One of the more interesting puzzles in the future of capitalism is the role of China. I noted earlier a report that the world's three largest banks by market capitalization are Chinese. Here are three additional data points:
The Princeton professor Burton Malkiel, author of "A Random Walk Down Wall Street," says in an interview that investors should have 5% to 10% of their portfolios invested in China: "Education is an important part of the culture in China. It is also hard-working and entrepreneurial, and it has a gambling instinct; that's what you need if you are going to be entrepreneurial. I expect it will be the economy that grows the fastest over the next decade...The income distribution in China is much more unequal than it is in the United States."
Yahoo! News has an article and a chart of the International Monetary Fund's projections for economic growth in 2009 and 2010 that shows China at the top of the heap, with 7.5% growth in 2009 and 8.5% in 2010.
The Financial Times has a fascinating report on rising tensions between China and India, fueled by Chinese naval expansionism and a Chinese alliance with Pakistan.
China's economy is still smaller than Europe's, America's, or Japan's. But it's large enough to be worth paying attention. Those who favor an increased government role in the economy will point to China as an example of where that is consistent with economic growth. But those who oppose an increased government role can also find arguments in China, arguments that may be less obvious but are nonetheless intriguing. For one thing, it's an example that suggests that high income inequality does not always slow economic growth. It's also possible that with political freedom and genuine rule of law, and with less of a government or military role in the economy, China would be doing even better than it is doing. Taiwan, after all, which is culturally Chinese but politically free and democratic, has roughly six times the per capita GDP of Communist China.