The Economist has included a survey that has again marvelled at the impact of the emerging economies of India and China.
The lead article concludes;
But regardless of how the developed world responds to the emerging giants, their economic power will go on growing. The rich world has yet to feel the full heat from this new revolution.
The Economist is of course but one of a growing list of commentaries on the wonder of the growing emerging economies. Living in Australia it is hard not to ignore the impact the growth in China has had, as it is the source of our resources "boom". However, it is fascinating to note exactly how little attention our politicians seem to give it.
Two examples. I was listening to Peter Costello's budget speech this year and noted how according to the speech all the wonders were of the Howard Government's making and no mention of China. And today I was at an ALP forum where WA Prenmier Alan Carpenter was extolling the wonders of their 14% growth as if it was all the doing of the WA Government and very little or no mention of China.
Yet I have on my bookcase a little book called "The Coming Collapse of China" by Gordon G. Chang. The volume poses some simple questions like how long the people will remain subjegated, how long the West will abide by the WTO Charade, how long investment can be expected to continue in a regime that doesn't properly secure the interests of investors, how the state owned enterprises will unfold and most significantly how stable the Chinese banking system is.
I would not dare to suggest I know one way or the other what the future will bring. However, the list of potential triggers is so great and the number of mitigants so low, that the possibility of collapse should be in everyone's scenario plans and quite reasonably in the near term. Certainly a collapse in China would be a far more significant shock than the Asian currency crisis (and one should note it was just before the collapse of these economies that commentators had decided to agree that the Asian Tigers would continue on their high growth paths for the foreseeable future). There seems little evidence that there are any reasonable plans for the sudden and severe contractionary effects it would have on the Australian economy.
The trade deficit and the further impact of loss of minerals exports would make any monetary expansion highly dangerous as the immediate consequence would be to increase imports against declining exports. Fiscal solutions of expanded Government programs of nation building may be ignored as being archaically Keynesian, but even if implemented would take a while to ramp up.
Perhaps all the talk about infrastructure planning might be well placed - but not for a to do list in the current expansion but as a to do list when we face a contraction.