6 Things I Learned from the Book "Stumbling Giant"

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I read the book Stumbling Giant: The Threats To China's Future by Tim Beardson. It's a great read that offers an alternative view to the theory that China is going to own the 21st century.

Here are six things I learned.

1. The rate of corruption is staggering:

Official Chinese research reported in 2007 showed that 88 per cent of those with assets over $14 million are children of high-ranking officials. This seems to lend official support to the view that 'the mainland remained very unequal because wealth was concentrated in a small "red class" of those related to and associated with leaders of the party and the government, who hold many senior posts in the government, party, army and large state companies'. Moreover, we should reflect on the origins of these private businesses. Many were corruptly acquired during privatisation, by people with influence and access to money. 'In reality, publicly owned resources found their way into the pockets of rent seekers through corrupt (power for money) exchanges.'

2. However, China's sheer size means lots ofanecdotalstories on nearly every topic:

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A key point to bear in mind is the problem of scale. China has over 1.3 billion people; so inevitably, there is a lot of everything there -- of poverty, road deaths, corruption. ... But America has the same proportion of poverty and almost the same level of income inequality as China. Driving is more dangerous per capita in Russia and several other countries than in China. China's level of corruption is appalling, yet the country is ranked in the 'better' half of the world's countries. ...


This is another example of China's 'rule of scale': because China is a very large place, there can be hundreds of examples of waste, yet investment overall has proved highly efficient.

3. China's demographics are appalling:

Although estimates differ, the national workforce size should have peaked by 2016, and will then decline; by about 2025, only about 40 per cent of Chinese will be of working age. ...

Because of its falling population, China has a limited window of opportunity -- maybe twenty years -- to make its economic breakthrough. Otherwise it risks being caught in a 'middle income' trap. The ChinaAmerica population ratio is projected to fall from over 4: 1 now to 1.9: 1 or even below by 2100. This will radically shift the global power balance from one influenced by scale to one driven by technology.

4. Even in modern times, China's government policies have led tooccasionallydisastrous results:

The 'Great Hunger' of 1959-61, which occurred in the midst of the Great Leap Forward, is blamed for 20-36 million government-inflicted deaths, caused by stubborn and cruelly unrealistic agricultural and industrial policies. Yang Jisheng, areporter for the official Xinhua news agency, used access to official archives to calculate 36 million deaths: 'There was no war. No disease. The weather was quite normal. But 35 to 40 million people just disappeared.'

5. It has experienced more disaster than probably any other modern civilization:

The first half of the nineteenth century witnessed four famines, with a possible death toll of 45 million. The middle of the century saw more natural disasters, coinciding with the Taiping and other revolts: in 1853, the Yellow River burst its banks (and yet again changed course, this time by 500 miles);the drought and famine in 1876-79 claimed around 10 million lives; and floodsin 1887 killed another million. The century ended with the 1896-97 famine. It is estimated that between 1820 and 1890 there was no net population growth, and that the economy actually contracted.

Businessmen salivate over books published today on how to tap a billion customers in China. But the 1938 book 400 Million Customers evoked the same excitement and had the same themes.

Go buy the book here. It's great.

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The article 6 Things I Learned from the Book "Stumbling Giant" originally appeared on Fool.com.

Contact Morgan Housel at mhousel@fool.com. The Motley Fool has a disclosure policy.