There are no limits to Chinese mercantilism

A limitation for China has been its long informational isolation from centres of industrial and scientific innovation. A new age mercantilist method to catch up is through cyberwarfare (waged by Chinese government hackers) to steal economic secrets including high tech designs and software. This solution is thriving and unlimited.

Under mercantilist theory increasing industrialisation permits the efficient manufacture of advanced weapons to arm a better paid military. This military can in turn sustain mercantilism by protecting the county’s trade routes, fighting for markets against armed competitors and even (like the US) invading countries to control a market (for example oil). China has mostly bucked the expectation that it build a blue water navy as it does not see its interests best served, yet, by long range naval power projection. In any case the US, French, British and Japanese navies already protect China’s trade routes because they are common international trade routes.

China has probably kept down its defence spending to around US$150 billion (about a 6th of US defence spending) in favour of other nation building concerns like education. To overcome potential economic limits by military means China will require more efficient ground and air forces (to meet its border land expansion objectives). Internal security and disaster relief also require a more flexible, mobile army.

For the next 20 years China’s influence on Australia will be much more in the economic than military sphere. There will be fewer international limits on China’s state directed enterprises and private multinationals as they grow in absolute size and as they grow larger than their US, European, Japanese and Indian competitors. China will have a greater ability to spring surprises (arrest of Mr Hu) or manipulate the market and get away with it.

The economic growth China is experiencing benefits major resource providers like Australia. We therefore shouldn’t let commentators from China’s industrial competitors, like the US and Japan, worry us about China’s economic rise. That’s their problem not ours. There are no limits on China mercantilist policies because they are appropriate, effective and flexible. China’s rise to being the world’s wealthiest country in the next ten years is inevitable. We soon may see ourselves as being in “China’s Trade Region.”