In a post titled China, Inc., Mr. Croft makes a pretty compelling argument that, due to lack of discipline in the west, China will soon own the U.S.  Mr. Croft concludes by joking, “Welcome to North America, sir, a wholly owned subsidiary of China, Incorporated. We hope you enjoy your stay.”

While one should never underestimate one’s opponents, I can’t help but remember when I heard the same things about Japan.  25 years ago, my company required us to take Japanese culture & language lessons.  The Japanese were buying various assets like Pebble Beach & Rockefeller Center.  There were apocryphal stories about Japanese arriving in Honolulu, jumping into limos and driving around pointing at property they were going to buy.  None of these investments worked out all that well, if I recall.

The points that I’d like to make are:  First, that we always seem to extrapolate growth in developing economies way too optimistically, until the bubble pops.  Second, we also seem to be worried that some other culture that doesn’t have the same weaknesses that we have is going to do us one better.

To the first point, and I say this recognizing full well that my professional career relies on a rapidly growing economy in China, we cannot forget that China faces extreme internal and external challenges.  Any one of these issues, or dozens of others, could really let the air out of the balloon:

• The pollution is almost overwhelming.  They’re killing their country and their people.
• The gap between the rich coastal areas and the poor inland areas is extreme.  They’re creating the sorts of inequities that lead to unhappy outcomes.
• Natural resources, especially clean water and clean energy sources are in very short supply.  I really worry about the water issues, and have even considered some of the business opportunities that are being created to solve the problems.
• There is massive unemployment / underemployment in many regions and economic segments.
• The one child policy could create a situation where an aging population is dependent on a too limited younger generation.

Personally, I think that the nation is doing a stunning job of clawing its way into the 21st century, while still keeping these problems in check.  However, before I worry about China dominating the world, I’ll want to understand how they’re going to keep things together domestically.

To the second point, I just flat don’t believe that “China, Inc.” understands the totality of the U.S. economy and culture any more than I believe an American who has been to China a couple times and tells me that he really understands China.  This is usually followed by a discourse on how he is going to teach them to do…whatever… at this point, I’m not paying attention I’m looking for an escape route.

Let’s relax about the doom and gloom and focus instead on how we compete in the global economy.

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