China By Dr Farrukh Saleem

Capital suggestion

Q: What is China’s economic model?

A: China’s economic model is export driven. In order to keep the world’s largest labour force – some 780 million Chinese – employed China must export $1.9 trillion worth of goods and services. China uses a variation of the old ‘Japanese model’ that revolves around value addition to raw material and the export of finished products.

Q: Who are China’s trade partners?

A: The United States is China’s largest export market (roughly 25 percent of all Chinese exports are bought by the Americans). The EU is the second largest importer buying some 17 percent of China’s exports.

Q: What are the two main weaknesses of China’s economic model?

A: First – China’s growth model is completely dependent on the US and the EU. Second – China’s exports are completely dependent on the South China Sea and the East China Sea. To be certain, all commercial sea lanes around China are completely controlled by the Seventh Fleet of the United States Navy.

Q: What about income inequalities in China?

A: China’s export-led growth model has led to an urban-rural/coastal-inland income disparity of over 300 percent in favour of China’s urban population. Currently, around 500 million rural Chinese continue to survive at under $2 a day. This income disparity has been behind 180,000 recorded ‘mass incidents’ in 2010 including strikes, demonstrations and protests (a ‘mass incident’ in China is defined as “at least 15 participants”). In 2006, there were 90,000 ‘mass incidents’ (figures on ‘mass incidents’ are maintained by Nankai University, a public research university based in Tianjin).

Q: What is China’s security model?

A: Internal security is the responsibility of 2.3 million active-duty personnel of the People’s Liberation Army (PLA) and 1.5 million personnel of the People’s Armed Police (PAP). External security is configured around “four non-Han Chinese buffer states of Manchuria, Inner Mongolia, Xinjiang and Tibet.”

Q: What is the primary responsibility of the PLA?

A: The primary responsibility of the PLA, as well as the PAP, is internal security. The PLA is the ultimate guarantor of the Chinese Communist Party’s (CCP) hold over undiluted power. The PLA, as a consequence, has little or no capability to project Chinese power into foreign lands (that’s unlike the United States Armed Forces that are almost exclusively configured to project American power into foreign lands).

Q: Why are rich Chinese leaving China?

A: According to the Bank of China, 46 percent of Chinese with assets of more than 10 million yuan ($1.6 million) were “either in the process of emigrating, or were planning to do so.” In 2007, less than 300 rich Chinese applied to emigrate to the US. Last year, a 10-fold increase was recorded when 2,969 rich Chinese applied to emigrate to the US. The three top concerns are: security of assets, fear for the future and education of their children.

Q: What about China’s demographics?

A: China is aging – 119 million Chinese are now over 65. By 2014, two years from now, China will be the only country in the world with 200 million elderly people. All this means a large, economically non-productive population – really bad news for future economic growth.

P.S. Some of the above concepts were first laid out by George Friedman of Strategic Forecasting.

The writer is a columnist based in Islamabad. Email:


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