“Another of History’s Great Failed Assumptions”

In “Moral Standards and Long-Term Wealth Creation in China” for the Canadian Christian journal Comment , Jonathan Wellum , a distinguished businessman and financier who also holds a theological degree warns that the “widespread belief that the twenty-first century belongs to China will turn out to be another of history’s great failed assumptions unless radical changes are made to that nation’s profound structural and demographic challenges.”

China, Wellum reminds us, is

facing severe demographic challenges that remarkably seem to have escaped the scrutiny of economists who are responsible for most of the 100-year growth forecasts fuelling commonly-held assumptions about China’s inevitable dominance. The country faces the most dramatic aging of a population that the world has ever seen. Given its current low levels of wealth, this will make 100-year forecasts of hockey stick-like growth trends appear ludicrous.

Add to this the growing gender imbalance of at least 113 males in China for every 100 females below the age of fifteen, which Wellum thinks “will cause family—and therefore economic—structures to collapse, and poses serious questions about the sustainability of a society in which females are treated as second-class citizens or, worse, as disposable assets with less ‘commodity value’ than males.”

Moreover, China will need to institute significant reforms to its legal and accounting systems, which are far too arbitrary, although it is likely to resist such changes.

The rule of law and the integrity of financial reports are fundamental for success and must include the protection of copyrights and patents, the enforcement of contracts, and the consistent punishment of crime. Yet, China remains notorious for theft of intellectual property and its deceit in rewarding a privileged few. There is little doubt among accounting professionals that financial reporting in China is far from accurate, and as we have recently found out in North America, truth in numbers matters. It matters a great deal.

Wellum also suggests that if China is to sustain its current growth it must

open its economic system further and accept a more modest role for government in order to create the freedoms required for its expanding middle class to flourish, beginning with religious freedom.

Apart from all this, Wellum argues, China “it is more likely to slide on to the Japanese highway of lost promise than it is to continue accelerating down the road to overtaking America as the world’s superpower.”