo;t find in world economic history a precedent of the most advanced and richest economy running a structural deficit and becoming a structural net importer of capital from an emerging country. This is a very, very strange situation. Britain, at the apex of its empire, was a net exporter of capital. Britain was a net investor in the rest of the world. So, it is a very, very exceptional situation, and this was certainly one of the recipes of the boom.</p>

<p>I could read Marshall Chen Yi's emotions. &quot;You guys come to China, you may invade China. The Soviets from the north, India from the west and America and Chiang Kai-shek from the south. We are ready. My hair is going grey. I am waiting for that moment.&quot; That kind of statement was indicative of the state of mind of the Chinese leadership. In 1978, in China, we had such an important meeting, the Third Plenum. We decided to focus on the economy, on the modernization. That was a big change, a strategic turning point. In a way, Deng Xiaoping understood that the world had changed.</p>