China is now on an unstoppable economic trajectory and the world is the catalyst of that, according to Joseph Kahn, deputy foreign editor of The New York Times. He spoke on Feb. 29 at the University of Washington’s Kane Hall.

China has by far the greatest reserve in its treasury compared with the United States and all European countries, Kahn said. The trend that China is emerging politically and economically is evident.

With billions of dollars invested in its infrastructure, China has, by far, the largest high-speed railway system in the world, Kahn said. On the other hand, the federal government is only willing to spend 10 percent of that amount on building a high-speed railway system.

“The Chinese, they have their own problems,” said Kahn, “but they are still building it, no matter what.”

Kahn said that China’s authoritarian government is what makes itself different from the American federal government. The Chinese government does not tolerate opposition the way the federal government does here, Kahn said. It easily decides how much money to spend on something while in the U.S., such a large-scale project would require approval by the Congress.

Despite its seeming prosperity, the Chinese growth model is more fragile than it seems, Kahn said. A large percentage of Chinese-made products are planned for export, which Kahn said is the major driver of the Chinese growth. That, he added, makes China the world’s most significant manufacturing power.

“It needs to shift to a more consumer-driven model,” Kahn suggested. “It is harder to change a financial model than it appears. China has never made the transition to a new system, which demands clarity, cleaner air and a more transparent system.”

China has a significant demographic challenge: the one-child policy, Kahn pointed out. In China, every household is only allowed to have one child unless it seeks permission from the government. Its labor force is not going to grow, and he said the elderly population is going to increase.

Kahn emphasized that China currently faces two major problems.

China’s growth model has become so unbalanced that Kahn questioned China’s ability to transition to a new system. China is the greatest surplus producer in the world. Kahn suggested that China should overcome its dependence on foreign trade, as personal saving is only 35 percent of the nation’s GDP. Along with a negative interest rate, people cannot save money as their savings lose value over time. The way to save this, Kahn concluded, is to go through a major recession so that the money could flow back to the consumers.

The Chinese government’s heavy involvement in the economy is also a problem, Kahn said. It is very commonly expected of the government to ensure high GDP growth, also known as GDP-ism, according to Kahn. That is, to hold every government official responsible for creating high GDP growth. Giving that much power to government authorities can lead to corruption, he said. If Steve Jobs, for example, had been born in China, he would have faced stiff challenges; the government would have intervened at some point, Kahn suggested.

In other matters, China is over-investing in its military development, Kahn pointed out. Another problem, according to him, is its impassioned dispute with Southeast Asian countries over the Spratly Islands, located in the South China Sea.

Kahn nonetheless reiterated that, though vexed with problems, China’s significant emergence in the world is unquestioned.

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