The Reality Behind the Olympics Coverage

My advice while you're watching the coverage of China that will start this weekend is, prepare to be dazzled, and prepare to be skeptical. Beijing and Shanghai are probably the most modern cities in the world, especially in their city centers, and they appear to bespeak a country as prosperous and advanced as our own, or nearly so. That's not the case. The national average income in China today is less than $150 per-month, and more than half of Chinese live on less than half that. No more than 20 percent have any health care coverage, and in a system that many Chinese call "pay or die," those that don't have coverage have to fend for themselves. (That's the main reason Chinese families save 30 percent of their small incomes.) China's economic progress since 1990 is truly stunning, with GDP and incomes more than doubling each decade, and exports growing an astonishing 20 to 25 percent a year for a generation. A new model of development has driven this extraordinary progress, in which China invited the world's advanced corporations to transfer entire business operations to a country that promised to soon be one of the world's biggest markets and is already home to the world's largest, low-cost skilled workforce. The result, in less than a generation, is that China has gone from being an economic backwater to one of the world's leading production and assembly platforms. That also means that while the spectacular architecture on display in the Olympics is all made in China, most of what's modern in the Chinese economy is still either foreign-owned or clones of foreign operations. It will be another decade or more before native Chinese companies can compete with their Western counterparts.

There's also a big "if" hanging over China's future. Everywhere else in the world, great economic progress has spurred demands for more political rights by those making the progress. China's leadership has always responded harshly to such demands - Tiananmen is only the best-known instance in which the government harshly put down political protests, with large losses of life.(Human rights groups estimate that China executes 10,000 to 15,000 people each year, and a significant share have likely been convicted of political crimes.) China also acknowledges that every year, at least 70,000 protests of more than 100 people occur, and the real incidence is probably quite a bit higher than that. The quandary for China is the almost certain collision sometime in the next decade of large scale popular demands for more political rights, and very small circle of leaders determined to maintain their monopoly on political authority. Thus far, the leadership's strategy has avoided such a collision: Preserve central authority by delivering extraordinary economic growth and progress. But since China shifted to market-based policies in the 1980s-with wrenching dislocations for hundreds of millions of people- it has never experienced an economic downturn. China may be facing at least a moderate slowdown this year and next: With high oil prices and financial problems here and in Europe, manufacturing orders and export growth have both fallen sharply for the first time. A serious slowdown may not happen this year or next, but it will happen - and the world will watch to see if the Chinese leadership will permit at last initial moves towards greater liberty and democracy.

To learn more about China's development and economy, read Futurecast: How Superpowers, Populations, and Globalization Will Change the Way You Live and Work, by Robert Shapiro (St. Martins, 2008).