No we are not, for one China isn't in a recession the US is, but China will be someday its nature.
An honest evaluation needs to compare all factors. The picture in China is not nearly as rosy as some people want to paint it. A rapidly aging population, looming population crisis as the effects of 1 child kicks in, massive on going environmental damage and lack of RnD spending, and a higher education education system that is still second rate. Other issues include that wage pressure will raise the cost of doing business in China, building anger at Chinese trade practices and rampant government corruption.
China has a lot of issues to resolve besides the technology gap. China might be able to do it, but the US won't be standing still either. The only thing keeping the US from an economic boom is a political class that had become addicted to progressiveness. The day we stop stealing from the rich we will shoot forward again. Obama is only in office till 2012 and the Democrat Congress is gone in 2010.
1. Aging population shouldn't be a problem. As the share of the primary industry (i.e. agriculture) shrinks toward 1 to 2% of the economy, there will be plenty of migrant rural workers to work in China's factories.
2. One child policy can be reversed whenever the CPC decides it is appropriate. This is a policy decision.
3. Environmental damage is expected during the process of industrialization. Britain (see cholera) and U.S. (see Love Canal) also had this experience. Environmental damage can be corrected later as the society becomes wealthier.
4. In the thread "In India, Anxiety Over the Slow Pace of Innovation," Koji has posted a graph of R&D expenditure as % of GDP. From 1997 to 2007, US R&D has remained at roughly 2.5% of GDP. However, China's R&D has increased from 0.5 to 1.5% of GDP. If the trend continues, China's R&D as a percentage of GDP will approach U.S. levels.
5. No argument regarding the educational system. Emphasis on rote learning is useful during the catch-up phase of industrialization. The goal of producing Nobel-prize winners in the hard sciences will take 2 to 3 generations.
6. Wage pressure is a tough issue. It is unknown whether average Chinese productivity gains will continue to outstrip the rise in wages and the value of the Yuan (appreciated 21% in the last four years).
7. Rising protectionism is a wild card. I'm sure that the Chinese will retaliate when they encounter significant protectionism. However, it becomes a lose-lose scenario and it could retard Chinese economic growth.
8. The future of the U.S. is indeed in American hands. My personal suggestion is to shut down most of the 750 to 800 overseas military bases. I would also close the tax loopholes and force large U.S. corporations to pay their fair share of the taxes. Government subsidies to rich agribusiness conglomerates like Archer-Daniels and Cargill should be immediately terminated. However, given the increasing influence of special interest groups (i.e. big corporations) on both major political parties and Congress, I'm not holding my breath on imminent change.
The above-factors can indeed be formidable. However, on the other hand, the CPC is a very competent manager of China Inc. and their decades of proven success inspires future confidence. Furthermore, China Inc. has $2.3 trillion dollars in reserves, which give them latitude to make mistakes.
Final verdict: The future of China Inc. looks pretty bright, however life can bring unexpected surprises. China has earned a very impressive economic record of growth. However, past success does not necessarily translate into future success. The unfolding China story is the greatest drama of our times. Can China Inc. really boom for another two decades? Will China succeed in its push into the large commercial aircraft market with the 190-seat C919 in 2016?
As long as they build the elegant American-designed Shanghai Tower, I'll be happy.
