Tuesday, January 18, 2011

Development in China: many facets

China may have already surpassed the US in terms of total GDP, though that will always be open to quibbling as Sumner reports:
Arpit Gupta sent me an article by Arvind Subramanian that suggests China did pass the US at some point in 2010.  I find his argument quite plausible, although I certainly wouldn’t claim it is “True,” as there is no fact of the matter.  The US and China produce a vastly different set of goods.  China produces much more “stuff” and we produce much better “stuff” (on average.)  Who produces more RGDP?  That depends on how one defines RGDP, and I’ve never seen an even half-way plausible definition.  Have you?
The Chinese government has decided to invest heavily in clean energy - on the kinds of scale only China manages - and the Obama administration's response is to praise them for joining his vision of a greener world. Psyche. Obama is filing a case against China at the WTO for subsidizing green Chinese companies unfairly. So apparently it's not that the US is in favor green technology so much as we're in favor of greenback technology.

A new paper by Wang and Gunderson analyzes the effects of a minimum wage hike in China from 2000-2007 and finds very different effects depending on where they look.
In slow-growing areas and in non-state-owned enterprises, minimum wages reduce employment. In fast-growing eastern provinces there is no effect. In state-owned enterprises in the east, however, the minimum wage increases employment, which would be consistent with a monopsonistic labor market.

There are reports of ongoing slavery in China, which the government is only sometimes able to identify and stop. Inter Press Service, via Poverty News Blog, claims that the mentally handicapped are particularly vulnerable. In 2007 hundreds of enslaved children and mentally handicapped were freed by government raids.

The Economist concerned that Chinese foreign policy has been less friendly and more aggressive of late and with fewer explanations and unreturned phone calls with the US. "At a time of domestic uncertainty, running down the foreign opposition is popular." Their review of Chinese actions in Europe is rather more favorable: supporting the Eurozone and the Euro in particular, though it appears to be purchasing little goodwill for its investments and charm initiative.

Lastly, Yglesias compares how things get done at community level in the US and China, finding problems with both systems. In the US, "the problem with community engagement isn’t so much the engagement as the community" and the failure to recognize neighbors as special interests. China lacks - as the US used to - participation systems to provide a check against corrupt local decision making: "Projects were undertaken primarily because they facilitated the dispensing of construction contracts rather than because they made sense on the merits. To put it mildly, this is not a problem the Chinese have solved."

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