The New Republic Online: Is China's Economic Boom a Myth

China's companies actually are becoming less productive. Despite recent stories in The New York Times comparing India's economy unfavorably with China's, India, which receives only 10 percent as much foreign investment as China, has posted only slightly lower rates of growth because it uses its capital more efficiently. While India now boasts globally competitive private firms like Infosys and Wipro, China has not produced such productive multinationals since its largest companies are SOEs that monopolize certain sectors, receive guaranteed loans, and waste vast sums of money. As one leading China banker notes, the Middle Kingdom has not moved strongly into higher-value production; even China's exports of electronic goods are mostly just re-exports in which China's only role is labor-intensive assembly.

Unable to produce better companies, China's rating on the World Competitiveness Scoreboard, a ranking of powerful countries based on efficiency of economic performance, has fallen sharply over the past five years, from 21 to 31, a drop that signifies China's economy is becoming less efficient and competitive. At the same time, South Korea, a country supposedly hammered by the Asian financial crisis, has risen from 36 to 27 on the scoreboard. Increasingly inefficient, China has been unable to generate enough jobs for the millions of peasants leaving the agricultural sector.

Article worries about xenophobic young Chinese when the economic bubble, which may be based on lies, bursts