China’s modernization hesitates at the crossroad

(The below content was written upon reading the digitalized model of analysis by Penn World Table.)

I

China, as a country with largest population and longest history in the world, is hesitating at the crossroad in the development of various sectors including economy, education, and political reform.

According to the statistics data from the Penn World Table, as of 2009 and 2010, there exists roughly 20- to 25-year time gap in terms of per capita income between Korea and China. What’s more, Chinese export structure in fact did not change substantially between 1995 and 2009, since instead of emphasizing focus on upgrading its export structure, China has paid too much attention on increasing its export volume only, which mainly consists of labor-intensive and capital-intensive commodities, such as footwear, apparel, and final-assembly products like automobile and computers.

Compared with the 27-year gap in per capita income between Korea and China as of 1990, the trend of development generally looks moving forward, with the per capita income gap being narrowed slowly and gradually.

The time gap in economy also coincides with that in education. Take the year of 2009 as reference, the tertiary school enrollment rate of China was 24.5%, which was close to the 1983 tertiary school enrollment rate of Korea. So in the education sector, there was approximately 26-year gap, very closely similar to the time gap in economy.

With the comparison of time gap in the sectors of education and economy, the Penn World Table keeps going forward with varieties of index innovation on analysis of competitiveness of trade structure. There has been a scientific calculation of TC(trade competitive index).

According to TC index, the Chinese trade structure has become more similar to the Korean trade structure over time. But for the time being, there has been a chronic trade imbalance between China and Korea. Korea enjoyed a trade surplus of approximately $32 billion with China as of 2009.

It’s because the trade structures between Korea and China are complementary to each other, with China exporting labor-intensive products at low profit to Korea, and Korea exporting more technology-intensive products at high profit to China.

For Korea, from 1994, labor-intensive products such as footwear, apparel, and outerwear disappeared from the top 10 export commodities of Korea.

For China, the top 10 export commodities from 1995 to 2009 show a considerable amount of overlap with those of 1988 Korea.

But Korea, with strategic reform in both government system and economy transformation in 1980’s, witnessed robust structure upgrading since then. With the efficient improvement of education by effectively increasing the tertiary school enrollment rate, the relative importance of IT-related commodities started to increase in the mid-1990s. Intermediate inputs such as motor vehicle parts and machines have become major export items since the early 2000s.

So from the above figures and facts, one can see clearly that sustainable development of a country is inseparable from the cultivation of high-tech human resources that are fundamental to the national economy, while high-tech human resources are the output of high-quality education.

II

According to research that has been done by professors at various periods of time and from varieties of viewpoints including economy, education, and political system, there’s been a prevailing analysis on trend of civilization which goes as below:

A country with per capita income between 1000-3000 dollars is well likely at the threshold of transition to democracy. When the per capita income reaches USD 3000-6000, it is near a successful completion of society transformation.

According to Penn World Table, the per capita income of 1983 Korea was 6,520 international dollars(I$) using 2005 as the base year, which was equivalent to 2074 US dollars by traditional statistics of economy.

Korea experienced an overall transformation of society in the period from 1980’s to 1990’s, and the per capita income of Korea in 1995 surpassed 11,000 US dollars. So one can imagine the tremendous changes that occurred in the dozen of years in the transformation of Korea’s society. This period of Korean history can be named as “golden period” of Korea.

When further comparing the features of similarities and differences between Korea and China, one may find that the tremendous overall structure upgrade in the golden period of Korea may not take place in China as smoothly. Since there are many other complicated factors which may influence the society as a whole. The factors may include the scale of population, the environment of general international trade circumstances, and the overall situation of political game.

For Korea, the golden period also coincided with the robust economy of the USA and Europe in the same period. So the transformation of Korean society enjoyed some positive factors in terms of international environment. Besides, the framework of political mechanism established in 1950’s by Korea was also a plus.

When comparing Korea and mainland China in the above aspect, one may easily think of Taiwan as well. Taiwan enjoyed similar structure upgrade and society transformation as Korea did in the golden period in the 1980’s and 1990’s.

Taking Korea, Taiwan, and mainland China as a whole, one may take the past 20^th century as a whole, and thus see that if there was ever a truly-genuine “culture revolution” that can upgrade the civilization of a nation, the revolution in Korea and Taiwan in the golden period of 1980’s and 1990’s was indeed an excellent “culture revolution”. Other than which, sometimes there were culture retreats instead of culture progress.

Some scholars even take the so-called “culture revolution” in 1970’s mainland China as “culture destruction”, since it’s due to this peculiar culture destruction which has led to the unchecked corruption that goes rampant in current situation of China. This point may hold some logic, since the dictator tycoon, who’s both a clever politician and cruel dictator, without the need of statistics analysis as done by the advanced Penn World Table, knew well the trend that robust development in both economy and culture would surely lead to an end of the dictatorship system.

The famous scholar Larry Lang (郎咸平- Larry HP Lang) even related some of the current degrading of morality standards to the jungle-law capitalism in 18^th and 19^th century. It may also hold some logic, since China’s ideology of feudal dictatorship has some heavy burden which cann’t be cleared off at one stroke.

However, with Premier Wen’s earlier remarks that clearly sent signal about being against a repeat of culture destruction, people may easily see that at the current situation of political game, there’d be no superman who’d be able to manipulate dictatorship as was done in the past.

For economists and historians who indeed care about the civilization of a nation, all of them may agree that the analysis of development trend by the Penn World Table indicate many positive factors when similarities are compared between Korea and China, especially by taking Korea’s modern civilization as a good example. It’s indeed a good example for China to learn from.

For writers and journalists who still keep conscience in China nowadays, all of them may agree that China’s sustainable development can not rely on large consumption and waste of resources as incurred by labor-intensive and resources-consumptive industries. Instead, an overall improvement should be made in all the aspects of civilization, including resolute improvement of education quality, transparency of government and justice, efficient use of finance and investment focused on structure upgrade instead of speculation.

The advanced analysis by the Penn World Table can serve as good source of intelligence for investment, trade, politics, and review of history. Combined with intensive study of relevant geopolitical trend of development, the advanced data system may help people achieve better understanding of economy, culture and politics based on a digitalized model of analysis.

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