What happens when you mix a nation which has endured decades of socialist policies with the desire to maintain economic growth?
China has been running up great growth figures. It is considered an economic powerhouse and is slated to take over from the United States of America as the world's largest economy in a couple of decades. However, things do not always seem as rosy as they seem. Growth is measured in the form of gross domestic product of GDP. Loosely explained, GDP refers to the market value of all final goods and services produced within a country in a given period. It is often considered an indicator of a country's standard of living.
Well what is the problem then? Let's take a company like Apple then. I am sure many people have heard of Apple products like the iPhone, iPad, iPod and their Mac computer systems. What companies like Apple are doing is producing innovative products that people around the globe want to buy and use. Often there are massive shortages. In Singapore, there was a period of time whereby people had to queue in the mornings just to get hold of an iPhone at the telecos' outlets. Apple products are always in demand and goods are always being shipped to end users. Apple produces about USD$25 billion of revenue a quarter. This goes into the calculation for the GDP of the United States of America. This is what I call quality GDP.
What is China doing? They are essentially a socialist economy. They measure success by the number of cities that are built. Not by the number of properties which are consumed. Since building is also an economic activity, they attribute the millions of empty apartments built as FINAL GOODS and thus calculate the market value of these goods into the calculation of their GDP. This is what I call rubbish GDP.
Perhaps this very informative video by NBC: Dateline can illustrate my point.
It makes my point as to why a free market economy like Singapore works. Demand and supply fundamentals are always important. Socialism does not work.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
