US v. China Showdown: China is still a low income country

 

My experience is that, when Americans go to China for the first time, the first two things they notice and comment on are 1.) that Chinese people often don’t line up, they don’t queue when waiting, they just kind of bunch together and jostle, and 2.) they notice the way the Chinese drive, which is to say, kind of all over the place.  I can’t tell you how many Americans have mentioned that to me after visiting China.  These things might not be that important, but they do stick out so people notice. 

 

China is different

 

Having lived in China for more than ten years I can tell you that, when it comes to how China is different, queueing and driving are just the tip of the iceberg.  China is very different.  I bring this up because, in any negotiation or confrontation, it is important to understand the counterparty—how they think, what is important to them, what they can and can’t do.  This is true in business negotiations and government negotiations as well. 

 

China’s per capita income only one-fifth of US

 

One reason China is different is that it is poor.  Although China’s growth gets all the attention, in fact China still has a per capita income that is about 20% of America’s, meaning that China is still a low income country and low income countries, in general, are different from developed or advanced countries.  To be honest, my experience is that, unless you’ve lived in such a place, it’s difficult to get a sense for the differences.  Not to toot my own horn but I actually made a short documentary film, called “Democracy Road,” that touches on this subject, explaining how cultural differences make democracy difficult for poor countries.  One of the main reasons is that the rule of law is weak in poor countries, meaning, among other things, corruption is high and intellectual property protection is low, which relates directly to the upcoming economic negotiations with China.  This weakness in the rule of law is true not only in China but in Russia, India, Nigeria, Brazil, and just about every other low income country.  Unlike queueing or driving, corruption, intellectual property protection, and the overall effectiveness of the government is very important. 

 

US was very different when it was at same stage of development

 

To put this in perspective, consider the following point.  In terms of its level of development, China is about 50% urbanized.  When America was at a similar stage, about 50% urbanized, it was about 1910 or 1920, a time when child labor was common and legal, when women couldn’t vote, and when segregation was alive and well.  We don’t even relate to ourselves back then yet a lone a country as different as China. 

 

Countries change as they develop

 

If we’re going to talk about how less developed countries are different, it’s important to point out that countries change as they develop, like we did.  For example, it worth remembering that Germany and Japan, formerly our implacable foes, became our close allies as they developed and integrated into the global economy.  China is changing as well as it develops and integrates into the global economy.  People line up more, driving is getting better, hopefully corruption will improve as well.  But China has a long way to go.  In later posts we’ll discuss specific differences in more detail.  For now the point is to remember that China is still largely a low income country and in many important ways—culture, economic structure, governmental structure and effectiveness—China is still very different from the US.  The US needs to keep that in mind as it approaches the upcoming diplomatic showdown with China.