Why China Is Winning The Economic War

During what was called the “cold war” that ended with the fall of the Communist Totalitarian Regimes in Eastern Europe, one of the major fears was a military conflict between Russia or China and the U.S. It did not happen. The potential of a military conflict has instead evolved into an economic war.

The U.S. was winning hands down for a long time. It used to be that the U.S. was number one in almost every category: education, technology, standard of living, economic and military strength; and as a moral and ethical leader of the world. It was leading the rest of the world into the future with the demonstrative power of democracy and free markets, for example, new technological breakthroughs in many fields: automation, computers, communications, energy, medicine and space travel, amongst others.

In recent years, a number of countries have surpassed the U.S. in specific areas, including consumer incomes, standard of living, and health care. The true economic powerhouse, however, has been China. Some of the statistics, and the speed with which they have changed, have been startling. Over the last ten years Chinas economy has surged past those of Canada, Spain, Brazil, Italy, France, and Germany, and is expected to pass Japan this year, to become the second largest economy in the world, behind the U.S.

Whether it is categories of manufacturing efficiency, high-speed rail-line technology, nuclear power plant construction, clean air energy technology or education, China is making impressive global inroads, even in areas where the U.S. still has significant dominance. Much of it has to do with Chinas massive population, about which the U.S. can do nothing.

For instance, while U.S. Internet companies dominate global headlines, China now has the worlds largest Internet market as measured by the number of users. Yet Internet use has only penetrated 22 percent of the population versus 75 percent in the U.S. Meanwhile, U.S. Internet giants like Google, Yahoo, eBay, Amazon and FaceBook are experiencing problems trying to transport their dominance into the Chinese market. Part of this are obstacles placed in their way by Chinas government, in support of Chinas state-controlled corporations. The result is Chinese Internet companies like Tencent, and Baidu, cannot help but become world leaders.

Here is a statistic of more importance: U.S. universities should graduate about 150,000 engineering students this year, while Chinese universities will likely graduate more than 500,000. Now that may be an unfair comparison since Chinas population is larger by approximately the same ratio. But that is not the issue. The issue is the degree to which China has moved higher education to the top of its priorities, and the fact that 500,000 new engineers a year will probably come up with more high-tech innovations than 150,000 can. Chinas great leap forward has been going through the same phases that the United States experienced in the turn of the last century as it worked toward becoming the worlds dominant economy.

In the midst of all this, it may be that China is starting to eat Americas lunch, never taking its eyes off the goal; while we squabble among ourselves, paying no attention. Thats unfortunate. As Sam Houston said in the U.S. Senate in 1850, “A nation divided against itself cannot stand.” Yet, for the last 15 years the U.S. has divided itself in increasingly bitter time and energy-consuming political arguments: the morals of President Clinton, whether or not war should be waged to remove Saddam Hussein from power in Iraq, whether the country’s current problems are due to the depth of the economic hole dug during the last administration, or ineptness of the current administration in pulling the economy out of the hole.

Meanwhile, China has instead kept its eye on the goal. It not only is making great economic strides, but on the financial side has become the worlds largest creditor nation, even as the U.S. has become the worlds largest debtor nation, with China holding much of its debt. The U.S. needs to interrupt its angry divisiveness and name-calling long enough to recognize the importance of what is going on. Unfortunately, historically speaking; this does not seem to be happening soon.

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