CBS 2 School: Hu On Tour

Can China buy the century, too?

Plenty of geopolitical prognosticators are using Chinese President Hu Jintao’s visit to the United States as another opportunity to dub the 21st century as belonging to China.

In the last 50 years, China has undergone a remarkable economic transition from a poor command economy ravaged by famine to a world economic powerhouse surging to 10% economic growth year after year.

In the last 3 years, economic growth in the United States has been decimated by burst bubbles leading to layoffs, recession and 10 percent unemployment rates.

Yet we think it’s highly premature to predict the demise of American economic strength and crown the Chinese as the economic dynamo of the century. If anything, the next 100 years will be the century of economic interdependence.

The symbolism of President Barack Obama hosting the Chinese for a formal state dinner at the White House shows the importance of the economic ties between the two countries. Despite China’s status as an authoritarian regime that prohibits and punishes political rival to the Communist Party, we are willing to treat them to the pomp and ceremony of a state dinner out of respect for their economic success and potential.

It turns out that we need the Chinese just as much as they need us.

The annual GDP of China is now at around $10 trillion while the American GDP stands at about $14.5 trillion. When divided out per capita, China’s GDP is about $7,500 per person while the U.S. produces about $47,500 per person. China has a little ways to go to surpass our overall productivity, and miles to go in matching our relative wealth.

The Chinese economic success as a market economy was made possible by investment dollars pouring in from the United States and around the globe to take advantage of relatively cheap labor that helped lower the cost of everything from t-shirts to computers. But this influx of cash into China didn’t just sit there.

China has sent about a trillion dollars back to the United States to help us finance our governmental debt. It has also used its massive governmental surplus to continue modernizing their economic infrastructure. This development has directly benefited Illinois firms like Boeing, Caterpillar and John Deere who have exported billions of dollars in equipment to China in the last two decades.

President Hu Jintao visits Chicago today as a sign of respect for Mayor Ricahrd M. Daley’s vision about this economic interdependence. Daley saw the important role that China would play in the Chicago economy more than a decade ago. And his personal commitment to building business and cultural ties with China will be honored during Hu’s visit.

  • Andrew LaGioia

    In the past few months I have come up with thoughts that China pretty much owns the US. I got these thoughts from what I’ve heard from the media and from my realization that if you look at many products that you own you can see a label that says ‘Made in China’. The thought of China having control over the US scares me because of how much power China has and how much money we owe them. But after listening to you guys talk about this topic, I am relieved to find out that our economy is still much better than China’s.

  • Sir circleknott

    Well China certainly has been supporting our economy which has been in a flop for a while with economists predicting this flop to continue for another ten years. The cause of this economic downfall was the housing bubble. “The US housing bubble was potentially caused by regional government restriction of land supply, federal laws that increased the demand for homes, and foreign cash inflows.” Is it possible that China might make a similar mistake in its future and see its own fall?

  • Annie Feldman

    Obama meeting President Hu stresses the importance of the United States maintaing good relations with China. America’s reliance on cheap labor in China is a problem that I think could potentially lead to America’s demise. Although the US’s GDP is greater than China’s, the important thing to note is how quickly China’s GDP is catching up to the US’s. Due to this, I would not be suprised if China’s GDP surpassed the US’s in the next couple of years. It is imperative that the US become less reliant on China’s export. This would be a difficult task since few Americans are willing to pay more for goods, but it is possible if US makes a united effort to become less dependent on China.

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