Carroll County Times
Carroll County Times Opinion

Batavick: China's economy could be on fragile footing

We should all be familiar with the iconic World Trade Center at Baltimore's Inner Harbor. At 32 stories, it has towered over Harbor Place for almost 40 years. Now I'd like you to picture eight such buildings, cheek to jowl, and perhaps a few stories higher. Next, conjure up another grouping of similar buildings a few blocks away, different in style, but just as densely packed together. Then, think of riding for 50 minutes in bumper-to-bumper traffic on an expressway with the view almost never changing —repetitive clusters of 20- to 30-story buildings, most of which serve as apartment houses and all of which have been built in the last 10 to 15 years. This is Xi'An, China, a city of nearly 9 million.

The Chinese tell a joke that their national bird is still the crane, only now the word refers to the omnipresent construction cranes dotting each city's growing skyline. The people who live in these new apartment houses manufacture aircraft parts that used to be made in cities like Seattle and pharmaceuticals that use to come from states like New Jersey. They also work in auto factories where instead of Ford Mustangs, China's BYD car (it stands for Build Your Dreams) rolls off assembly lines. And to make matters worse, last December GM announced it will sell the Chinese-built Buick Envision, a crossover SUV, in the U.S. market.


A few decades ago, many Chinese skilled workers lived on small farms at a subsistence level. Today they've "built their dreams" by moving to the city, buying new cars and enjoying indoor plumbing. They count themselves among the winners in today's global economy, and the residents of Detroit wouldn't disagree.

A number of years ago I read somewhere that there are cities in China that are bigger in population and square miles than New York City and London, and most Americans have never even heard of them, let alone know how to pronounce their names. For me, Xi'An (pronounced She-Ahn) was one of these cities, though Discovery Channel fans may recognize it as the stepping-off point to visit the fabled terra-cotta warriors located an hour or so east of the city. Xi'An is just one of a half-dozen or so second-tier cities that have exploded in size to accommodate the manufacturing colossus that is modern-day China.


China's GDP approaches $11 trillion and the country boasts more than 250 billionaires and 2.7 million millionaires. For me it was difficult to juggle this market-driven and state-run capitalist economy with China's status as the world's largest communist country. An inveterate book collector, while there I bought a copy of Mao Zedong's "Little Red Book" that helped fuel the horrors of the Cultural Revolution from 1966 to 1976. In it he predicted, "The socialist system will eventually replace the capitalist system; this is an objective law independent of man's will." Souring Mao's legacy, this so-called law now has no place in reality.

So, does the mere fact that today China has 27 Ferrari dealerships disqualify it as a communist country? How does the party leadership rationalize this "one country/two systems" philosophy that has evolved since 1978? The answer lies in a folksy saying someone there shared with me: "We don't care if the cat is black or white as long as it catches mice," meaning, "as long as we all get rich." Mao wouldn't approve, but how else to motivate, employ and feed a population of 1.4 billion and growing?

Some economists are concerned that China is in the midst of an economic bubble and that it will soon burst. Others believe there are signs this has already happened. To save on rising labor costs, a few multi-nationals have moved their factories from China to Vietnam and Cambodia, echoing what was done to Mexico in the 1990s. And with the increasing use of 3-D printing, the airlines may find it more opportune to manufacture parts on-demand in Dallas than having them made and shipped from far-off Xi'An.

China holds about 15 percent of all U.S. Treasury bonds and notes. Last year it sold more than $150 billion Treasurys in a handful of months to raise cash and cover capital flight instigated by Chinese nationals concerned about their economy's contraction. This further fueled concern that if China sneezes, the U.S. could catch a cold.

Frank Batavick writes from Westminster. His column appears Fridays. Email him at