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The Rise of East Asia: Threat or Opportunity
The question of whether China's success story will continue is intimately interwoven with the question of whether China is a threat or at least should be regarded as a threat by the rest of us. And I want to deal with that under an economic heading, I want to deal with it in domestic and political terms and I wanted to deal with it in environmental terms. I want to look at the security aspect, especially in relations to Taiwan.

Is China a threat in economic terms? In one sense, I think, it is an insultingly foolish question. I don't believe that for one-quarter or one-fifth of humanity to get better off is bad for the rest of us. Would you prefer China dirt poor and starving to increasing modern and prosperous?

Would we prefer China engulfed in the sort of turmoil that we saw in the 1920's and 30's or would we prefer China stable? The problem is, politically that those who gain most in America and Europe from Chinese economic growth, don't really see that they are benefiting and why they are benefiting. But those who lose out see only too clearly.

The beneficiaries are, first of all, very obviously, consumers. Consumers, for example, who have in the United States seen in the last decades, the real price of clothing and shoes failing by 30% because of the cheapness of Chinese import. And the beneficiaries are American home purchasers.

The American trade deficit, at about 7 to 7 ½% of GDP, requires, as I said earlier, America to borrow hugely from the rest of the world. Roughly speaking about 2 ½ billion dollar a day, weekends included. The cost of that debt and therefore the cost of house purchase for American citizens would be far higher were it not for the amount of American paper which is being bought by China and other East Asian countries. They regard it as part of the price that they have to pay in order to keep American's markets open. But there is something a little absurd about China running up banking debts even in excess of its foreign exchange reserves in order to go on exporting to the United States, in order to create jobs, in order to secure political stability. And on the other hand, America recklessly disregarding its fiscal and trade deficit because it can borrow, at the moment, whatever it wants.

The great American columnist called Herb Stein who once said "Thing that cannot go on forever, don't." And I worry that one day; somebody is going to wake up, as they say in Starbucks, and smell the coffee.

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