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Stephen Archer is a speaker with great charisma. By using illustrations and personal experiences and not being afraid to share his own point of view of the current situation and who is to blame for it, he engages the whole audience, at the same time helping us all to understand the credit crunch a little better.

— Warwick Business School

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China – More freedom and more control in 2014

Is there going to be significant and sustained change to be seen in China? In my view the answer is yes. As we head into 2014 we have a legacy of change in China during 2013 to consider so what is the evidence of change?

We may see China as approaching the Western economic model but it I unlikely that we will see in this generation such a change coming about. China remains a centralist, controlled economy under the guise of freedom and democracy.  In China the state is greater than the individual- even long after Mao.

Xi Jinping took the reins late 2012 and in the autumn set out the path forward as he sees it. It is best characterised by ‘give and take’ but the state remains at least if not more powerful. Jinping himself labours under some fears about the economic history of China’s giant neighbour Russia and in particular the rapid loss of strategic state controlled industry to a handful of individuals.

Jinping sees the rot in Russia setting in with Gorbachov rather than later leaders and as result has clamped down on activism and free speech – especially online in the past year. But at the same time Jinping sees the individual at the economic driving force in the future and consequently publicly champions the individual.  This is building on Deng Xiaping’s legacy of ‘reform and opening ‘ going back to 1978 and from this 400 million Chinese are no longer in poverty.

The ‘Third plenum’ document of Autumn 2013 sets out the basis for future Chinese growth.  The policy of one child per family is being eased (with good reason, this poses a demographic issue if allowed to carry on for too long.

Farmers are now allowed to sell their land and free themselves from the communist collective model. But there are no sigs that Jinping wants to see China move towards the Korean or Taiwanese economic model of greater economic and individual freedom. The legacy of Tiananmen Square also hangs over this subject. Since 1989 much of China has seen growth benefiting the country and many individuals. If the forward movement of the economic well-being is arrested then society may rapidly react against the state. Even now there is reaction against tyrannical working conditions, poor air and even food safety.

Against this background China is perhaps too far down the road towards the Korean model to ever be able to prevent increased personal freedom and voice. Jinping wants growth to be driven by private enterprise whilst the state continues to own and control vast swathes of industry.

So what of the coming year? China will slow even more this year than last, already the rate of commodity purchases is showing this trend. Manufacturing is slowing and the consumer is not taking up the role of driving the economy. China has a $1.8 trillion local government debt, which does not sit well with any attempt to allow consumers to take on debt themselves. Meanwhile, central government is trying to put the brakes on local government debt but the impact of this has been to further slow the economy.

Slowly falling competiveness means that they are in a double bind. That said, growth may still be around 5% in 2014.

Its the year of the horse but there is a time for a race horse and a time for a heavy lifting, smart horse. Which will it be?


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