China’s economy is strong despite the global recession. “Make Way For The Rise Of Asia” says Kishore Mahbuban, author of “The New Asian Hemisphere: The Irresistible Shift of Global Power to the East.” Many academics, journalists and businesspeople share Mahbuban’s opinion that America is declining economically and that China is the next superpower. Their predictions are premature, as it will take decades before it can be called the world’s economic superpower. Fortunately for the U.S., it is far from losing its international edge in business and innovation.
China’s prosperity should be welcomed. It benefits the Chinese people through better living standards, social mobility, economic freedom and improved government safety nets. China’s growth will also increase demand for foreign products and spur trade.
Despite its strengths, China still lags far behind the U.S.—especially in economic freedom and its capacity for innovation. Its GDP per capita is relatively low and its government inhibits innovation. While China should be recognized for its progress and strong economy, it is ridiculous to discount the U.S.’ economic potential or prematurely pontificate about American decline. The U.S.’ diverse population and capacity for innovation will keep it economically competitive and geopolitically strong for years to come.
Proponents of America’s decline make it appear as if China outperforms the U.S. both economically and educationally. In China, however, more than 20 million college students have few job prospects and half of its engineering graduates only have associate degrees. Naturally, given China’s massive population, it will eventually overtake the U.S. in its population of scientists. The U.S. though, educates more engineers per capita than does China and in its 2008-2009 report, the World Economic Forum ranked the U.S. as the most competitive economy. Minxin Pei, senior associate at the Carnegie Endowment for International Peace, says that despite China’s rapid growth, it will take nearly 50 years for the average income in China to equal the average income in America.
A recent article in the New York Times suggests that job opportunities for American graduates in China are plentiful and that so are the Americans seeking these positions as evidence of American economic decline. It recounts stories of Americans and their successful jobs in China; yet, it cites no research and provides no concrete figures. Some Americans may easily find work in China like the Americans in the article. Shaun Rein, founder and managing director of the China Market Research Group thinks not. Jobs for recent college grads are scarce in China. And Rien says that Chinese companies would rather hire Chinese employees who understand both American and Chinese cultures than American applicants. Rein says that Americans have to convince employers that they are more valuable than the Chinese applicants—hundreds of thousands of whom have the same western education as the Americans.
Jobs are scarce in China. Unemployment in cities is officially 4.3 percent, but unemployment among last year’s Chinese graduates is about 12 percent. And the number of Chinese college students is growing. The bottom line is that Americans will struggle to find jobs in China just as they will in the U.S.
Both countries suffer slow growth and high unemployment rates in this tough economy. The difference between the U.S. and China is that American culture and its government fosters innovation. The U.S. is home to a majority of the world’s most innovative companies and people. In 2003 IBM, an American company garnered five times as many patents as China and India gained combined. In 2008 the U.S. still greatly outpaced China in the number of patents generated.
Former Woodrow Wilson School dean and current Director of Policy Planning for the U.S. State Department, Anne Marie Slaughter talks about America’s creativity in “America’s Edge,” published in Foreign Affairs this year. She says that the U.S.’ capacity for networking will “renew its power and restore its global purpose.” Slaughter says that China’s economic and political policies will prevent it from becoming an international leader in economics.
American companies and even American universities are experts at networking and marketing themselves and their products. Slaughter explains how American multinationals use networking to create well-selling products in markets around the world. A recent article in The Economist points to America’s history to show how important marketing has been for American innovation: “Edison did not invent the light bulb and Ford did not think up the motor car, but both came up with the business-model innovations required to profit from those marvels.”
American universities also market themselves to draw foreign students who contribute greatly to innovation in America. Fareed Zakaria, author of “The Rise of the Rest,” says that nearly half of all science researchers in the U.S. are either foreign students or immigrants. Foreign nationals made up 62% of all PhDs in the 2006 in the U.S., but they only comprised 7% of all B.S. degrees. Although the stay rate—percentage of foreign students who stay in the U.S. upon graduation—decreased slightly over the past few years, it remains high. A little over two-thirds of foreign PhD students stayed in the U.S. for at least 2 years after graduation. The stay rate will depend on America’s economy and immigration policies and whether foreign students and researchers have job prospects there in the future. As of 2009, the U.S. State Department is reworking its policies to reduce the time it takes to process Visas to two weeks.
For now though, as a 2008 RAND corporation report says, “America accounts for 40 percent of the total world’s spending on scientific research and development, employs 70 percent of the world’s Nobel Prize winners and is home to three-quarters of the world’s top 40 universities.” Diversity helps America discover new markets. Like Henry Chesbrough of the Berkeley Haas School of Business says, Americans are so successful at marketing because of their “ability to listen to, and learn from, customers in new markets.”
The Chinese government is trying to increase its capacity for innovation through state-created communities that consist of University campuses and research centers of International and Asian firms. These state-planned centers of innovation will not recreate the dynamic environment that encourages innovation in the U.S. because innovation comes from what Slaughter describes as “positive conflict”—the ability to challenge the status quo. China wants to produce more innovative citizens yet it controls the simplest aspects of their lives.
During the 2008 Beijing Olympics, China exposed how strictly its censors media. Foreign journalists were appalled by how much the government censored the internet. Chinese journalists also face tough restrictions—China leads the world in number of Journalists imprisoned. The Chinese government controls foreign trade just as strictly. On August 12th, 2009 the WTO ruled that China has been violating trade rules by restricting imports of media—movies, music etc. The state film distribution organization, China Film Corp., can decide for example that this summer the Chinese people will watch Harry Potter and not Star Trek. Unless China allows its people more freedom, both personal and economic, its private sector will remain stifled and small.
China has a strong and growing economy that is helping many people escape poverty and improve their lives. The U.S. and the world though, should not lose confidence in America. Eric Schmidt, CEO of Google’s reminds us that, “innovation is how America works…creative destruction, this constant process of layoffs and new jobs and new companies and so forth is key to America’s competitiveness.” That mentality will make America the world’s most competitive economy for decades to come.
