Sunday, October 26, 2008

Article - China's sudden fall and slow recovery

International Herald Tribune

Monday, August 11, 2008

Winston Lord, the former U.S. ambassador to China, long ago remarked on the tendency of Americans to regard China with an attitude alternating between romance and fear. Thanks to the Olympics, we finally know whether China is an unassuming poor country suddenly made good or a menacing superpower in the making. The answer is neither.

Take a minute to put the China's Olympian moment in its proper historical context - one going back centuries, not mere decades.

For 500 years, from the 14th century until the 1830s, China accounted for a remarkable 30 percent of world economic output. That is more than the U.S. economy at the height of its global economic dominance after World War II - sustained for a half-millennium! But by the time reform-minded Deng Xiaoping took charge in 1979 after a particularly destructive two decades of Maoist social experiments, China's share of global gross domestic product was barely 1 percent - a high dive of epic proportions. Today, after nearly three decades of staggering growth, China accounts for about 5 percent of world output - impressive relative to 1979, but not in the ball park of the historical norm of centuries past.

Remember what happened? Everyone in China watching the Olympics does.

Despite its economic prowess, China at the start of the 19th century was showing clear vulnerabilities. The British East India Company was aggressively developing markets in southern China for its most lucrative product: opium. The Chinese imperial government issued edicts to block opium smuggling, but to no avail. The market was not one that the British were going to abandon lightly.

As Britain's illegal exports of opium continued to grow, the emperor appointed a senior civil servant, Lin Zexu, to act as the country's "drug czar." From his headquarters in the city of Dongguan, Lin initiated a crackdown in June 1839, confiscating and later destroying over 1,000 tons of opium. The British made the most of the incident, reacting swiftly and decisively to assert their commercial interests. Other Western countries were supportive. Stating that commerce is "among the natural rights and duties of men," John Quincy Adams later would criticize China for its "unsocial" refusal to trade on "terms of equal reciprocity."

A three-year war with Britain ensued. Another against Britain and France followed after a little more than a decade. The scientific and technological advantage of the Western nations was overwhelming. China was compelled to accept "unequal treaties" pertaining to trade relations first with European powers, and then with Japan. The country's decline was underway.

Skip ahead to 2008. What has become of Dongguan, fateful site of the start of the opium wars? Dongguan today is a raw, expansive city of 7 million people. It is a key manufacturing hub, ranking only after Shenzhen and Shanghai among China's leading export cities. The city produces 40 percent of the tennis shoes sold in the United States and 200 million sweaters sold in American shops.

China's resurgence extends to a domain in which the country has historically been weak: science and technology. Twenty years ago, China was not on the list of the top 10 exporters of high-tech products; today it is number one. The United States remains the world leader with regard to research and development investments, but in China such spending has for over a decade been growing at a remarkable 19 percent per year - more than six times the American rate.

So does all of this make China a poster child of modern economic development?

A menacing Third World upstart?

Neither shoe fits this Cinderella. Viewed in a time frame of centuries rather than decades, China may most accurately be understood simply as a rich country gradually returning to its old form. Responding sensibly to China's ascent in the past 30 years requires first an appreciation of the magnitude and causes of its decline.

If better historical understanding alone can't get us to fear or romanticize China less, perhaps it can at least help us to do so better.

Philip E. Auerswald is director of the Center for Science and Technology Policy at the School of Public Policy at George Mason University and a research associate with the Belfer Center for Science and International Affairs at the Kennedy School of Government.

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