How America Overestimates China’s Rise

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Here are my quick two cents from a trip back to the U.S. from China. Two years ago when I was last here, I felt like the smart, educated people I talked to underestimated China’s rise. Yes, the Olympics had shown the world that Beijing was a big city full of modern buildings and amazingly talented athletes. But there was still this feeling that China had light years to catch up to America—and that America, by virtue of its democratic political system, its tradition of innovation and its overall gee-whiz niceness, didn’t have to worry too much about 1.3 billion Chinese halfway across the globe. Today, I sense the exact opposite. Many of the Americans I’ve spoken to over the past few days tend to overestimate China’s place in the world. Here are two China themes I’ve heard over and over during my U.S. trip:

  1. China, which last year displaced Japan as the world’s second-largest economy, is buying up everything: natural resources, U.S. treasury bonds, small African countries, Louis Vuitton bags. Who will save the global economy? Why, Chinese consumers hungry for more of everything.
  2. China’s Tiger Moms are raising cubs that will take over the world. Actually, they’ve already taken over the world. Look at those test scores from Shanghai in which Chinese kids outscored the world in math, science and reading.

There are big elements of truth to both of the above. But here’s a bit of context:

  1. The average Chinese still makes less than a quarter of what an average Japanese (the world’s former No. 2 economy) makes. China’s per capita annual income is lower than that of Thailand. Venture into the vast Chinese countryside and you will see another world. At least 150 million Chinese live under the poverty line, and the wealth gap is only increasing. Housing prices are out of whack, inflation is eating away savings. That’s not to say there aren’t many rich Chinese, and rich Chinese are far younger than other rich people in the world. But don’t count on the Chinese consumer to save the world just yet.
  2. True, those Shanghai students aced their tests. But venture out of the cities (or go to most of the country’s second-tier cities) and China’s education system is hardly a model for emulation. Rote learning blunts the innovation instinct. Teachers, particularly in rural areas, are paid so little that they regularly accept bribes from parents to keep them in the classroom. I’ve been to many places in China where kids—girls and offspring of migrant workers in particular—drop out because their parents can’t afford schooling. The anecdotal evidence just doesn’t match the rosy government figures that boast of 95% nine-year compulsory school enrollment. And those Shanghai kids who rocked those global exams? I’d bet you that if most of them had a choice between Harvard and Peking University, they’d choose the Ivy League any day.