In a lecture in Taiwan, future trend guru John Naisbitt one-sidedly praised China's economic boom, saying that cross-strait economic integration was an inevitable trend. However, he ignored two major problems.
First, more than 60 percent of Taiwanese believe that the economy has already been hurt by overheated cross-strait trade and will suffer even more severely if the trend continues. Therefore, unless Taiwanese are willing to be unified with China, it is practically impossible to integrate the two economies.
Second, China's economy is not as good as Naisbitt says. The book Fault Lines in China's Economic Terrain, published by RAND Corp, lists eight major problems with the Chinese economy that will continue to crop up over the next 10 years and which will affect its development. Naisbitt made a point of ignoring these faults.
The first problem listed in the book is unemployment, poverty and social unrest. Poverty in the rural areas has already expanded the urban-rural wealth disparity and has caused problems such as greater population migration, higher unemployment rates, rising crime and social unrest.
Second is the effect of corruption on the economy. If this situation deteriorates further, the distribution of earnings will become even more imbalanced.
Third is the spread of AIDS and epidemic diseases. Estimates by the UN and other sources put annual deaths from HIV/AIDS in China between 1.7 million to 2.7 million in the second decade of the 21st century, resulting in annual reductions in GDP growth between 1.8 percent and 2.2 percent from 2002 to 2015.
Fourth, water and environmental pollution. China is encumbered by unequally distributed natural water sources in the south and north. This problem could reduce China's GDP growth by 1.5 percent to 1.9 percent per year over the next decade.
Fifth, prices and consumption of resources. Within the next decade, global oil supply is forecast to shrink about 25 percent, decreasing China's average yearly economic growth rate by 1.2 percent to 1.4 percent.
Sixth, the fragility of China's financial system and state-run enterprises. The high rate of bad loans in China's state-run banks demonstrates a weak spot in the state-run financial system. Financial crises and shrinking credit could reduce total productivity 0.3 percent, in turn shrinking the yearly capital growth rate and lowering the yearly GDP growth rate 0.5 percent to 1 percent.
Seventh, a possible drop-off in foreign direct investment. Tension created by China's ruling class, the possibility of financial crises, the inability to exchange the yuan, China's delayed implementation of its WTO promises and changes in the Eastern European and Indian investment environment could all seriously shrink direct foreign investment. This could lead to a 0.6 percent to 1.6 percent yearly reduction in China's GDP growth rate.
Eighth, Taiwan and other potential conflicts. If future deterioration in cross-strait ties leads China to isolate Taiwan militarily, it will have an impact on China's stock market, exchange rate, military budget, personal savings and and overall productivity.
Naisbitt just happened to avoid these major problems during his lecture and question-and-answer session. I don't know if he truly doesn't understand the fragile side of China's economic development, or if he simply chose to ignore it. But it is certain that he lacks a clear understanding of Taiwanese society. One must already have a certain "Mind Set," which also is the title of his latest book, to keep emphasizing the importance of cross-strait economic integration, and to so seriously misunderstand Taiwan's future economic "trends."
Michael Lin is a political commentator.
Translated by Marc Langer
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