This was when kaizen was the new thing, Mitsubishi had bought Rock Center, and the movie Gung Ho, about the Japanese takeover of an American auto plant, was released. Gung Ho, by the way, is not even a Japanese word, but rather a vulgar Americanization of a Chinese phrase. Could you even release a movie with a title like this today? I doubt it. My father was not alone in his paranoia, of course, but he was more tenacious and vigilant than most. He had me take Japanese lessons with him for a year at a nearby university, which in turn allowed me to (almost) be able to greet my Nikkei colleagues in his native language. Meanwhile, the whole Japanese idea of global acquisition has become a retro meme. Why do I mention all this? Because Americans have been paranoid for some time that China is going to eat them, and this conventional wisdom is now coming under fire.
Financial Times contributor Mohamed laid out the counter quite well last week, arguing that bleeding debt levels, decoupling with the United States and autocratic excess cast doubt on the idea that China will eventually Job Function Email Database become the largest economy in the world. So is this a case of China going Japanese, at least when it comes to the hype about its global dominance? Very possibly. As Apollo's Torsten Sløk explained in a fantastic PowerPoint to investors last week, slowing exports, real estate deflation and demographic deterioration are seriously threatening China's rise. Two of the most surprising statistics: the ratio of house prices to income is five times higher in Shanghai than in New York, and youth unemployment exceeds 20 percent. In some ways, this validates the US economic model vis-à-vis China (particularly its decentralization) and creates breathing space for US officials to push through difficult negotiations around issues such as technology transfer, tariffs, or labor and environmental standards.
China is by far the largest and most exceptional Asian nation to ever attempt to break out of the middle-income trap. It is not clear that this will succeed if the country bets its future on an autocratic alliance with states like Russia or emerging markets that are in economic trouble. But if China can't manage the transition, what does that mean for the United States? China's share of global growth is much greater now than it was two decades ago. It is a top export destination for eight of the G20 countries, including the United States. While the decoupling between trade and financial markets will continue (in my opinion) at an even greater rate in the future, it will take time to create the redundancy in the market that will help offset the input inflation that is part of paying the real cost (in terms of decent work and carbon standards) for global goods.