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Apologies! jf
Joe Smith
JOE SMITH’S DILEMMA
JF’S 4 BASIC QUESTIONS
1. HOW TO RULENeed for a strong state, authoritarian rule, justified by
ideologyPragmatismCCP dominance at all levels (societal penetration)
2. GREATNESSChina coming back as the West declines
3. TRANSFORMATIONTechnology from the West but “stay Chinese” (ti-yong?)Catch upShift from factory to innovatorGo greenDevelop the interior provinces
4. THE OUTSIDE WORLDA source for transformationShift from autarchy to engagement (globalization & WTO)A source of subversion and meddlingNo more “disrespect”
THE ROLE OF DENG XIAOPING
Dedicated follower of Chairman Mao?Capitalist roader?Authoritarian pragmatist?Making China strong: wealth and power
Key: 3rd Plenum of the 11th Central Committee (1976)
1992: ‘”Nanxun” - 1992
On his watch:Continued agriculture reform, but shift in focus to industryFurther moves away from central planning – “capitalism with Chinese characteristics”, “market socialism”
(and move from “Asian model”?)Learning from the world: the Tigers, SEZsLink China to the rest of the worldEngagement with US
BUTSupremacy of Party #1 (“4 Cardinal Principles”)Tiananmen
Time, March 3, 1997
WHAT WAS BEING REFORMED?
AN OUTLINE OF “ECONOMIC EVOLUTION”
•“LEANING TO ONE SIDE” – THE SOVIET MODEL 1950S
•“RED OR EXPERT” – THE MASS LINE…PARTY CONTROL 1960S
•THE DANWEI SYSTEM
•AGRICULTURE: FROM COOPERATIVES TO COMMUNES 1950-60
•REFORM! POST-MAO
•AGRICULTURE: “RESPONSIBILITY SYSTEM” 1970S
•SLOW GROWTH OF A SEMI-PRIVATE SYSTEM AND FDI
•REFORM AND CONSOLIDATION OF SOES
DRIVERS OF THESE CHANGES…. (Opportunities for business?)
URBANIZATION: migrant workers and development of “the west”
MIDDLE CLASS EXPANSION
REFORM OF THE POLITICAL ECONOMY
Party still dominant…but power/responsibility shifts to the localities(province, district, township)
Local power: licenses, land, credit, protection
Cadres evaluated on economic and political achievementsEconomy, birth control, “incidents”
6
SOE vs “PRIVATE”
The Economist March 2011
BUT “INDIGENOUS INNOVATION”
BUT…PROBLEMS
IPR
Corruption
Overemphasis on infrastructure – there’s a limit
Lack of social safety net – displaced workers(End of the danwei system)
Inflation
Energy & resourcesoil, food, water, environment (“China clouds”)
“WORKSHOP ON THE WANE” (FT 17Oct11)
“The export and investment-led model behind China’s economic miracle looks increasingly obsolete”
*No more cheap labor, cheap energy, cheap capital, cheap land
*Inflation
*Age shifts; fewer workers
*Unbalanced growth – surge in investment, real estate
*Housing bubble; credit bust?
*Stimulus loans to SOEs re-lent;interestarbitrage
*SMEs have to go to loan sharks; NPLs*Razor-thin margins
*12th FYP???
“The End of Cheap China” Economist 10Mar12
CHINA’S 12TH FIVE YEAR PLAN… EDITED KEY POINTS(Aspirations, Good Intentions or Reality?)
Economic targets-- GDP to grow by 7 percent annually on average;--- Prices to be kept generally stable.
Economic restructuring-- Rise in domestic consumption;-- Breakthrough in emerging strategic industries;-- Service sector value-added output to account for 47 percent of GDP, up 4 percentage points;-- Urbanization rate to reach 51.5 percent, up 4 percentage points.
Innovation-- Expenditure on research and development to account for 2.2 percent GDP;
Environment & clean energy-- Non-fossil fuel to account for 11.4 percent of primary energy consumption;-- Energy consumption per unit of GDP to be cut by 16 percent;-- Carbon dioxide emission per unit of GDP to be cut by 17 percent;
• Livelihood
• -- Population to be no larger than 1.39 billion;
• -- Pension schemes to cover all rural residents and 357 million urban residents;
• -- Construction and Renovation of 36 million apartments for low-income families;
• -- Minimum wage standard to increase by no less than 13 percent on average each year;
• Social management
• -- Improved public service for both urban and rural residents;
• -- Improved democracy and legal system;
• -- Better social management system for greater social harmony;
• -- More than 10 percent of all residents will be registered as community volunteers.
• Reform
• -- Encourage qualified enterprises to get listed in stock markets;
• -- In-depth reform in monopoly industries for easier market entry and more competition;
• -- Improved government efficiency and credibility
Checking out the usual sources:
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
http://www.doingbusiness.org/data/exploreeconomies/china/
http://www.transparency.org/country - CHN
http://reports.weforum.org/the-global-competitiveness-report-2013-2014/
http://hdr.undp.org/en/countries/profiles/CHN
China: Market Challenges
Adapted from ITA “Country Commercial Guide” Mixed results: some successes, some failures.
Business environment not predictable: poor IPR protection, inconsistent laws, opaque regime
Mercantilist policies: local protection; NTBs, tech transfer required
Legacies of planning: planning mentality, lack of understanding of markets, state/Party involvement in companies
US firms do inadequate preparation: “MarcoPolo-it is”
AMCHAM WHITE PAPER 2011
http://www.amchamchina.org/businessclimate2013
China Business Environment October 8, 2013USCBC—2013 Member SurveyTop Ten Business Concerns Identified by Companies (2013)
1.Cost Increases
2. Competition with Chinese Companies in China
3. [tie] Administrative Licensing
3. [tie] Human Resources: Talent Recruitment and Retention
5. Intellectual Property Rights Enforcement
6. Uneven Enforcement/Implementation of Chinese Laws
7. Nondiscrimination / National Treatment
8. Transparency
9. Standards and Comformity Assessment
10. Foreign Investment Restrictions
OLD ISSUES…
STILL THERE?
“Commonplaces of the China trade”
Apologies! jf
Joe Smith
JOE SMITH’S DILEMMA