A far
cry from the “oriental” fishing port city of yesteryear where over-imbibing sailors
from the West were captured from the sleezy bars and bordellos surrounding the
docks to be spirited aboard Chinese junks and merchant ships for months,
sometimes years, of forced servitude, Shanghai is a modern day wonder. In fact, in all our travels, Vicki and I
agree the Shanghai skyline is one of the most spectacular we have ever seen—day
or night
Called
“Paris of the East” and also “Queen of the Orient”, Shanghai is a large (pop.
24 million), clean (as clean or cleaner than Singapore, one of the cleanest in
the world), gleaming city and the largest in China. The crowning jewel and
result of modernization and innovation over the past 25 years, Shanghai, even
more than the capital city of Beijing, represents what can be accomplished with
the right combination of political and economic policy. Built on the banks of
the Huangpu River, Shanghai is the financial center of China and the rival of
Hong Kong in most every way. The people are friendly, happy, smiling folks and
not at all what we expected from a citizenship that lives at the low end of the
poverty scale in a very expensive environment.
Shanghai is proof of the rise in Chinese economic superiority; however,
some think China’s best days are behind them.
Let me explain.
In the
early to mid-1970’s, President Deng Xiaoping and his cabinet moved to make
significant changes in economic policies. Communist China did not allow for private
ownership of property. Realizing that agriculture had to be emphasized as the
monetary engine which could power expanded investment in industrialization,
Xiaoping established 30-year land leases to peasant farmers. This incentivized
families to maximize production on their land, join with other families to
produce small joint ventures and then larger, more efficient cooperatives. Expansion was encouraged by allowing farmers
to mortgage their leases to provide capital for growth. Agriculture rose to be 38 % of their gross
domestic product (GDP) and, consequently, investment in industry
blossomed. By comparison, agriculture in
the U.S. is only 1 % of our GDP. At the
same time, industrial production boomed due to a combination of domestic and
government investment. Using their
abundance of cheap labor, China focused on overseas markets, boosting exports
to record levels. To stem population
growth, Chinese law forbade a family to have more than two children. It worked.
By
2009, China’s GDP was up + 400 %, averaging + 9.5 % a year. That year China became the 2nd
largest world economy, surpassing Japan, and is responsible for 20% of world
GDP growth. In 2009 the Chinese bought
more cars than Americans did. China is
the second largest importer of oil but had a $ 200 billion trade surplus. Not incidentally, China also owns about $ 1
TRILLION of the U.S. government debt. Someone
said China is like Walmart with an army.
Unfortunately,
the recession which hit the rest of the world finally caught up with China as
well. When the U.S. and European
economies declined, so did Chinese exports.
From 1970 when China’s per capita income was 1/3 that of Mexico, in 2009
it was 1/3 higher than Mexico and + 434 % higher than Vietnams. However, even though the middle class in
China had grown during those years of relative prosperity, per capita income
remained one of the lowest in the world.
Ranked at # 117 it is only $ 9,100.00 per year. More bad news, The Economist did a recent
analysis on the debt that China holds and estimates that up to 50 % of the
loans they have on their balance sheet will be non-performing, not counting the
U.S. treasuries.
The
birth rate declined from 5.8 children per family in 1970 to 1.8 per family
today, not enough to sustain population levels. At the same time, the
population has aged with the elderly growing from 100 million people to over
320 million….nearly as many elderly as the population of the United States. Despite
population declines, unemployment is calculated at around 20 %, although the
Chinese government will not confirm that figure. There is no pension system in
China. Pollution is still a major problem in China. Two-thirds of the energy produced in China is
from coal-fired plants and their carbon footprint is one of the highest in the
world. It is estimated that only 1 % of
the population of China breathes what the World Health Organization defines as
“clean air”. Healthcare is
underdeveloped and the government made the decision to put the money into
upgrading their military instead of providing this vital service for their
citizens. Even though China has only
internal and regional security challenges, defense spending is estimated to be
between $ 148 and $ 241 billion, more than publically stated. By comparison the U.S., with its global
security challenges spent $ 524 billion plus $ 88.5 billion for the war in
Afghanistan in 2013.
Corruption,
while having declined in the past forty years, still is a problem and ranks #
80 in the world. President Xi has vowed
to crack down on corruption but it is a deeply rooted part of the system and
will be slow to change.
In
2010 the government decided to change their focus and move the economy more
away from external consumption to internal consumption. This, of course, would be difficult with a
declining and aging population. To aid that, they have partially lifted the ban
preventing more than one child per family.
Similar to the U.S. the government pumped over $ 600 billion into
economic stimulus, cut interest rates to 1% (which they have since raised back
up) and set aside $ 123 billion for healthcare.
China also started cutting some corners in agriculture and industry by
loosening standards and ignoring other safeguards accepted by most first world
countries. Inserting recycled plastics
as fillers in certain prepared foodstuffs and cutting copper pipe with cheaper
aluminum are two examples typifying the desperation for China to lower costs
and maintain their export competitiveness.
Vicki
and I are about to get off the ship on our own and do a little shopping, maybe
get a Peking duck lunch before we go to a Chinese Acrobat show tonight in the
city. More info and photos in the next
Travel Update. Until then,
God
Bless you all.
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