Wes Moss: Should we fear China’s growth?

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here Monday mornings.

Wes-Moss-032011-USE-THIS-VERSIONThe International Monetary Fund recently reported China could “overtake” the United States in terms of economic output by 2016.

Overtake. That’s a scary word. Sounds like we’ll be invaded. Some headline writers and talk show hosts reacted to the IMF report by predicting “The End of the Age of America.”

If China continues to grow faster than the United States, is it bad for our economy? Would you and I be worse off? No, and no. Here’s why:

1. It’s not a case of “they win, we lose.”

Economics, is not a zero-sum game. China growing wealthier doesn’t mean America will grow poorer. Quite the opposite is true. China’s rapid economic expansion the past few decades has generated huge opportunities for U.S. companies. Walk into a 200-year-old teahouse in Shanghai and you will likely find Starbucks coffee being sold under a Nike poster featuring Kobe Bryant.

2. A more productive China means bigger markets for U.S. products.

Let’s compare per capita gross domestic product, a measure of economic output per individual. China’s is about $7,500, while our per capita GDP totals about $47,000.

Let’s say China doubles its per capita output to $15,000 during the next decade. This will mean more people in China producing more products and spending more money, including some spent on goods and services from other countries. That’s a good thing for U.S. companies like Apple and Procter & Gamble, which sell some of the world’s best consumer products, such as iPads and toothpaste.

3. As China continues to grow, wages will increase and China will lose some of its “low-cost” wage advantage.

That could result in more jobs actually staying here — welcome news for U.S. workers.

So , just because its economy (with its 1.3 billion people) becomes “bigger” than ours (with our population of 310 million), it won’t mean China is “overtaking” us.

We have a very mature economy that can be expected to grow at only 3 to 4 percent over time. China is still an emerging economy that should grow at a faster pace.

Remember, the Chinese turned toward capitalism barely 30 years ago. Americans, who will remain at the center of the global economy for years to come, should be glad China decided to join the club.

Still think we should be afraid of China’s continuing economic growth?

– By Wes Moss, for Atlanta Bargain Hunter

Follow Wes Moss: Twitter | Facebook | Email

Atlanta Bargain Hunter: Twitter | Facebook | Email

20 comments Add your comment

Ace

May 16th, 2011
7:15 am

A bigger China is great for the folks on Wall Street, bad for just about everyone else in America…

Tom H

May 16th, 2011
7:46 am

Great article Wes. I hope you are right!

seabeau

May 16th, 2011
7:49 am

China is attempting to corner the market on all of the worlds precious rare earth metals,and since they have cash money to invest they are suceeding. China is our greatest threat. That great sucking sound is more American jobs going overseas.

Tom H

May 16th, 2011
7:55 am

Ace, Can you explain your comment? A bigger China is inevitable. The wealthier Chinese people will continue to crave western goods at a growing rate. It is very posible that ALL of America can benefit.

MiltonMan

May 16th, 2011
7:57 am

No mention that China is producing more than 10x the amount of engineers/scientists than the Good ‘ole USA??? That is where we should be concerned.

American politicians on both sides play nothing more than lip service in the need for us to have more engineers. How about debt forgiveness that we see given to teachers that teach in inner city schools be afforded to engineers?

brad

May 16th, 2011
8:15 am

I thought you were a free market kind of guy, Milton. Are you now advocating government intervention?

Dan

May 16th, 2011
8:33 am

China may be producing more scientists but I doubt 10x more, not to mention their brightest still come here to go to school. I also think China will hit a tipping point where the people will start to focus on their internal needs, like indoor plumbing for instance, and demand a greater share of their resources be spent internally rather than competing with the west

George P Burdell

May 16th, 2011
8:55 am

‘The International Monetary Fund recently reported China could “overtake” the United States in terms of economic output by 2016.’
The scary word is not “overtake”.
The scary word is the continual misuse of “could” in silly reports like this.
How many people remember all of the scare stories from the ’70s and ’80s of how it was just a matter of time before Japan “could” overtake the United States in terms of economic output.
Where are all of the great prognosticators that forecasted the coming era of Japan?
Does anyone remember Tiananmen Square in 1989?
It is more likely China will see a political revolution that succeeds and changes the growth path of the Chinese econmy.
Good ecoomists don’t make projections beyond a few years since there are far too many variables that will change any forecast.

Ace

May 16th, 2011
10:12 am

Tom H wrote: “The wealthier Chinese people will continue to crave western goods at a growing rate. It is very posible that ALL of America can benefit.”
——————————————————————————————————————————————
I think a good question would be: “Which western goods will the Chinese people crave that are not already built in China?

radly

May 16th, 2011
1:53 pm

Yeah, America could benefit!!! if we could get the $%#@! government off of the back of Americans and business. We’re over taxed and over-regulated!!!!!!! How can forcing businesses over seas be of benefit to Americans? The only thing we make here is tech. and dependency on government!!!!!! Anything labor intensive has been laid in the grave…geee thanks Uncle Sam…..you idiot!!!!

Cool Ghoul

May 16th, 2011
2:09 pm

Ace – you aced it!

Ole Guy

May 16th, 2011
2:14 pm

Good analysis…no, make that GREAT ANALYSIS. However, this appears to be a “crossroads picture” frozen in time. It’s a pretty good snapshot of the “runners” as they trundle down the road of the dynamics of the global economy. The one big determinant that’s missing is education; while the Oriental value structure of education appears to be at an all-time high, this Country’s “educational output” seems rather dismal. The storys, if you follow Ms. Downey’s discussion series, all point to a rather…no, make that EXTREMELY…disappointing future for both today’s youth, and for the direction in which this Great Country is headed. With 1) low graduation rates, 2) the political gamesmanship which takes place in the mere interests of appearing to accel while reality speaks to the contrary, and 3) what seems to be a perpetual insistence on hiding political heads in the sands of ignorance, believing, all the while, that all is well in education land…all combine to ask the big question, should we fear China’s growth?

While Mr. Moss paints a rather convincing picture…a “not to worry, children, all is well” broad sweep of confidence, we would be wise to start demanding a realistic educational approach to our future, not the straw house known as NCLB. ONLY when we start focusing on education…on REAL education; not the crap which passes for education in Georgia…can we even dare to face the economic threats posed by China and, for that matter, the rest of the civilized world.

Gerald West

May 16th, 2011
2:28 pm

China’s spectacular social and economic development can be attributed to freedom from politicians and freedom of enterprise. It is the greatest humanitarian achievement in world history: in only 25 years, more than a billion people have risen from starvation, poverty, and despair to prosperity, hope, and pride.

A western-style “democracy”, replete with corrupt and obstructive politicians, would certainly put an end to China’s development miracle. Don’t count on it! It would be out of character for the Chinese people to trade responsive and wise governance for a noisy, divisive, do-nothing American-style political circus.

itsmeagain

May 16th, 2011
3:22 pm

First the US bashes communism and says everyone needs to be capitalist because communism is dangerous. Then when one of those communist countries becomes successfully capitalist, Americans bash that country because its success is “dangerous”. Basically, Americans don’t care what type of political system is present in the rest of the world, just as long as it is unsuccessful.

Pessimistic Cynic

May 16th, 2011
3:41 pm

“China’s rapid economic expansion the past few decades has generated huge opportunities for U.S. companies.”

When is that going to trickle down to the rest of us?

Pee Wee

May 16th, 2011
4:06 pm

I admit it. I’ve had a longterm fear of China. I accidentally broke a piece of China in my wife’s set some time back and she still hasn’t gotten over it. I now prefer old plates or even Chinet.

Bejing Bertha

May 16th, 2011
4:08 pm

Uh Pee Wee. I believe he’s referring to the country. You know, the one with the big wall.

Pee Wee

May 16th, 2011
4:09 pm

JASon

May 16th, 2011
4:22 pm

America was in the lead for a long time. It would not have been difficult for America to maintain that lead, but they found a way to squander it away through greed and ignorance. The chinese work harder for less money, and they actually produce things in that country.

Based on that, I would respectfully disagree with Lauren and say that it is a lot worse than it sounds.

Ace

May 16th, 2011
5:13 pm

They produce more BECAUSE they have a communist government and the people (cheap laborers) MUST do as they say. These laborers live in “dormitories” at the job site for pennies an hour, no vacation time, sick time, benefits, etc. For example, The company that makes Ipods installed suicide nets at their factories because so many workers leaped to their deaths-Fox conn is the name of the factory-true story-google it) Now just because the Chinese elite put on a smiley face and can glad hand when the world is watching does not make it right, They treat their people like mules all in the name of the dollar, and we accept it because it makes our 401K’s go up a little, Just not right!