China’s economic problems have been front page news in the world of business recently. The stock market plunge there has been largely responsible for the sudden dip in equities globally. For years, economic troubles and China didn’t belong in the same sentence. American mayors and politicians who traveled to the Communist superpower would come back complaining about the slow pace of getting things done in the United States. The future of global economic growth was assumed to have permanently moved eastward, and America was perceived to have fallen behind.
China’s growth story has no historical comparison, as its rise to the top has been quicker than any other country in human history. China has been growing a lot faster than mature developed economies for the past thirty years, and it is now the largest economy in the world by some measures. Development has been insanely fast in China–so insane that sometimes it is hard to digest figures about the country’s economic transformation.
For instance, China used more cement between 2011 and 2013 than the United States did during the entire 20th Century. The old saying goes that Rome wasn’t built in a day, but in the far east it seems Beijing, Shanghai and Guangzhou have all come about in blink of an eye. Evidently, the Chinese demonstrated that you can become the world’s largest economy in just a few decades. But underneath the breathtaking speed of development is another story, one of the high cost of economic growth trumping all other concerns.
The sustainability of China’s breakneck growth is now facing significant doubt. Recently, China’s growth has slowed down. How much it has slowed down is a big question for many economists, as some speculate that economic growth numbers may be heavily doctored. We do know that the economy has slowed down enough to help depress the price of internationally traded commodities like oil and copper.
Just like China’s statistics, no one is really sure how serious the country’s problems are. The eastern giant’s economy is much more authoritarian than other modern economies. When there are crashes, the government has the power to introduce measures that soften the blow. For instance, when stocks start to decline, they restrict mass selling through various channels. This behavior is replicated in nearly every sector. What China does in response to its economic panics is a massive experiment, as crash-free economic growth is being pioneered in China. This is unfortunate because economic corrections can often be healthy, and gradual growth is much more sustainable than overnight booms.
Runaway growth has produced a number of serious problems that threaten future growth. One of the most obvious problems that is easy to identify in modern China is pollution. Pollution of all types has become very serious, because the economy has grown far too fast for regulators to keep up with expanding industry. Smog has been so bad in Beijing during the winter that it was called “crazy bad” by American Embassy officials in 2010. Our government’s chart to categorize particulate matter pollution couldn’t accommodate the off-the-chart readings. And it’s not just the air, pictures of grotesque pollution can easily be found all over the internet. It’s been estimated that 60% of groundwater in China isn’t fit for human consumption. Future economic growth is being compromised as the environment suffers for short-term gain.
Pollution is just the tip of the iceberg. China has a great deal of systemic problems that need to be addressed. As a mature country and a global superpower, China faces a fork in the road. Its current economic growth model is unsustainable and will need to be retooled. The success of the last three decades is not guaranteed, and the Chinese elite agrees. A survey taken in 2014 claims that half of wealthy Chinese would like to emigrate to other countries, which is a pretty grim assessment of the future by any means. Hopefully, China will reform and continue to help power global economic growth. A sustainable China will be better for the entire world, including its most important economic partner, the United States.
David is the Editor of Bold. He's especially passionate about millennial economic empowerment. A former local news reporter, David is originally from the Little Havana area in Miami, and later became a pioneer resident of the Disney-inspired town of Celebration, Florida. David holds a Master’s in Public Policy from the Harvard Kennedy School.