The great fall of China

Walter Mead writes in the LA Times about an almost unreported adjustment of China's GDP by the World Bank,

China's economy, said the bank, is smaller than it thought. About 40% smaller.

Fourty percent smaller than previously thought! This reduction is astounding. Walter Mead continues with the significance of this GDP adjustment in terms of economies.

China, it turns out, isn't a $10-trillion economy on the brink of catching up with the United States. It is a $6-trillion economy, less than half our size. For the foreseeable future, China will have far less money to spend on its military and will face much deeper social and economic problems at home than experts previously believed.

Finally, he explains the most significant fact.

Under the old figures, China was predicted to pass the United States as the world's largest economy in 2012. That isn't going to happen.

He goes on to explain how the GDP numbers were readjusted and also discusses China's environmental issues.

And there is the environment. With poor air quality, acute water shortages, massive pollution in major watersheds and many other environmental problems, China needs to make enormous investments in the environment to avoid major disasters.

While I don't buy into his global warming concerns, China does have significant local environmental issues it must clean up. Finally he discusses China's future political stability.

China's political stability may be more fragile than thought. The country faces huge domestic challenges -- an aging population lacking any form of social security, wholesale problems in the financial system that dwarf those revealed in the U.S. sub-prime loan mess and the breakdown of its health system. These problems are as big as ever, but China has fewer resources to meet them than we thought.

So, economically, politically, and militarily, China is not as big and menacing as once thought. This fact is a good thing as China is still a communist nation, albeit propped up by the capitalistic economies of Hong Kong.

As a communist nation, it still represses its people, lacks basic civil rights for its citizens, and is a threat to free democracies like the United States. Maybe now that it understands it economy is 40% poorer than previously thought, it will look more and more to the capitalistic economy of Hong Kong and the freedoms that population has compared to the rest of China and become less restrictive on the rest of its population. In effect, become fully democratic.

However, until this day, we still need to watch China. Since all wars are over resources and China now lacks 40% of the economic resources it once thought it had, we need to ensure China does not take over another thriving capitalistic economy to get it out of its mess. That capitalistic economy is Taiwan.