10 China Myths for the New Decade

January 28, 2010
10 China Myths for the New Decade
by Derek Scissors, Ph.D.
Backgrounder #2366

Abstract: China's economic growth has been accompanied by growing misinformation about its economy. Contrary to conventional wisdom, China is not leading the world out of a recession, is no longer moving toward a market economy, is not America's banker, and may never surpass the U.S. Heritage Foundation Asia expert Derek Scissors debunks 10 leading myths about the Chinese economy and replaces them with the accurate picture necessary to guide American policy.

The article is too lengthy to include here. Therefore only the ten myths have been included. To read the full article, visit this link.

Myth #1: China is now the leading engine for global growth.

Truth: China detracts from the rest of the world's growth in gross domestic product (GDP).

Myth #2: China could surpass the U.S. as the largest economy in 10 years.

Truth: There is a reasonable chance that China will never surpass the U.S.

Myth #3: China will surpass Japan as the world's second-largest economy in 2010.

Truth: China probably surpassed Japan several years ago.

Myth #4: China is America's banker.

Truth: If there was ever any Chinese financial influence, it is not there now.

Myth #5: The U.S. and China are intensely interdependent--"Chimerica" has emerged.

Truth: China depends far more heavily on the U.S. than the U.S. depends on China.

Myth #6: China's controlled exchange rate is a central factor in the global economy.

Truth: The controlled exchange rate is merely one symptom of a larger problem.

Myth #7: China continues to reform its economy, with perhaps an understandable pause due to the financial crisis.

Truth: China's market reform slowed sharply in 2002 and effectively stopped in 2005.

Myth #8: China is rebalancing toward more domestic consumption.

Truth: The dominance of investment over consumption in driving China's economy is intensifying.

Myth #9: China's greenhouse gas emissions are about the same as America's.

Truth: China's emissions are as much as 25 percent larger, and the gap is widening every day.

Myth #10: China has an official program to substantially cut its carbon emissions.

Truth: The goal is to cut carbon emissions intensity. Actual emissions will soar in the next decade.