China As Security Threat: Big Bad Wolf Or Wounded Bear?

Conventional analysis of the Chinese economy is it is an unstoppable juggernaut, and those following China through a security prism note the growing resources that nation has to spend on its military. But some analysts wonder if the Chinese economy may not be quite as muscular as advertised.

MIT economist Lester Thurow notes that, based on historic data on fast growing emerging economies and electricity consumption stats, it is more likely China has been growing in the 4.5% to 6% range, not the 10% of official statistics of recent years. If official statistics are to be believed, China’s cities would have to be growing at a 33% rate, which is highly unlikely, according to Thurow.

International economic consultant David Smick notes that half of China’s current GDP is government lending, that the government has started censoring its economic statistics, and 42% of its GDP is exports. With export markets in Europe and America flat on their backs (the US trade deficit has fallen by 50% this year), how is it possible China still has such a fast growing economy?

The International Energy Agency has weighed in, noting China’s reported 6.1% growth in 1Q09 does not tally with contracting oil and electricity demand data, not to mention a 20% decline in trade volumes over the same period.

Let’s suppose these analysts are correct, and China is actually in a period of economic retrenchment that could be prolonged due to contracting global trade. The security threat emerging from that nation might be of a much different nature than we now believe.