For and Against China Optimism

Martin Wolf thinks the past 20 years worth of convergence between the West and the developing world will continue apace:

Until recently, political, social and policy obstacles were decisive. This has not been true for several decades. Why should these re-emerge? True, many reforms will be required if growth is to proceed, but growth itself is likely to transform societies and politics in needed directions. True, neither China nor India may surpass US output per head: Japan failed to do so. But they are far away today. Why should they be unable to reach, say, half of US productivity? That is Portugal’s level. Can China match Portugal? Surely.

Of course, catastrophes may intervene. But it is striking that even world wars and depressions merely interrupted the rise of earlier industrialisers. If we leave aside nuclear war, nothing seems likely to halt the ascent of the big emerging countries, though it may well be delayed. China and India are big enough to drive growth from their domestic markets if protectionism takes hold. Indeed, they are big enough to drive growth even in other emerging countries as well.

I like this argument for India, which of course is growing a good deal slower than is China, than I do for China. The reason is that the political risks involved in China continue to seem to me to be very severe. If India’s rise is interrupted, it’ll be interrupted. But the Chinese political system is a good deal more brittle. A temporary economic contraction could lead to major political chaos and that could lead to anything. You could imagine China being as rich as Portugal in 20 years, or you could imagine China being in one of its sporadic episodes of central government collapse and civil war.