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The “coming collapse” that never came

I n 2001, a book came out that caused a bit of a stir in Canada's economic and manufacturing sectors -- mostly, I suspect, by people who were hoping that the volume's blunt title would prove prophetic...


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March 1, 2008 by Canadian Plastics



In 2001, a book came out that caused a bit of a stir in Canada’s economic and manufacturing sectors — mostly, I suspect, by people who were hoping that the volume’s blunt title would prove prophetic. Written by economist Gordon Chang, the book was called The Coming Collapse of China.

Published at a time when the spectre of Chinese competition was beginning to seem more and more real in North America, the book advanced a number of reasons why the People’s Republic of China would fail within the next few years, swamped by a perfect storm of economic and political crises.

To begin, Chang said, China’s economy was a mess, and would continue to get worse despite a program of massive fiscal stimulus. From 2001 onward, he predicted, the country would run ever-increasing budget deficits in an attempt to stave off collapse, with the economy becoming hooked on ever-increasing, and ultimately unsustainable, amounts of central government spending.

Second, he continued, the government of the People’s Republic would be increasingly weakened by a major political transition, as the old generation of rulers is slowly replaced by the new generation.

Third, China had just then joined the World Trade Organization (WTO), and Chang predicted that during the next decade the worst effects of membership would be felt: business failures, mass layoffs, and social unrest as the nation implemented the structural reforms necessary to exist within this global trading body.

“Any one of these factors would be difficult for China to take. Add them together and we can see why the regime will fail,” Chang concluded. “From politics to economics, the Communist Party of China has no good options left…they have run out of time.”

Why mention this particular book now? Because 2008 was the approximate year given by Chang for the People’s Republic to begin collapsing.

Obviously, this hasn’t happened, despite the many difficulties the Chinese government experiences in keeping itself in power. Far from imploding, China continues to surge in many respects, as in the growth of its manned space program, the remaking of Shanghai into a glittering metropolis, and the securing of the 2008 Beijing Olympics.

The economic collapse certainly hasn’t happened yet either, despite a recent high-profile black eye inflicted by the Made-in-China toy recalls.

I don’t know how many people working in Canada’s plastics industry have read The Coming Collapse of China. Whatever the number, it’s fortunate that very few seem to have made Chang’s theory the basis of their business strategy. Just the opposite, in fact: rather than waiting for China to self-destruct, the vast majority of the manufacturers and processors I’ve spoken with are treating the threat from Chinese competition as permanent. Even better, they tell me they’re confident of being able to take on and beat Chinese shops, as well as other Asian competitors, by working harder and investing resources to improve every aspect of their operation. All around, I see companies getting leaner, as well as hungrier to take on challenging new projects.

The coming collapse of China might have looked inevitable on paper. But as long as Canadian firms continue to rise to the challenge, the ongoing success of our industry doesn’t have to depend on that collapse. Mark Stephen, managing editor

mstephen@canplastics.com