Chimerica was actually coined in the shadow of relation-dependency as both China and America are equally dependent on each other. Holding 10% of all US public debt, China has become Washington’s largest creditor, foreign or domestic. China’s foreign exchange reserves stand at about $ 2 trillion as compared to America’s feeble $ 73 billion.
The direct contrast between both the countries is their economic and political philosophy. The Free world believes that capitalism really works, especially when the rich nations gather their massive wealth at the expense of the poor. Monetarism basically states that the markets should be able to work with or without minimal intervention from government.
But in recent events, it has been seen that the greed driving global financial institutions needs to be controlled. Some people have called this the death of capitalism. Till the end of the Cold War, capitalism had a special appeal because of the stark contrast between the living conditions of the people on the two sides, a contrast most pronounced from 1955 to 1990. Determination was showed by the Chinese President Hu Jintao when he said, at the 30th anniversary of the reforms, that China would never adopt a western political system.
In 1998 the rest of Asia experienced a recession while China claimed an 8% growth rate; it has been maintained since then. In 1999 China amended its constitution to acknowledge private enterprise as a component of the economy. China’s GDP growth hit 11.5 in the first nine months of 2007 and was at 9.8% in 2008. However, the country is facing various crises that might not provide it with the stable position in the economic world anymore.
Asia is heavily export-dependent. In China the challenge to sustain its economy is to overproduce in terms of exports and investments compared to America to save more and consume less. The Americans and Europeans have stopped buying Chinese products, therefore the Chinese economy is slowing down. Export reduction will lead to a GDP slowdown. Only urbanites in China are getting richer, while a 95% decrease has been observed in China’s incidence of rural poverty since 1978; the urban-ruler gap has also increased by 30% in this period.
Social security, medicare, unemployment insurance, and public education are examples of government-run social programmes, especially in the communist and socialist countries. According to WHO, China spends less than 1% of GDP on healthcare, ranking at 156 out of 196 nations. According to another report 10 million migrant workers have lost their jobs. Pollution is also the biggest issue in China. Around 70% of its growing economy needs are met by coal. With some 50 new coal mines opening annually, the Chinese government needs to find viable alternative sources of energy.
According to Jim Walker, the global recession would end China’s 30-year boom, because it is caught in ‘malivestment’ crisis. ‘Malinvestment’ means bad investment in a sense that once there is normalization of monitory conditions, the cracks in the industrial and capital structures begin to show up.
China needs to overhaul its social welfare system to provide universal basic health care, education, unemployment and retirement benefits for the country’s 1.3 billion people. The Growth Enterprise Board has to promote intercommunication between highly innovative enterprises and the capital market. And 15% of insurance could be invested in the stock market, while currently it is 8% investment. Economists are also expecting 2% growth in the Asian region; China would achieve a 4 to 5 percent growth rate with a 30% probability of negative growth this fiscal year.
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