China Mercantilism and New Global Economic Order

China is Emulating 19th Century German Mercantilist Model of Rapid Development

Modern communication technology has allowed China to achieve a centralized bureaucracy that has a smaller chance of becoming overextended and too top heavy. The danger, of parts of central government melting into regional structures with rebellious consequences, is diminishing every year. The risk is not totally gone however if rapid economic growth bumps into serious stagnation and even GDP reversal. As of today, China has the creaky uneven centralization of 18th century France and is gleefully engaged in large scale mercantilist practices.

Chinese society is not yet fully urbanized and consolidated. Beijing cannot yet engage in cutting edge mercantilist practices as done by Japan and Singapore. Chinese political center only recently overcame last remnants of feudalism, warlordism, and peripheral regional integration. Having dealt with that, China is pursuing the same economic path that allowed Kaiser's Germany to rapidly grow by taking advantage of British post-mercantilist free trade period. It is very historically appropriate. There is no need for Beijing to emulate Spanish, British, or French mercantilist experiences.

For a nation of 5 year plans, it makes sense to try to skip developmental steps and leap from macroeconomics of Kaiser's Germany to those of Japan. As of today, China has done rapid neomercantilist development by the book:

1) Government imposed positive trade balance through protectionism and currency control (yuan pegged to the dollar)

2) Self sufficiency in agriculture and manufacturing of basic to advanced goods

3) Acquisition of large amounts of money and gold (around a trillion dollars worth as of 2009). Controls to prevent wealth from flowing out of the country through protectionist restrictions on imports