Deutsche 
Espagnol 
Francais 
Italiano 
Portugais 

Site map

Amazon 
DMOZ 
Google 
Yahoo 



CHINA the race to market


Keywords Chapters 1-4 (excerpts)

Chapter One: China's Curse: To Live in Exciting Times
Chapter Two: China and the US: Ineluctable Partners or Rivals?
Chapter Three: The land of the rising dragon: China's Economic Growth>
Chapter Four: Riding the Tiger: China's Economic Policy Reform
Chapter Five: Feeling the Stones as You Cross the River
Chapter Six: Applying the Dracula Principle: China joins the WTO
Chapter Seven: Keeping it in the Family: Corporate reform in China
Chapter Eight: Getting China Right: The multi-national experience
Chapter Nine: China in the Twenty-First Century
Tables, Figures and Abbreviations
Author's Biography and Photograph
Jacket Cover and selected Reviews
Chinese business links, Google, Yahoo, Author's Blog


translate a word or phrase on this page

Search for


Home Page>

Chapters 1-4 (excerpts)   >

Chapter One:

[Return to Top]
[Go to Bottom]
> Where am I? >

China's Curse: To Live in Exciting Times.

Time hangs heavily on Chinese civilization. For nearly four thousand years, depending on when the first dynasty is dated, sixteen dynasties have ruled for varying lengths of time over the Middle Kingdom until 1911 AD. Marco Polo, the Venetian traveller, wrote in the thirteenth century of China as the richest country in the world, where science was far more advanced than in Europe, where many Chinese inventions such as gunpowder, the marine compass or printing were unknown. Yet the prevalent Chinese interpretation of history remains cyclical, trapped in a pre-industrial monotony of repetition whereby the broad tapestry of human existence is for ever re-played.

Typically, traditional Chinese historiography has a new dynasty begin with capable rulers receiving the mandate of heaven to carry out various reforms and extend the boundaries of Chinese administration. These are followed by a golden age of stability, prosperity and cultural achievement. However, as routine sets in, so does corruption and decay. Finally, the dynasty loses heaven's mandate through internal rebellion or external invasion, only for a new dynasty to be established in war and violence, and for the pattern to repeat itself.

So we may ask: How far along its cycle is the present communist dynasty? Is it heading for a new golden age, or about to succumb to corruption and decay? The answer depends much on the evidence deployed, and the time horizon adopted. The two are intimately associated: the closer the future is, the more turbulent China appears. The farther the future lies ahead, the more serene the judgment becomes. This trick of perspective is explained by the many facets of China's present transition. Let us look at these first, before presenting the different prognoses about China's future.

China's Transition
When China's paramount leader, Deng Xiaoping, embarked on a policy of reforms in 1978, he was well aware that his formula of marketisation combined with continued communist party primacy would create trouble. As the Chinese saying goes, an open window inevitably attracts in flies. Over two decades later,
the house of China was abuzz......

 

Chapter Two:

[Return to Top]
[Go to Bottom]
> Where am I? >

China and the US: Ineluctable Partners or Rivals?:

China's reactions to the devastating September 11th attacks in New York and Washington DC confirmed the centrality of the US to China's external relations. On October 8, President Jiang Zemin once again expressed China's desire to develop exchanges with the United States to ensure peace and stability in the Pacific region and in the rest of the world. China, he went on, offers to be the partner of the United States in promoting world peace. While the President's rhetoric reflected the regime's concern for status in world affairs, it also endorsed the leadership's view of the US as an indispensable partner.

The lesson being learnt is simple: China has most to gain as a status quo power-one that seeks to come to terms with, rather than to challenge the reigning distribution of capabilities among states in the world as it is. The paradox is that were this strategy to be implemented, China's successful integration into the world system transforms it. Over time, China realises its potential as a major world power. This prospect worries China's neighbours, and evokes a variety of responses in the US. One response is to engage with China so as to transform it into a political and business partner for the US in the longer term. Another is to confront China, by creating a malign environment which undermines its development.

Hence the recurrent swings in US-Chinese relations between mutual efforts to ensure a benign environment for China's transformation, and mutual invective which threatens to invert the Chinese leadership's preferred ordering of its foreign policy priorities. These run in order of precedence: status, development, security, Taiwan. Over the longer term, China both accommodates to the reality of US supremacy, and resists it as best it can. Conditional co-operation with the US is what China seeks, given that the US is the unavoidable but not sole partner for states across the region.

Nor has China much to gain from pursing a counter-balancing strategy to US primacy through closer relations with Russia and India. So let's start by looking at how China turned to the US in the war against Japan, and then-as the cold war progressed-against the Soviet Union. The Asia-Pacific became a US lake. For the foreseeable future, I argue, the US is the vital partner for China-a crucial point in considering what this means for corporate strategies toward the China market.

War with Japan, Civil War, Cold War
In China's book, the world war broke out in 1931, when Japan invaded Manchuria. Six years later, in July 1937, Japan launched all-out war in China. Nationalists and communists, who had been at each other's throats for a decade, made an uneasy truce to form a common front against the enemy. Then in December 1941,
the Japanese attacked Pearl Harbour......

 

Chapter Three:

[Return to Top]
[Go to Bottom]
> Where am I? >

The land of the rising dragon: China's Economic Growth

If China runs smarter in the future, it can still catch up with the richer countries. Running smarter means reforming economic structures and systems to fit global markets. Mao's China had run hard to stay very poor. That was the bad news. The good news for the pundiets was, and is, that East Asian countries have demonstrated that better living standards are fast entering the reach of millions of people. The new Asia is going to be driven not by Japan but by China, ruled by a communist party with a deservedly radical reputation.

The party, after all, is the heir to Mao Zedong, a man with a justifiable claim to being the greatest of all tyrants in the annals of the world. He sought to introduce a socialist utopia to China, to build up its industrial base, make the country self-sufficient, prepare it for wars with either or both of the two world powers, consolidate his political power base, transform Chinese people, promote revolution in developing countries and abolish class differences. At the end of his life, he admitted that much of his life's activities had been in vain, and that the old China he had sought to drag kicking and screaming into the modern world was still alive and well.

Over a quarter of a century since his death, China's economic performance is feted by unabashed China bulls the likes of Ken Courtis, vice-chairman of Goldman Sachs, Asia-Pacific,who expresses his approval of China's financial market and corporate reforms in superlatives. China, the financial dealmaker, world renowned and INSEAD-trained pundit says, is a capitalist El Dorado.

In this chapter, let's set out to answer the question: what has China's economic performance been, and what is it likely to be? This involves us in tracking Mao Zedong's record and inheritance, and how China has become deeply embedded in the world economic structure. One point worth noting here is that there is no deus ex machina, such as The Will of the People or The Class Struggle which propels the China saga forwards through time. Better policy in China, as elsewhere, is a matter of discretion. In the next chapter we ask, why has policy been such as it has been, and what is the likely future thrust of policy?

Mao's utopian economics
The promise of a socialist world never seemed more probable than in the years following the triumph of Stalin's Red Army in 1945, the defeat of Germany and Japan, the independence of India in 1947, and the entry of the communists to Beijing in 1949. Nowhere was confidence in the ability of government to set wrongs to right more widespread than where communist parties ruled. The prime fact of human history, they had learnt, is ownership and therefore
control of the means of production......

 

Chapter Four:

[Return to Top]
[Go to Bottom]
> Where am I? >

Riding the Tiger : China's Economic Policy Reform

Pragmatism has been China's method of exiting from the command economy. It doesn't matter, Deng famously stated in 1962, whether a cat is black or white as long as it catches mice. Pre-conceived ideas are out, and pragmatism is in. This has translated into the party-state demonstrating a commendable capacity to deal with the unintended consequences of its own actions.

By contrast to Russia, China's reform has been well managed. Whereas Russia wallowed in stagnation over most of the last decade, China's economy has gone from strength to strength. Yet Russia is at least a semi-democratic polity, a step which China's leadership has yet to take. Failure to take it could destroy the prospect, now open to China, of re-establishing its central place in world markets. As the Chinese saying goes, once you're on a tiger, it is hard to get off (gi hu nuanxia).

Clearly, the CCP prefers to keep riding to running the risk of ending up in the tiger's abdomen. So let's start by specifying how a market opening exercise in a socialist command economy leads rather quickly into the initial stages of regime change. We can then introduce a comparison of the transformation in economic policy between China and Russia. The takeaway is that the CCP has gone about as far as it possibly can in economic reform without bolder political reforms-the subject of the following chapter.

The process of changing regime
As Vaclav Klaus, the former Czeck prime minister, has said, all transformation processes are multidimensional. This is particularly so of the transformation out of a socialist command economy, whose original creation has entailed the destruction of "capitalist economic institutions, the adaptation of command economies to local conditions, and the creation of socialist institutions.

Exit from socialist command economies requires no less destructive, adaptative and creative activity. With one major difference: entry to a command economy requires destruction of the trust upon which market exchanges depend, whereas exit into a market economy requires the construction of trust, between public official and market agent, and between market agents. Destruction of trust is an exercise in ham-handed brutality; the construction of trust requires sensitive cultivation, especially-as in the case of China-when trust is a very scarce commodity, in view of the fact that
many marketeers are communist party officials......



translate a word or phrase on this page
translate from:


[Return to Top] > Where am I? > [back to Home Page]
send us an email to suggest improvements.

URL: http://www.chinatheracetomarket.com/chap_1-4.htm

[Page created: 11th Nov 65, Last Update: 22nd October 2003]
Copyright © 2003, ,