Posted on 08/08/2002 7:00:00 PM PDT by Lessismore
OVER the coming decades, China will become a thoroughly new form of political and economic entity. Brutally competitive in both politics and world markets, innovative and resilient, China will be more dominant than any nation except America.
Such a shift in the global balance of power occurs only about once every century and is comparable to the emergence of the United States as a world power a century ago.
The magnitude of this change is due, in part, to a radical and rapid shift in China's governance.
Because the shift has been so sudden, it is tempting to write it off as a fluke. But China's restructuring is permanent and will affect all aspects of national life, as well as its global standing.
The People's Republic now embodies two systems: the centralised, autocratic communist administration, dominated by an outdated ideology and military interests, and the decentralised, free-market economic regime.
Whether deliberately or not, China is reorganising itself to balance central authority and common purpose with decentralised freedom, in the same way that nimble companies balance home-office and divisional control.
The result is a new geopolitical model - the country as corporation.
Call the new China 'Chung-hua, Inc'. (Chunghua translates as 'China' and actually means 'the prosperous centre of the universe'.) Like many corporations, China is moving most decision-making to the 'business unit' level - semi-autonomous, self-governing economic region-states that compete fiercely against each other for capital, technology and human resources (just as American states do).
This new, decentralised free-market regime encompasses only a small part of China's vast territory, and many Chinese officials still refuse to acknowledge its existence.
Indeed, only seven years ago, the word 'federation' was banned from the Chinese language; companies like Federal Transport or Federation Merchants were required to change their names. Today, China has the most federal governance structure of any large nation except the US.
Two broad categories of region-states exist.
The first are relatively small, comprising cities and their surrounding areas, generally with a population of five to seven million people. Some of these - Shenzhen, Shanghai, Dalian, Tianjin, Shenyang, Xiamen, Qingdao and Suzhou - are now growing economically at a rate of 15-20 per cent a year - faster than such Asian 'tigers' as Malaysia, Taiwan, Thailand and Korea ever did. These smaller region-states, in turn, are propelling the growth of larger mega-regions, with populations approaching 100 million each.
The mega-regions, which tend to share common dialects, ethnic identities and histories, are becoming economic powerhouses in their own right. If they were separate nations, five of them - the Yangtze Delta, the Northeastern Tristates area (formerly known as Manchuria), the Pearl River Delta, the Beijing-Tianjin corridor and Shandong - would rank among Asia's 10 largest economies.
Regional governments also have been toughened up by the Chung-hua, Inc ethic. Most officials are appointed, not elected, but their posts are not sinecures. Not only are they held to targets of 7 per cent annual economic growth or better (like many corporate executives), but they must also improve environmental quality, build better infrastructure, and reduce local crime levels. Last October, a half-dozen bureaucrats were expelled from one of China's major cities for not meeting their economic-growth and security targets.
Local officials are often considered heroes, not oppressors. In January last year, Mr Bo Xhi Lai, then mayor of Dalian, was promoted to governor of Liaoning province. Thousands of women, many in tears, spontaneously came to a park to bid him farewell.
During Mr Bo's nine-year tenure, Dalian evolved from a ramshackle port into one of the cleanest and most prosperous cities in Asia. It now has a street life more vibrant than Singapore, a layout reminiscent of Paris before the car, and a reputation among Japanese tourists for high-quality hotels and restaurants.
All of this is taking place in a nation where communist ideology is still strong. Introduction of foreign companies, technologies, and unfettered mobility for corporations and people would be seen as a threat to the communist system if publicly acknowledged.
Instead, China's highest officials insist they run the most centrally controlled government in the world, with full authority to appoint or dismiss mayors, governments and bureaucrats.
Strictly speaking, they are right. But they dare not overrun the open, commercial ethic of China's region-states - the source of their country's prosperity.
So debates about China should not be cast as a simple matter of right or wrong, but of when and how.
A decade or two of economic freedom and growth will give China's people an appetite for self-determination and participation that may surprise the rest of us. Already, some village leaders are elected; this may slowly spread to regional officials, and then upwards to the central government.
Even top communists appear to acknowledge and embrace change. Recently, China's head of state, Mr Jiang Zemin, said that the Communist Party 'represents' every good aspect of China, including wealthy capitalists, not just the poor and the proletariat.
We should not be surprised if soon - perhaps at the party's 2002 General Assembly - China's leaders call for a new doctrine to match its new model.
The writer is one of the world's leading business strategists. He is President of Ohmae & Associates and has advised many of Japan's governments.
China does need a real military threat in their backyard to keep their aggressions in check. The only downside I see on this is if the two countries join forces against the West...that is something to think about.
It's almost like taking a nation of extras from the cast of Deliverance and having them all win the lottery. They've got money for the first time ever, they've got no manners, they're racist as hell, and they figure that since they're Chinese whatever they do is OK. Not here. Even though their civilization has been around a long time, when it comes to the industrialized first world they are the new kids on the block. Rich, trailer trash new kids. To hear an American speak highly of them is nearly seditious - they are the greatest threat that this nation has ever faced, and it will come down to either them or us eventually. If you choose them, you know where to go.
The whole issue of China as a threat is something Americans should grow out of. China is here to stay regardless of what anyone thinks. In a few decades, most of the Fortune 500 will actually be getting most of their revenues from China rather than America itself. At that time, it's nonsensical for them to be fighting any war with each other.
Although, Communist China is actually allowing more and more private enterprise, they still have a long way to go, before they understand capitalism. One thing that importers must do, when dealing with Communist China, is to work through an agent in one of the nearby Asian countries (Taiwan, Hong Kong, etc.), who insures that the importer gets what he ordered and takes a commission for his service. This obviously adds to the cost of the imported product.
But, if you do not go through an agent, instead of getting the 100,000 sky blue widgets that you paid for, you may end up getting 80,000 sky blue widgets and 20,000 baby blue widgets, because they ran out of sky blue dye. If you try to get the manufacturer to make good on your order, they will just blow you off, saying that all 100,000 widgets that you received were blue and that the difference in color is only slight and not worthy of a refund or replacement and the Communist Chinese government will support them, unless your company is large enough to cause them embarrassment, like Coca-Cola or McDonalds. They just do not understand that contracts must be adhered to in every respect.
And that's just the beginning. There are many places where the Communist Chinese fail to understand the most basic principles of capitalism and competition. That's because they grew up in a country where competition and contracts between companies did not exist. All companies were controlled by the government. It will probably take at least another generation or two, before the younger business people in Communist China will be able to accept those basic principles as a requirement for doing successful business.
In the mean time, the low price of their products will be bumped up by the cost of having to go through agents, to check shipments, before any money changes hands. They cannot become a major force, until a large number of their companies learn these basic principles and that will require that most of the older Chinese businessmen retire.
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