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The use of GDP as a measure of economic growth must be qualified because its performance is subject to the law of big numbers. If the base population was underdeveloped in the beginning, its growth would have been naturally very fast. But over time, the growth rate would naturally subside due to reducing incremental returns - unless new engines of growth are found or developed necessary to bypass the middle income trap. For a country as big and populous as China, economic strategies to become a moderately prosperous nation must necessarily develop further her middle income groups while lifting up her many peoples who are still poor, a number which is bigger than the total population of North America, for instance. |
The west has been printing their money more to play their stock markets in an attempt to bolster confidence in their economies without addressing fundamental challenges needed to be overcome in order to spur real growth. Challenges such as right training to keep manpower skills relevant to market trends, optimized investments to modernize steel, concrete, transport and fibre infrastructures, and continuous innovation that can be mass-commercialized at affordable prices for populations already having to pick up their mess left from their last financial crisis caused by a disproportionate focus on trying to take shortcuts to more wealth by financial plays than real hard inspired work.
China, on the other hand, and similarly with other countries which have experienced the devastating collateral effects from the excesses of the west, have been working hard to overcome those challenges and keeping the eye focused on what really needs to be done for their peoples, industries and economies, even as the more advanced countries flail and flounder in their increasingly wild attempts to put her down by misfitting, misguided and misfiring deeds and words. In short, they are trying to bring her down to their level....
.....So, with that pinned up as the background, what can be done next, going forward after this Phase 1 deal signing?
For one, China must assume the US will try its utmost to make her completely dependent on US technologies so she must develop her own as quickly as possible looking at a number of factors, namely US private sector R&D is circumscribed by short-term fast returns, furthermore skewed towards bourse sentiments as measure of wealth generation when what is fundamental are the applications, affordability and scalability of the products - which remain exactly the weakness of their entire technology pipeline, something they can overcome - if they collaborate with their collaborators in China with whom they have been working smoothly before until Trump.
And then, there's the matter of a second opening up. The deal proscribes there is a mechanism for bilateral arbitration on any dispute in fulfillment. That pre-requires a stable and friendly relationship. Since it is the US which has been antagonistic from day one, it must dial down its aggressiveness to be superiorist on an arrangement which requires both to be equal and mutually respectful. Unfortunately people like lighthizer in front and navarro in the back have still not signified they understand the knife-edge on which the deal stands.
On which matter, three - buying more from the US must mean buying less from other countries with which China has already signified interest that was in the first place caused by the US making its globally ruining demands on China. The upheavals to the word of agreements has thus been internationally distorted by a US hellbent on getting what it assumed it had lost from everyone when believing so would be a megamyth of mythical proportion since if true, it would mean US companies big and small have not been getting anything in equivalent value for themselves as industrialists, financiers, service providers and traders.
So, will Phase 2 see the US hawks next beam in on China's SOEs? There's something which can be commented on this. It could be whether China can privatise them but in such as way as to bypass the negative effects of west-type privatization. For countries like China, moving SOEs into the private sector has to accommodate their social functions of alleviating many from poverty while keeping lids on any spikes in prices and rates. There are of course some advantages in greater efficiency and productivity but would increasing domestic competition not harm those others which are already trying to overcome the effects of Trump's trade War on China before the Phase 1 deal?
Maybe there's a new way to resolve this that is hidden in the way how SOEs and private sector can coexist at the common objective level while State can remain central to continue developing international relevance, domestic efficiency and social responsiveness.