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Subscribe to RSSBEIJING – As news spread this week that after decades of growth, China had officially passed Japan to become the world’s second-largest economy, behind the United States, I was on the outskirts of western Beijing for the unveiling of the third generation of China’s “pod houses.”
Huang Rixin, a spritely 78-year-old former engineer turned Beijing landlord, has made a name for himself in recent months producing cage-like, 21.5-square-foot living spaces dubbed “capsule apartments” for the capital’s burgeoning class of jobless and underemployed college graduates.
Photo by Wang Yish/Imaginechina
Two Chinese men sit in their own small spaces in capsule apartments in Beijing, China, in a photo taken June 12, 2010.
Taking Japan’s famous capsule hotels for inspiration, Huang has improved on previous iterations of his pod houses by doubling the size of the rooms and including more shelf space. Huang views his pods, with rent of about $51 a month, as a cost-effective way to house the estimated 3 million recent university graduates seeking employment or earning less than the average starting salary of approximately $400 a month.
In many ways his capsule apartments highlight the social and economic problems that belie China’s gaudy GDP numbers.
Even as the national economy surges, China’s per-capita income has simply not kept pace, and millions of people have been left out of the nation’s economic miracle.
China’s per-capita income, at around $6,600, is closer to that of Turkmenistan or El Salvador, rather than to the U.S.’s $46,000 or even Japan’s $33,000.
While China’s liberalized economic policy has certainly pulled hundreds of millions of people out of poverty and transformed the country into an industrial dynamo, little of that prosperity has trickled down to the majority of would-be Chinese consumers – the very people who many economic experts insist will fuel China’s growth well into the 21st century.
One such expert is economist and Peking University professor Michael Pettis. In an excellent blog post this week, Pettis, succinctly summed up this point, writing, “In order to reduce China’s excessive dependence on export surpluses and investment, it is vitally important that household consumption, which in China represents probably the lowest share of GDP ever recorded, rise significantly.”
Not enough ‘Made in China’ consumed there
For better or for worse, China’s Communist Party has tied the legitimacy of its power to elevating the economic situation of its people. So far, this approach has paid off, as Chinese citizens over the years have enjoyed healthier incomes and lifestyles.
However, as time has gone by, China’s economic model – modeled on the Japanese system of subsidizing growth through heavy capital investment, easy low interest government loans and an undervalued currency – has proven to be too successful, essentially starving domestic consumption in favor of national growth through export.
In short: Too little of what China produces ends up consumed by the Chinese themselves.
The government has tried a variety of strategies to curtail this trend and boost consumption. This summer has seen a rash of labor unrest as the government allowed Chinese workers to agitate for higher wages. It also introduced government subsidies on a number of products ranging from cars to household appliances in a bid to generate domestic consumer spending.
Both proved successful, yet as Pettis noted, consumer consumption in 2009 was still less than 36 percent of GDP, which is an almost unheard of number for such a massive economy.
In essence, China is still the largest market in the world for virtually everything, and despite claims otherwise, Chinese consumers are very willing spenders. However, Chinese wages are currently so low that consumers simply are unable to contribute to domestic consumption unless serious wealth redistribution or salary adjustment occurs.
Tokyo’s take
Meanwhile in Japan, the government’s reaction to being surpassed by their Asian neighbor was so calm, it set off alarm bells.
Japan's economic minister Satoshi Arai said, “It doesn't matter who comes out at the top or bottom. It simply represents each country's current economic health.”
But that thought was not shared by the rest of the country. Practically all of the major Japanese newspapers had editorials warning that Japan was in desperate need of serious change.
In particular, the Nikkei, the largest business daily, lashed out at Prime Minister Naoto Kan’s administration, writing: “The current policies of the Japanese government are not only marked by underestimating fiscal analysis, but they're also extremely ill-equipped to deal with any crisis both in terms of posture and structure."
Hiromichi Shirakawa, chief economist for Credit Suisse explained why he believes Japan is in it's current predicament. "The biggest problem for Japan right now is that there is a significant lack of demand, and also whether they're individuals or corporations, everyone here is exercising 'precautionary saving' against an unpredictable future.”
"It was just a matter of time,” said Shirakawa. “Japan's economy has been contracting while China has been expanding. Japan has already lost in terms of ‘quantity’ and now it's time to look at the aspect of ‘quality’ such as people's personal income and purchasing power.”
Social unrest concerns lead to subdued announcement
Back in China, in the past, a seminal moment like the nation’s elevation to the No. 2 spot would have been heavily played up in state media as proof of increased Chinese prosperity and global relevance.
However, while local news reports have noted the event, they were quick to note the country’s low per capita income and the need for continued gradual economic progress.
The Chinese coverage seemed to be low key in comparison to Western coverage, which highlighted the milestone as front page news and analyzed its implications for the broader global economy.
But it seems that concerns over class friction and social unrest led to the subdued way the announcement was made domestically in China. In the year alone, the central government that has found itself enmeshed in a host of social class issues that run the gamut from dating shows and local government corruption to the rights of household pets.
Whatever their concerns, China has earned its moment in the sun. Deep economic, environmental and social issues lurk, and only time will tell whether China’s status is sleight of hand or real. However, there is no denying that in only 30 years, China has transformed itself into one of the greatest economic power houses in world history.
Whether that economic stature is fleeting – as it was for the Japan – or relatively more long-term, as it has been for the U.S., will bear close watching.
NBC News' Arata Yamamoto contributed to this report from Tokyo.
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There are over 3.5 million homeless people in the US and hundreds of thousands more just one step to homelessness. In China they spent money to provide cages. In the US they spent USD3.5trillion on war and destruction.
I was in the Southern Chinese city Nanning, capitol city of the state of Guangxi five years ago. There were many new office buildings and beautiful parkways but if you wandered down a side street all of a sudden you were in old China--there were even old brick buildings with no electricity or plumbing with dirt floors that were still inhabited. China is a land of extreme contrasts as you might expect from a country that has gone from a rural 19th century environment to a 21st century one in 30 years. The title of the article is misleading, like they are trying to hide something--its not something that's advertised but it shows how open to different kinds of housing the Chinese are. It can work there because there are not the social attitudes towards having a house (yet) that exist here, and no real estate industry (yet) with a legal establishment to guard "property values." In many ways they are freer to try different things than we are as long as they don't challange party rule of course, but if it can make money they'll do it.
How many schools have dumped vocational programs? Welding, mechanics, woodworking, agriculture, logging, yea that's right logging, that branches off into forest care and management, silvaculture, you know wood for houses. How to build a house, plumb and wire it. A very high percentage of our kids have no interests in working inside or inserting tab A into slot B, but somehow we were sold and we bought a pack of crap about what we need as a country and in the meantime we are losing thousands of intelligent people because we no longer fund these forms of education. You do what you want, but you get what you deserve.
All men are created equal. It's just that some are created more equal than others.
For someone to win, someone else has to lose. We all want the other guy to lose. It's okay for us to take advantage of someone else, but it's not okay for them to take advantage of us. We all want our "team" to win, but what about the fathers of the kids on the other team? We think somehow they deserve to lose. Sometimes I think we are all losers, playing the wrong game, and thinking all the time that we are winning. If we spent as much time trying to figure out how to help someone else take advantage of our knowledge and resources, as we do trying to take advantage of others because of their ignarance or lack of resources, we and they would all be "richer". Maybe bringing religion into the picture might make it a little clearer. If we are all "children of God", as most religions claim, then which "team" is He rooting for? Don't wait until you die to find out.
Maybe the "Mormons" have something there. They are just "sickly" nice to everyone, and seem to be getting "richer" by the minute.
Really good thoughts Kenneth.
I don't know Ken, the Mormons accross the street from me haven't paid their motgage since last August and their house is up for short sale.
Is there gov't welfare in China? WIC? Food stamps? Medicaid? Free health care and education for illegal immigrants? Stab free schools?
We live in a resourse limited world. Does anyone doubt that? What if these people are happy in their little pods? Imagine how much easier it would be to get to know your neighbor. Do you know your neighbors?
Today I drove to a gated community to meet a man and his wife who just bought a $450.000 house (in 2007 it was $750.000) . What an incredible example of waste on so many levels. 6000 square feet for TWO people to live in. I am going to build them their own personal theater in one of those massive rooms they have there. The whole thing is really offensive to me. I hate to contribute to this earth destroying concept that has become the American way of life. What a waste.
I'd have said that this is uncommon but it isn't really. Lots of money circulating China at present but it sees that they have learned the capitalism lesson too well. The wealth is very highly concentrated and as much as China say they're a modern progressive nation, millennia old feudal traditions die hard. There s a huge underclass present.
Life's as cheap as their manufactured goods I'm afraid.
They are still a socialist nation, maybe they should be out there 'redistributing' that wealth a little to those who need it like they ought to.
This kind of thing never ends well...given time, people will tire of the rampant poverty and it'll come to a head.
I would be willing to bet that you have read "The Good Earth"
One of my all time favorites.
http://en.wikipedia.org/wiki/The_Good_Earth
It's time for me to go to my kingsize bed (with emphasis on "kingsize") in my 5,000 square foot mansion, that I don't have to pay for anymore, because I can walk away and buy a house just as nice for half as much, because something called a "Federal Reserve" system pulled all the money out of our economy and caused the other guy to lose his business, because they pulled his business loans out from underneath him, and he lost his income property, because none of the "member" banks were allowed to fund the loan he was already qualified and approved for, because the federal money that was given to the "member" banks to loan out prior to the election, was somehow "recalled" before the banks could fund the loans, so he quit paying his mortgage; the lender foreclosed, and now I can buy it CHEAP...what a deal! Oh well, I'll just buy my house back from the lender, after the "trustee sale" that no one will show up for, with a friend that still has good credit and some cash that I saved from not paying the mortgage, while I was going through Chapter 11 "reorganization", because the "Federal Reserve" pulled the money for the permanent loan that I had already qualified for to refinance my brand new income property, so I couldn't pay off the high interest construction loan and credit lines, which loans came from the "Federal Reserve" member banks in the first place, but.......wait a minute! Where did the money go? Where did it come from to begin with? I think somebody just made it all up. Somehow I think sleep is the most important thing, not how big your bed is. How well do you sleep at night?....knowing someone else out there has no bed at all, someone nearby, not only in China.
I'd sleep better knowing that you weren't walking away from a mortgage you can afford.
I'll tell you what's very very close to living like these pod people do in China. That's living in Arkansas on minimum wage, un-empolyment and worst of all, disability. For 2 years I think it is the disabled don't even get their measly few dollars raise. In the meantime groceries, rent, utilities just keep climbing. Why Obama thinks that taking away from people that need it the most is going to help save the economy is beyond me. I say take it from those that can afford it. I'm sure many others out there feel this way. If I were president I could have this country out of debt in no time and there wouldn't be homeless and hungry people. The rich and all the high paid officials would be seeing red, but who cares! I know I don't, especially everytime I have nothing but peanut butter or beans to eat. Please try to refrain from bashing me over my personal opinion, spelling/typos, or not so proper englilsh. Thank You.
I have to agree to that! Agent orenge has made me very Ill,I filed for disablity!Know what they said,are you receiving kemo?I said no. Are you having bone marow implants? I said no not yet!Well your denied because your not sick enough! Thank God for V.A. or I"d be living in a card board BOX!!
Hi vetvetvet
You are right that some people cry to much about every thing being some else fault.But i also think that you have the wrong idea about some of the things you complain about, you seem to think that all a person needs to do is work hard and they will be rewarded with a good job.It doesn't work that way, greedy big business has bout the gov and they have given big bossiness tax brakes for out sourcing job over seas. Now there are a lot fewer GOOD jobs and no matter how hard most people work if they do not have a good education most will end up working low wage jobs and if corporate trends keep going the way they have been going those wages will keep going down NO MATTER HOW HARD THEY WORK.
me chinese me play joke me make pee pee in your coke
@Ron, Get your education online on your own time http://bit.ly/a45y6d
What is Career Training Program? It gives Jobs training for the 21st century, Get a degree in higher education http://bit.ly/a45y6d
I want one of those pod houses!
I was homeless and living in my car for four last year when I had to support my sister's family after her husband lost his job and couldn't find another. To have one of these pods available for rent would have seemed like (comparative) luxury.
I think everyone is missing the point here. If the chinese workers are making more money (which they should) then this will only cause everything to go up (INFLATION). Why do we think that everything is made over there now? Because they make them better and of better quality? NO it is because it is cheap, cheap, cheap. This is a double edged sword for the United States. Once China and India have all the manufacturing and "outsourced" jobs and then start demanding more pay then we will see the United States in real trouble.
Once Chinese currency is raised UP to its actual real value and ours is LOWERED to its real value things will not be pretty here in the US. The days of ultra cheap consumer goods from China will be over, putting a serious hurt on cash strapped American consumers.
For all you lovers of China.
Communism is not love. Communism is a hammer which we use to crush the enemy.
-- Mao Zedong
I really question the ethics of those Americans like a Sam Walton who choose to do business with a nation that observes no human rights, environmental regulations and pay their people slave wages and beat down any dissent with military force. Greed got the better of American business and politicians. Now we are so desperate we continue to take loans from our ideological enemy, did it ever occur to anyone they are using these loans to bankrupt us?
We are the worlds top dog. So naturally everyone is going to challenge and undermine our position at every opportunity. If you do a thing slowly enough it will go unnoticed. America seems to have forgotten how to plan for the future. Not so in China, or Mexico for that matter.
One could argue they also control death in the process. Pay a fair wage, avoid war at all costs impose a fair tax on wages and salaries of the working and middle class and maybe buy your wife something and you will live a good long and happy life. The rich have proven they have no interest in working and middle class families attaining any of the latter.
What a truly shocking comment and perspective from TotoKomo. I hope you'll consider this useful advice from someone who could have a hard-feelings with China, but instead practices compassion and loving kindness with them. He walks the talk.
In the practice of tolerance, one's enemy is the best teacher.
Dalai Lama
Be kind whenever possible. It is always possible.
Dalai Lama
These are a great idea for saving traveling expenses. They could have also been used for a sort of homeless-transition housing. For permanent housing purposes, such capsule units are a scam.
"Bogey29
I think everyone is missing the point here. If the chinese workers are making more money (which they should) then this will only cause everything to go up (INFLATION). Why do we think that everything is made over there now? Because they make them better and of better quality? NO it is because it is cheap, cheap, cheap. This is a double edged sword for the United States. Once China and India have all the manufacturing and "outsourced" jobs and then start demanding more pay then we will see the United States in real trouble."
and
"writer21177
Once Chinese currency is raised UP to its actual real value and ours is LOWERED to its real value things will not be pretty here in the US. The days of ultra cheap consumer goods from China will be over, putting a serious hurt on cash strapped American consumers."
I have wondered for years why top economists never admit this.