Abrami Regina M - Can China lead? : reaching the limits of power and growth

For the past decade, much has been written on how China is going to change, and perhaps lead, the world. We do not agree. True, China has sustained a level of economic growthnearly 10 percent for over thirty yearsthat remains unmatched. But China is now at a critical inflection point in realms that go beyond those of economic development.

Lost in the telling of Chinas dizzying array of infrastructure improvements, its huge foreign reserves, its growing status in international organizations, and the prevalence of its goods around the world has been one constant nonevent: there has been no change in its political system. The Chinese Communist Party (the CCP or the Party), founded in 1921 in emulation of the Soviet Union, is still in control, still claiming its role as vanguard of the People. It stands at the helm of Chinas economy, state, and society, but no longer can anyone argue easily that it is a source of Chinas stability.

If anything, the political system created by the CCP stands in the way of the substantive changes needed to transform this country of 1.3 billion people into a place with sustainable foundations for economic growth and social well-being. The question, quite simply, is whether the CCP can constrain itself when its members hold sway over the countrys corporations, universities, civic organizations, and, of course, the state. If not, we contend, the China miracle as we have known it is coming to an end. The changes necessary to ensure greater accountability at the highest levels of these organizations will require either internal checks on Party authority or more dramatic political change.

We do not make these claims lightly. We acknowledge that substantial positive changes have unfolded in recent decades. Most important, Chinese standards of living have improved markedly. This improvement has been uneven, and much remains to be done. China is still only eighty-ninth in the world in per capita GNP, and its Gini coefficient of economic inequality is higher than those of the two other countries to which it is often comparedthe United States and India. Still, overall incomes in China have risen significantly, and the Chinese people now enjoy a far greater degree of freedom than was ever known under the rule of Mao Zedong (19491976). The countryside has also been transformed, most notably by three forces: the recommercialization of agriculture, the spread of industry, and the waves of rural to urban migration that have integrated China in new ways. Access to education in China has improved greatly, as has the quality of Chinas university system. Chinese businesses compete globally, now going head-to-head with North American and European corporations in telecommunications, heavy machinery, and renewable forms of energy. At home, Chinas new middle and upper classes have developed expanding appetites for international luxury goods, travel, and international real estate.

China is thriving by most comparative measures. But it faces major unmet challenges. The lack of accountability, transparency, and ease of operating in this market, combined with stunning examples of high-level corruption, make both domestic and foreign businesspeople wary. Good roads cannot compensate for poor governance. A robust private sector is limited in scope by sectors of the economy still monopolized by state-owned corporations. Research and development cannot flourish if fears of intellectual property theft persist. Most significant of all is the question of political stability. The turmoil of the most recent political transition reminds us how inadequately institutionalized the Chinese political system still is, more than sixty years after the Communist seizure of power.

By focusing attention on the centrality of politics in China, this book turns the conventional story of the China miracle on its head. Instead of telling the story of how the Chinese government lifted hundreds of millions out of poverty, we emphasize the role of Chinese workers, farmers, and entrepreneurs in lifting themselves out of poverty, once given a decent chance. At the same time, we assess the political reasons that led the CCP to push institutional change in specific directions, resulting in increasingly unsustainable patterns of economic growth and dangerous levels of economic inequality.

Deng Xiaoping, Chinas principal leader from 1978 until his death in 1997, had likened economic reform to feeling for stones when crossing a river. But Chinas fault lines today cannot be crossed with such ease. Stepping from stone to stone may be useful in filling gaps in innovation, social equality, access to financial resources, and product quality assurance. There is, however, also the gap between the Party and the People. It grows wider each time a high-level corruption scandal explodes in the press or is exposed informally by the millions of Chinese blogs now operating as vibrant, if at times suppressed, social spaces for dialogue and criticism on Chinese political and economic matters.

Our attention to the political drivers of Chinas model of economic reform and its aftermath is critical, we believe, to answering the larger theme of this volume: Can China lead? Will the twenty-first century be the Chinese century? We believe that attention to this theme will put our readers on a surer footing as they assess their own strategies for doing business in China, and withor againstthe growing number of Chinese competitors, both private and state-owned, now operating successfully around the globe.

Understanding modern China also requires deep appreciation of the unique forces that led to its emergence in its particular economic form. Historical and political processes continue to shape how business is done. If you dont understand them, your Western-driven decision processes will almost surely bring you to ruin. History suffuses this book because it matters so much in China today and will help define where it is going in the future.