According to the latest headlines, China is getting ready to emerge as the world’s greatest economic superpower.  But most of the stories in the business and financial press provide only a one-dimensional view of China’s situation. 

For example, Bloomberg¹recently reported that China surpassed the United States as the world’s largest auto market and a story in The Wall Street Journal² states that Japan has yielded the title of the world’s top manufacturer of automobiles to China.  The Associated Press³ reported that China had recently surpassed Germany as the largest exporter in the world and the Financial Times⁴ noted that Chinese banks recently overtook their U.S. counterparts. 

Robert Fogel, a Nobel Prize-winning economist, recently forecast that the Chinese economy would grow to $123 trillion by 2040, double the entire global economy today.  He also predicted that per capita income in China would reach $85,000 — three times the income level seen today in Europe.⁵ 

China’s growth in recent years has been reported at 10 percent, on average, and it stayed strong, at 8 percent, even during the depths of the recent recession.  It will supposedly hit 9.5 percent in 2010.  By comparison, according to a CNNMoney.com⁶ report, most economists are predicting that U.S. economic growth will be only about 3 percent this year. 

In recent years, this has led to a growing consensus that China will become the global economic “top dog” within the foreseeable future. 

This view, however, fails to acknowledge that China has a lot more problems than most people realize, including: 

• A growing real estate bubble.
• Intensive economic investments directed at the wrong priorities.
• Internal unrest, as glimpsed in its desperate efforts to censor Google.
• Growing disputes with its biggest trading partners, including the U.S.

Much of this comes down to the fact that China’s current leadership and its institutions have no...