FX: Murdoch Warns Of China Economic Prowess

[JMS]

http://www.myfoxny.com/dpp/your_mone...s-20101116-ncx

Murdoch Warns Of China Economic Prowess

NewsCore - The US faces an immense economic challenge from China's explosive economic growth, free trade has gotten a bad rap, and President Barack Obama will have trouble getting reelected, News Corp. Chairman and CEO Rupert Murdoch told FOX Business Tuesday in a wide-ranging interview.
Speaking with Fox Business' Liz Claman, Murdoch also explained that the US is still in the middle of a very bad recession and defended the motives of the up-and-coming Tea Party.
"What was really scary," Murdoch said, "was when Larry Summers, the chief economic adviser of the President, said, when we look back at the end of the century, people are not going to talk about this recession, they are going to talk about the rise of China."
China, Summers pointed out in a speech earlier Monday at the Wall Street Journal's CEO Council in Washington, has doubled its standard of living in less than ten years, compared to the US where it has doubled every thirty years over the last century.
"They [China] have enormous economic power," Murdoch added. "I'm not saying they would use it to hurt people, they would use it to certainly help themselves."
Saying that China's staggering population of 1.3 billion will continue to drive the country's economy, Murdoch added that, "They [China] are not going to give up on expanding and manufacturing jobs, service jobs -- anything at all -- so they can lift the standard of living of the whole population."
The News Corp. chairman also lamented recent discourse on free trade.
"There is a lot of ignorant talk this morning about how free trade has become a dirty word with the public," Murdoch said. "If we don't have free trade, we don't have Walmart, we don't have low prices, we don't have non-inflation.
"We have got to use free trade to sell more to these developing countries like Brazil, like China, like Vietnam and I think it is happening," he added.
On the Tea Party, the political movement that helped energize Republican efforts to retake the House earlier this month, Murdoch said, "People talk about them being extremists. They're not extremists, they're moderate centrists. They simply say that we ought to have a balanced budget with a smaller government and people ought to take more responsibility for themselves and their own lives."
And as to whether Obama will be re-elected president in 2012, Murdoch said, "I don't know."
"He's talking the talk. Will he walk it -- is the big question. I think he has a real problem. I think if he does the sort of things which his commissions are suggesting, then he would be in great danger of losing his left wing base."
And as for the economy, "We're still in a very deep recession," Murdoch said.
"We have got a long way to go and there are a lot of people that are hurting. For a long time we have been living way beyond our means," he added.
"The old-fashioned thing is you used to have to save before you bought your first house," Murdoch said. "That all went by the board. That was all too easy. We have been on an enormous spending and borrowing spree, which is related right into people's lives. Now it is going to be paid for and it is going to be tough on all people, wealthy people as well as poor people."
News Corp. owns Fox Business, NewsCore, and MyFoxNY.com the publishers of this report.

[AsburySkinsFan]

JMS gotta lay off the Murdoch/NewsCorp sauce this morning.

[Predicto]

Pretty much the same thing that Soros said.

[dwbiggs]

And the opposing view....

http://www.thepresidentpost.com/?p=5403

Editor’s note: Joseph S. Nye is University Distinguished Service Professor at Harvard University, and author of the “The Future of Power,” which PublicAffairs press will publish in February. In 1993 and 1994 he was chairman of the National Intelligence Council, which coordinates intelligence estimates for the president. In 1994 and 1995, he served as assistant secretary of defense for international security affairs.

Cambridge, Massachusetts (CNN) — A century ago, the rise of Germany and the fear it created in Britain led to world war. Some analysts predict a similar fate from the rise of China and the fear that is creating in the United States.

One should be skeptical about such dire projections. By 1900, Germany had surpassed Britain in industrial power, and Kaiser Wilhelm II was pursuing an adventurous, globally oriented foreign policy that was bound to bring about a clash with other great powers.

In contrast, China still lags far behind the United States economically and militarily, and has focused its policies primarily on its region and on its economic development. While its “market Leninist” economic model (the so-called “Beijing Consensus”) provides soft power in authoritarian countries, it has the opposite effect in many democracies. Soft power is the ability to produce preferred outcomes by attraction rather than coercion or payment, and China has announced major efforts to increase its soft power.

Even if China’s gross domestic product passes that of the United States around 2030 (as Goldman Sachs projects), the two economies would be equivalent in size, but not equal in composition. China would still have a vast underdeveloped countryside, and it will begin to face demographic problems from the delayed effects of the one child per couple policy it enforced in the 20th century. Moreover, as countries develop, there is a tendency for growth rates to slow.

Assuming a 6 percent Chinese growth and only 2 percent American growth after 2030, China would not equal the United States in per capita income until sometime in the second half of the century. China is a long way from posing the kind of challenge to America that the kaiser’s Germany posed when it passed Britain at the beginning of the last century.

Unlike India, which was born with a democratic constitution, China has not yet found a way to solve the problem of demands for political participation (if not democracy) that tend to accompany rising per capita income.

The ideology of communism is long gone, and the legitimacy of the ruling party depends upon economic growth and ethnic Han nationalism. Premier Wen Jiabao talks of reform but faces conservative resistance. The Chinese political system suffers from a high level of corruption, and should the economy falter, it is vulnerable to political unrest.

Whether China can develop a formula that can manage an expanding urban middle class, regional inequality, and resentment among ethnic minorities remains to be seen. Xi Jinping has been anointed the likely next leader (in 2012), but not even he knows how China’s political future will evolve.

The current generation of Chinese leaders, realizing that rapid economic growth is the key to domestic political stability, has focused on economic development and what they call a “harmonious” international environment that will not disrupt their country’s growth. But generations change, power often creates hubris, and appetites sometimes grow with eating.

Already, some younger party members and military men argue that China’s success in recovery from the global financial crisis should lead to a greater political role. And the United States objected last summer when China defined its “core interests” as including the distant waters of the South China Sea.

TED.com: Why nations should pursue “soft power”

Whatever Chinese intentions are, it is doubtful that China will have the military capability to expel the United States from East Asia. The region has its own internal balance of powers, and in that context, many states welcome an American presence in the region. Chinese leaders will have to contend with the reactions of other countries as well as the constraints created by their own objectives of economic growth and the need for external markets and resources.

Too aggressive a Chinese military posture could produce a countervailing coalition among its neighbors that would weaken both its hard and soft power. China’s recent overreaction to a maritime collision near the disputed Senkaku islands led to a hardening of attitudes in Japan. A recent Pew poll of 16 countries around the world found a positive attitude towards China’s economic rise, but not its military rise.

The fact that China is not likely to become a peer competitor to the United States on a global basis does not mean that the dangers of conflict in Asia can be completely ruled out. But given the global challenges such as financial stability, cybersecurity, and climate change that both China and the United States will face, they have much to gain from working together.

Unfortunately, hubris and nationalism among some Chinese and unnecessary fear of decline among some Americans make it difficult to assure this future.

The opinions expressed in this commentary are solely those of Joseph S. Nye.

[CurseReversed]

Both points are interesting, I tend to side with the viewpoint that china's rise will be less dramatic then expected.

They have a lot of problems to balance out their astounding success.

Bringing 1.3 billion people onto the grid and providing them modern services is a pretty high mountain top.

On the other hand If somehow the U.S. were to self destruct, well then that would definitely put them in the drivers seat, this is a real possibility.