Don’t bet your bank balance on China overtaking the United States as the world’s most powerful nation, former Australian Prime Minister John Howard says.
Howard passed the comment during an address to the Property Council New Zealand’s annual conference in Queenstown today (Thursday).
“We must take care not to be mesmerised by China,” he says.
“I think this applies particularly to some people in politics and some of the commentariat in my country, Australia.
“I used to read those stories about Japan in the 1980s.
“I remember reading a book called The End of the American Century, and the whole theory was it was only a matter of time before Japan overwhelmed the United States.”
Howard says there’s no doubt the transformation of China has been unbelievable, but he referred to two elephants in the room.
“The first and most important is demographics – to use a cliche, China will grow old before she grows rich.
“The one-child policy has condemned China to a demographic challenge of mammoth proportions.
“As the years go by and by, more and more Chinese people will depend on the rest of the community to support them in their retirement.
“If you think Europe, New Zealand, Australia and United States have a demographic problem, it’s nothing compared with what China has got.
“And in this way, it’s starkly different from India – India has roughly the same population at the present time and it’s vastly younger.
“You all know the analogy of the slowly-turning ocean liner – well, I can’t imagine an ocean liner turning more slowly than China having to overcome the legacy of the one-child policy.
“Its consequence is enormous.”
Howard pointed to democracy as the other elephant in China’s room.
“There are many views around the place as to whether a country can exist with a market-based approach and political authoritarianism.
“I belong very much to school that you do in the long run have to be both economically and politically liberal.
“It’s understandable that the first generation of the newly-enriched Chinese, the middle class, will put up with being told what to do by their political masters, but their children won’t, because the next generation will take that economic empowerment for granted and demand equivalent political empowerment.”
Howard says the “middle classing” of Asia, particularly China, had lifted more people out of poverty than any other event since the Industrial Revolution.
“When people criticise globalisation and criticise capitalism and criticise economic growth, let’s tell them of the hundreds of millions of people who are now out of poverty in the countries like China that would have still been in poverty if it hadn’t been for the spread of competitive capitalism – and that extraordinary decision of Deng
Xiaoping in 1978 to open up the Chinese economy and to decide that it should over time become part of the liberal west, economically-speaking.
Howard also praised New Zealand’s reforms of the 1980s and early 1990s.
“I think, by any measurement, those few years of deregulation here in New Zealand, and the new taxation system and the removal of so many of the subsidies, and later on, with the change of Government, the labour deregulation, was quite an example to the rest of the world.”
Howard urged New Zealand and Australia to resist very strongly any unreasonable objections to foreign investment.
“There’s a bit of a debate, very low-level, in Australia, about Chinese investment.
“I don’t think we should get in any way spooked about Chinese investment. We’ve had that debate before.
“I can remember years ago when I first went into politics, some people in the unions in Australia complaining about Detroit running our motor manufacturing industry.
“Right now, with the shrinking investment, people would love Detroit to be more heavily involved in the motor manufacturing industry.
“I can remember the debate about Japanese foreign investment – people got rather freaked out about the level of that.
“We now, of course, look back and say, ‘well, what was all the fuss about?’ We can’t take full advantage of this great region unless both of our economies are open to investment.
“We can’t expect people to buy our products and our resources unless we give them the opportunity to invest as well.”
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