Fallows compares China to Japan

Writer and author James Fallows (and his wife Deborah) have been living in China recently (I assume Fallows is working on a book on China) and he’s writing for The Atlantic. Fallows has a great, long, article on China that’s worth reading in it’s entirety but I wanted to highlight the part where he compares China to Japan:

One other aspect of China’s development to date has helped American companies in their dealings with it. This is the fact that China, so far, has been different in crucial ways from America’s previous great Asian challenger: Japan. Americans have come to view the Japanese economy as a kind of joke, mainly because the Tokyo Stock Exchange has been in a slump for nearly 20 years. Nonetheless, Japan remains the world’s second-largest economy. Toyota has overtaken General Motors to become the largest automaker; Japan’s exporters have continually increased their sales of electronics and other high-value goods; and the long-standing logic of the Japanese system, in which consumers and investors suffer so that producers may thrive, remains intact.

China’s economy, technically still socialist, has also been strangely more open than Japan’s. Through its first four decades of growth after World War II, Japan was essentially closed to foreign ownership and investment. (Texas Instruments and IBM were two highly publicized exceptions to the rule.) China’s industrial boom, by contrast, is occurring during the age of the World Trade Organization, to which it was admitted in 2001. Under WTO rules, China is obliged to open itself to foreign investment and ownership at a much earlier stage of its development than Japan did. Its export boom has been led by foreign firms. China is rife with intellectual piracy, hidden trade barriers, and other impediments. But overall it is harder for foreign economies or foreign companies to claim damage from China’s trade policies than from Japan’s.

When I was living in Japan through its boom of the late ’80s, I argued in this magazine that its behavior illustrated some great historic truths that economic models cannot easily include. Sometimes societies pursue goals other than the one economists consider rational: the greatest possible growth of consumer well-being. This has been true of America mainly during wartime, but also when it has pursued martial-toned projects thought to be in the nation’s interest: building interstate highways, sending men into space, perhaps someday developing alternative energy supplies. In a more consistent way, over decades, this has been true of Japan.



The Atlantic Online | July/August 2007 | China Makes, The World Takes | James Fallows