Time's Five China Lessons

Time magazine has an article in this week's issue by Bill Powell saying we can learn some things from China. He's lived in China for five years and is married to a woman from Shanghai, so he's no doubt a knowledgeable guy. Yet I'd like to offer my counterpoints.

1.) Be Ambitious
P: Powell says China possesses a palpable sense of progress that allows it to overcome NIMBY-related objections. And its infrastructure spending more than doubles that of the U.S., despite our sizeable stimulus bill. Whatever happened to our sense of progress?

Me: Our sense of progress got tempered by a greater appreciation for labor standards, minority rights, and the environment. China's "progress" may be impressive, but it comes at a cost. Last year, 3215 people died in coal mining accidents; the government touts that this is a drop of 15 percent from the year before. [Source]

To paraphrase China's growing environmentalism, "What good is progress if you can't breathe the air?"

Time provided its own rebuttal for the first point, with its video on Guiyu (贵屿), an electronic waste city in Guangdong Province (广东). [Source]

2.) Education Matters
P: China's literacy rate tops that of the U.S., kids go to school on Saturday, they're learning English, and the emphasis on math and science is enviable. This will have an impact on their position in the global economy 20 years from now.

Me: I agree, but I remember hearing the same things about Japan 20 years ago. Then their economy suffered a big setback, and they've struggled to overcome their structural limitations ever since.

There's a reason why kids study so hard in China; it's because their parents make them. And there's a reason why parents make them; it's because these days, the future of the family depends on the grandchild.

The one-child policy that went into effect 30 years ago is now in its second generation. In the future, that one grandchild will be responsible for supporting not only his two parents, but possibly even his grandparents.

No pressure, kid.

3.) Look After the Elderly
P: The number of elderly in the U.S. will almost double by 2030. We need to learn to provide home care like the Chinese, for whom -- according to his wife -- putting a parent into a nursing home is "a great shame." Senior-care costs are, for the most part, borne by families.

Me: That's nice, but there's another aspect of Chinese society that wasn't mentioned -- while the U.S. has had a federal social security system in place since the 1930s, China has yet to institute one. In a sense, adults take care of their retired parents because they have to -- there are no other options.

4.) Save More
P: The average Chinese household saves 20%, as opposed to (now) 4-6% in the U.S. In 2005, before the financial crisis, it got down to zero. The U.S. needs to learn a little frugality.

Me: Agreed, but the differences between the U.S. and Chinese economic structures make citing numbers akin to comparing apples with [mandarin] oranges. (Ha!)

The reason the U.S. hasn't saved as much as China is because it hasn't needed to. Social Security provides stability for retired Americans. The down payment required to buy a house is much lower, and there's the tax-deductability of mortgage interest that provides an incentive to borrow and buy rather than save and wait.

In addition, we tend to put our savings into non-cash assets, like our more transparent stock market. There's also a question as to how 401k contributions count toward that savings percentage (and for that matter, an employer's matching contributions). China lacks a comparable system of Roth and traditional IRAs.

As I think back to 2005, the year of 0% savings, I remember there being no down payment requirement for mortgages. While it certainly wasn't a good idea in retrospect, I think it explains why Americans didn't save anything -- if you don't even need to save to buy a house, then why bother?

5.) Look Over the Horizon
P: Powell's final lesson is an anecdotal extrapolation. He multiplies one young man's success story by millions and call on the reader to "get a sense of what a forward-looking country this once very backward society has become." He also includes a quote from another, unnamed expatriate.

Me: This is the weakest lesson of the five; it seems like he just threw is in there to get from four to five lessons. What numbers are in there? None. Where did he come up with the "millions" multiplier? He pulled it out of an orifice.

My conclusion:
Yes, China's got a lot of momentum; you could see how proud they were last year during the Olympics. And similar to the U.S. at the start of the 20th century, it's the rising star of the 21st.

However, that doesn't mean that we necessarily need to learn from it -- at least, not anymore than we needed to learn from Japan. China's a different country with a different system. Its national characteristics are effects derived from unique causes, and those causes need to be considered before declaring applicability to our own situation.

So while I agree with Powell's premise that we need to be more conservative financially, more involved in our children's education, and more considerate of the elderly, that's not because of China.

It's because that's what will sustain America's prosperity in the long run.

[One more thing: Contrary to the picture in the upper right, China's a good bit older than 60. Time's assertation gives the impression that a civilization and its government are the same thing. As a democracy looking at a communist regime in the post-Cold War era, we should know better.]