NO ANCIENT WISDOM, NO FOLLOWERS: The Challenges of Chinese Authoritarian Capitalism
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Then why do China’s leaders describe the nation’s economic model as “unstable and unsustainable”? Because it is.
James McGregor has spent 25 years in China as a businessman, journalist and author. In this, his latest highly readable book, he offers extensive new research that pulls back the curtain on China’s economic power. He describes the much-vaunted “China Model” as one of authoritarian capitalism, a unique system that, in its own way, is terminating itself. It is proving incompatible with global trade and business governance. It is threatening multinationals, which fear losing their business secrets and technology to China’s mammoth state-owned enterprises. It is fielding those SOEs – China’s “national champions” -- into a global order angered by heavily subsidized state capitalism. And it is relying on an outdated investment and export model that’s running out of steam.
What has worked in the past, won’t work in the future. The China Model must be radically overhauled if the country hopes to continue its march toward prosperity. The nation must consume more of what it makes. It must learn to innovate. It must unleash private enterprise.
And the Communist Party bosses? They must cede their pervasive and smothering hold on economic power to foster the growth, and thus social stability, that they can’t survive without. Government must step back, the state-owned economy must be brought to heel, and opportunity must be freed.
During the Tang Dynasty, an official in the imperial court observed: “No ancient wisdom, no followers.” He was lamenting that regime was headed alone into dangerous and uncharted waters without any precedent for guidance.
Again today – as McGregor makes clear – this is China’s greatest challenge.
Council released formal notice to nullify documents linking innovation policies to government procurement incentives.54 The jury is still out as to how seriously the government will implement this change. With these announced concessions, China maintains that the Indigenous Innovation issue has been completely resolved. However, many foreign businesses and governments are unconvinced. The procurement policies are just a fragment of the Indigenous Innovation–inspired impediments to foreign access
central SOEs. SASAC is gaining some influence over international investments by the SOEs through a $10 billion fund aimed at strengthening the SOE national champions through overseas acquisitions of technologies and companies. Nonetheless, since SASAC shares oversight with so many others, and lacks real power over top executive appointments and other key aspects of SOE management, “SASAC is not only the largest controlling shareholder in the world, it is also quite possibly the most
decades —more than the entire labor force of the United States.234 Breakthrough Progress to a Market of Unprecedented Size China can’t make it to the next stage of development without essentially turning its social and economic model upside down—while radically changing the way reforms are carried out. To create an urban middle class from the current mass of migrant workers, China will need to go beyond its customary step-by-step modifications and launch comprehensive reforms of the country’s
http://www.businessweek.com/articles/2012-03-01/the-chinese-communist-partyscapitalist-elite. 13 Feng Wang, “China’s Population Destiny: The Looming Crisis,” BrookingsTsinghua Center, February 6, 2011. http://www.brookings.edu/research/articles/2010/09/china-population-wang. 14 Liu, “The Basic Logic behind the 12th Five-Year Plan,” 12. 15 Author’s interview with trade attorney who requested anonymity. 16 Author’s interview with company executive who requested anonymity. 17 “The Government Admits
http://online.wsj.com/article/SB100014240529702035503045771384931923255 00.html. 173 Wan Xu and Don Durfee, “China’s State Grid in Talks to Buy AES’ US Wind Assets: Sources,” Reuters, February 27, 2012. http://www.reuters.com/article/2012/02/27/us-aes-chinastategrid-wind-idUSTRE81Q0QL20120227. 174 “The US Approved of China’s State-owned Bank’s Acquisition in the US for the First Time,” Xinhua News, May 14, 2012. http://www.e521.com/news/hwxw/264350.shtml. 175 Michael Cieply, “Deal Expands Chinese