Is China a Galapagos?

Today China got two choices, to fall or to try to stand as an economic super power. The Chinese authorities economically want to become as USA, and is almost there. To manage this they have stipulated an economic growth on 6.5%. China work hard to grow and the cost is debt and less needed reforms. Economists all over the World think this is more fiction than possible, and predict a disaster in the Chinese economy. Most likely of April 2016 is a secular stagnation. This is a situation where the country has a lot of resources and a long lasting low economic growth.

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As mentioned China have two possible outcomes an economic disaster or becoming a new super power due to some new reforms. Some economic analysts think about a third alternative – a gradual stagnation. In the seventies we had the same developing situation in Japan; ¼ of the USA national product per person. Democratically we find China like Japan in the eighties; 6 workers per retired. In a few years China will have the same ratio as Japan in 2015; 2 workers per retired person. The similarities are striking and China is running into the same situations as Japan faced short time ago, but China is bigger – much bigger. The only difference is the responsibility of the Japanese keiretsu (industry magnates) is changed for the state controlled companies in China.

China got a lot of debt; about a growing 160% of national product. Well, China grows and growing costs, but we cannot overlook the fact that debt sooner or later has to be played. Bad income is often hidden in complex growing and buying structures.

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Within economic theory we find a syndrome called the Galapagos syndrome. This is a word stolen from Charles Darvin to explain the evolution theory. For example Japan grows fast in the nineties and entered ten years of no growth. The internal Japanese market did not expand out of Japan. Now you see the same start in China; big companies in China, but practically unknown outside. Is China a Galapagos?

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