Chinese economy at risk, prof. says
By Jennifer Liu
Published on Wednesday, January 14, 2009
Massachusetts Institute of Technology political scientist Edward Steinfeld delivered a lecture on Chinese economics in Filene Auditorium on Tuesday.
China has duplicated, rather than replaced the Western economic model as a result of its recent financial transformations, Massachusetts Institute of Technology political scientist Edward Steinfeld said in a Tuesday lecture at the College.
In his presentation, "Playing Our Game: China, Economic Transition and the West," Steinfeld dispelled perceived American misconceptions about China and explained that the country's economy will likely experience an economic slowdown similar to the downturn in the United States.
Americans view China's economic growth and increased presence on the global stage as both "awesome" and "unsettling," Steinfeld said, citing measurements such as the growing Chinese trade surplus with the United States.
China has mirrored the United States in economic development by adopting the Western model of the market economy during the 1990's, he said, but the methods China has used to achieve its rapid growth -- including its manipulation of exchange rates, lack of enforcement of intellectual property rights, state ownership of the economy and mercantilist policies -- have discomforted many Americans.
To some American observers, he said, it appears as though "China is eating our lunch in the globalization game."
In contrast to these views, the Chinese see their own lunch as "being eaten" by the United States and other external powers, Steinfeld said.
While China has trade surpluses with some global powers, including the United States and the United Kingdom, it runs trade deficits with other countries, such as Korea, Japan and Saudi Arabia, he said.
These countries, which supply China with its electronics and energy, do not see China as an economic threat and "win in the trading game with China," he said.
The prevalence of foreign-controlled enterprise in China presents a long-term problem for Chinese innovation, he explained.
Due to outsourcing, the Chinese economy relies on assembly rather than innovation, he said, as the product definition and branding sides of global companies remain in their home countries.
To illustrate the challenges to long-term economic growth, Steinfeld explained that Chinese companies view Apple as "intimidating" because of the corporation's versatility, as it has products ranging from computers to music to telecommunications.
"Apple [jumps] from industry to industry in ways that elude many Chinese producers," he said.
Close economic connections with other countries makes China even more vulnerable to the economic stresses felt by its peers, Steinfeld added.
Following the recent slowdown of economic growth in the United States, for example, China's industrial output and exports dropped, he said.
China's December exports were 2.8 percent lower than last year, according to China Daily. The world economy may be significantly damaged if China's growth this year falls below 6 percent, according to the World Economic Forum's annual Global Risk report.
Because China's political and economic system is "enmeshed" with outside players, it will not necessarily be able to change the Western economic model that is now "under question," he said.
"I don't see China in real, serious terms redefining the institutional path to modernity," he said.
Steinfeld's presentation was part of a year-long event series, "The Rise of China," hosted by the War and Peace Studies Program according to government professor Daryl Press, War and Peace Program coordinator.
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