To get a flavor of the thesis here, consider the final paragraph of the article, which would probably be quite startling to a lot of US government types. More's the pity that your average US Congressman doesn't read The Economist and would not read this particular article anyway (too many icky stats and econ terminology). Here's the end of the article:
The American government frequently accuses China of relying excessively on exports. But David Carbon, an economist at DBS, a Singaporean bank, suggests that America is starting to look like the pot that called the kettle black. In the year to September, net exports accounted for more than 30% of America's total GDP growth in 2007. Another popular belief looks ripe for reappraisal: it seems that domestic demand is a bigger driver of China's growth than it is of America's.
Earlier in the article, Anderson is quoted as saying that the export share of GDP figure for China is currently at about 10%. Not exactly what you normally read about in the press. The article also tackles the issue of investment, noting that many commentators bring this up to suggest that the Chinese economy is overly reliant on foreign investment. Investment accounts for roughly 40% of GDP in China, but according to Arthur Kroeber (another familiar name), only 7% is linked to exports. When you add capital spending for export enterprises, you still only get 14%, which in the grand scheme of things means that China should not be scared to death that a slowdown in exports will lead to a freefall in their GDP.
So why are the critics so wedded to these myths? Consider this important passage from The Economist article:
Many of China's foreign critics remain sceptical. They argue that China's massive current-account surplus (estimated at 11% of GDP in 2007) proves that it produces far more than it consumes and relies on foreign demand to buy the excess.
Take into account the whole China bashing narrative that has been going on in the US for years and is now taking hold in the EU. Here's the argument:
1. China exports a huge amount of cheap stuff using slave labor (and babies and prisoners), unsafe working conditions, and lax environmental standards.
2. My country [insert whatever you want] has high standards and productivity and can't compete with Chinese unfair trading practices.
3. China's trade surplus with North America and the EU is a result of these unfair trading practices.
4. China's huge foreign reserves are, therefore, also a product of unfair trading practices.
5. China has developed its economy and saved a lot of money from these ill-gotten gains.
6. China would not have developed and saved but for these exports.
7. Ultimately, therefore, we [insert name of country again] are not to blame for anything wrong with our economies, China is.
OK, this is well known. Now, if the story changes, and you admit that China has developed for a lot of reasons, including domestic demand and so forth, then the whole "I'm a victim" thing falls apart. As a US politician, you would have to find another country (always has to be another country) to blame for the loss of manufacturing jobs. This presents a problem, because there are already a lot of speeches and position papers written about how it is China's fault. This is political inertia, and no one likes to see a popular notion torpedoed — too messy.
I guess we better just try to ignore folks like Anderson and publications like The Economist. The US government and the international press already does.
To be fair, here is one note of caution on this subject from the China Economics Blog, which states that things over here are quite fragile (talking about asset price bubbles) and that a slowdown might therefore be amplified when the air is let out. Fair enough and a great point — doesn't effect the political dynamics of this, however.