So, who is George Magnus when he’s at home?
He’s the former chief economist of UBS and a Research Associate at both Oxford University and SOAS London. And he thinks that China has got real problems.
Hang on- I thought they were growing so fast that they would overtake the US before Cowes week, and would go on to rule the world. Or something like that. What’s gone wrong?
According to George, they’ve fallen into the same trap as the USSR and Japan.
What trap?
Back in the 1950s everyone said the USSR would overtake the USA and go on to rule the world. Then in the 1980s it was going to be Japan. Remember them?
You mean it doesn’t happen-why?
All these places, China, USSR, whatever, start out well with masses of investment, low consumer consumption and all that. A real Puritan dream. For a few years the economy booms. Even the CIA admitted Soviet GDP figures were real horrorshow in the 50s.
But then?
The tight political stability which let them grow starts choking off the new ideas you need to move to the next stage. Old party cronies take over. The result is a real misallocation of capital and investment. Look at the Evergrande affair, says George.
But China was growing twice as fast as the US between 1900 and 2020, right?
Key word is was. There are signs that the US is pulling away again. That means real problems for Mr Xi as he tries to divide up the cake. But don’t take our word for it. Have a look at George’s piece in the Guardian here. [1] He’s got a fact-packed website of his own here [2] And, if you’ve really nothing to do over the holiday he’s even written a book which we reference here [3]
But it could happen, right? After all Manchester City overtook Manchester United, didn’t they?
Powerful metaphor. But the key point is wait and see. And never take anything for granted.
[1]ttps://www.theguardian.com/business/2021/dec/28/from-economic-miracle-to-mirage-will-chinas-gdp-ever-overtake-the-us
[3] Magnus, G Red Flags: Why Xi’s China is in Jeopardy Yale University Press 2018
#Peoples Republic of China #United States of America #Geopolitics #Economics #world trade
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