Today, China’s representative at Davos, a conference for the world’s top leaders, spoke of China’s economic policies and promised to exceed international expectations for growth and economic opportunities with China. I’ve noticed increasing interest and coverage of China this year and wish to contribute a few personal observations of China’s growing role in the world stage.
Having explored cities in China, I am surprised by the breath and consistency of modernization. Chinese cities house millions, benefiting from network effects and amplified by connectivity, which significantly increases innovation and overall well being. We would be foolish to believe that the essence of Silicon Valley, Hollywood, and New York cannot be replicated and improved upon. The Chinese dream is very much similar to the American dream and we should expect the same if not better efforts to achieve them.
A often unrealized circumstance behind China’s growth is the breakneck speed by which it’s manifesting. In less than 50 years, an Agrarian society leaped ahead to lead the world in manufacturing and, soon also, technology. This acceleration beats all bubbles ever observed, creating an unprecedented count of Nouveau riche. Imagine the Industrial Revolution and post World War II eras combined in a fraction of the time and simultaneously benefiting almost all of the country. As an example, China is almost a fully cashless economy where everyone uses their phones as wallets. In contrast, debit cards and cash are the primary payment method in America.
China has also fully converted to a consumer economy with optimistic and aspirational spending habits that absorb China’s excess production. Although income per capita is low, when accounting for the lower cost of products in China (mainly because of less shipping fees and tariffs), the purchasing power is significantly higher. By some measures, China has exceeded America’s annual GDP. These figures are pushed higher yet by a major $1 trillion dollar infrastructure project known as the Belt and Road Initiative which seeks to build a modern “Silk Road” connecting China to South East Asia, Africa and Europe.
China’s “economic miracle” is seen by some as a regression to the mean. This view assumes that China’s large population and history as a large economy, means it will eventually catch up to reclaim it’s historic share, but no more. China’s large investments will likely exceed not only this view, but the promises laid out at Davos.