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Get set for a totally new China
The Straits Times (Singapore) ^ | 2002-08-09 | By KENICHI OHMAE

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The People's Republic now embodies two systems: the centralised, autocratic communist administration, dominated by an outdated ideology and military interests, and the decentralised, free-market economic regime.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.


TOPICS: Foreign Affairs; Front Page News; News/Current Events
KEYWORDS: chinastuff; clashofcivilizatio; prclovefest; redchinaexcrement; slavelabor; zanupf
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To: Hank Rearden
Unlike Japan, China's GDP potential is not limited by population size.
41 posted on 08/08/2002 10:18:31 PM PDT by AIG
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To: Singapore_Yank
Every great economic power in history has also had a big military, merely to protect its farflung economic interests.
42 posted on 08/08/2002 10:21:27 PM PDT by AIG
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To: Lessismore
BUMP FOR FILES LATER
43 posted on 08/08/2002 10:26:47 PM PDT by Quix
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To: AIG
Wow, that's a heck of a growth rate. Amazing. So is this good...or just more dangerous?
44 posted on 08/08/2002 10:28:22 PM PDT by PoorMuttly
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To: PoorMuttly
Capitalism is going to do whatever it wants to do.
45 posted on 08/08/2002 10:32:22 PM PDT by AIG
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To: Blackyce
Time to take the chains off the Japanese military. Reviving the capabilities of the second largest economy on earth would create a perfect balance to the growth in China.

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.

46 posted on 08/08/2002 10:34:42 PM PDT by WRhine
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To: AIG
As China modernizes, the rural worker is being displaced by the millions. Estimates are around 150 million of these workers in the next three to five years. Combine that with bad loans within their central banking structure where the state owned enterprises can borrow money without ever paying it back, and you have a set of "cooked books" that makes our corporate scandals seem pretty insignificant. In reality, not propaganda, their economy is far less stable than they want you China cheerleaders to know.

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.

47 posted on 08/08/2002 10:41:07 PM PDT by 11B3
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To: AIG
You really see China as fitting a pattern here? I don't.
48 posted on 08/08/2002 10:42:58 PM PDT by Mr. Mulliner
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To: 11B3
Today, Moody's gave authoritarian China's sovereign debt a "Aaa" (very high) rating, while the IMF had to bail out democratic Brazil with the biggest bailout in history. Not too long ago, the IMF had to bail out democratic Turkey as well. I don't deny that China's banks have problems, but the difference between China's authoritarian government and the dysfunctinal Third World republics is that China can use authoritarian power to effectively pass economic reforms to address its problems while legislative gridlock paralyzes Brazil and others from addressing theirs. Moody's cited China's continued "pragmatic" approach in implementing economic reforms.

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.

49 posted on 08/08/2002 10:55:35 PM PDT by AIG
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To: Singapore_Yank
What do u expect? China to voluntarily choose not to have any military? Even the smallest country on earth (Brunei) has a military.
50 posted on 08/08/2002 10:57:31 PM PDT by AIG
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To: 11B3
Peasants moving off farms and into cities is an essential part of the process of industrialization and urbanization and the development of a middle-class. The US too was mostly rural about 100 years ago, but as machines replaced workers on farms, peasants moved to the cities, got jobs, and formed America's middle-class. Any First World country followed a similar pattern. China's doing that now. Peasants getting displaced is part of the process. And workers getting laid off from China's state-owned industries is part of the process of China's move toward a decentralized, capitalist economy. Labor unrest is a sign of how seriously China is trying to de-nationalize its economy.
51 posted on 08/08/2002 11:02:25 PM PDT by AIG
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To: Lessismore
What a pile of crap! China is communist. As long as they are communist , they will a dangerous third rate power. As long as they are under a totalitarian government, they will command zero respect. Now if they embraced a US style Constitution and Bill of Rights.....watch out. They could become a very powerful and respected country.
52 posted on 08/08/2002 11:04:45 PM PDT by hove
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To: hove
Has India, Indonesia, or Russia become mirror images of the US yet?
53 posted on 08/08/2002 11:11:00 PM PDT by AIG
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To: hove
Foreign investors are scared away by the political and economic chaos in today's Third World republics, by and large. No wonder China gets the bulk of foreign investment. Today, democratic Brazil needed to get a $30 bil. IMF bailout.
54 posted on 08/08/2002 11:15:12 PM PDT by AIG
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To: Lessismore
Unless and until China manages to find away to allocate capital efficiently (it doesn't now, and its banks are all insolvent big time), China's road to becoming a super power will be long one. Still, it will gradually become a more important player, as will India. That is inevitable.
55 posted on 08/08/2002 11:18:44 PM PDT by Torie
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To: Lessismore
The free market in China goes under the official euphemism "socialism with Chinese characteristics." The Chinese Communist Party's embrace of entrepreneurs and getting rich and building a society that can truly feed, clothe and house its people through private initiative sounds truly progressive compared to the Democratic Party's demonization of businesses and the free market here at home. We could learn from the Chinese that the free market has worked everywhere its tried. The more one thinks about what socialism is in China, the more one likes what one sees. Oh if only we could unleash the free market like this right here in the USA!!!
56 posted on 08/08/2002 11:22:42 PM PDT by goldstategop
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To: Lessismore
bump for later read
57 posted on 08/08/2002 11:23:19 PM PDT by antidisestablishment
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To: Lessismore
Having run my own import/export business, dealing with businesses in Far Eastern countries, until only a couple of years ago, I can tell you something that the above article fails to mention.

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.

 

58 posted on 08/08/2002 11:38:52 PM PDT by Action-America
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