China’s Quiet Revolution

Chinas quiet revolutionAs 2013 passes and 2014 begins there is a wish to see new beginnings, but we actually carry on from the days and weeks before.

China is undergoing a quiet revolution.

Two major forces are in operation.

The first is to focus on economic development and build a shareholder economy which doubles per capita income in seven years and then again in another 20 years or less. This new Chinese economy is unfolding around us, and publications like Bloomberg and the New York Times misunderstood the experiments with safe shareholdings as examples of corruption at high levels. The Party and Government will develop trusted shareholders, both individuals and corporate forms, who will build a market economy on the basis of guided growth and social justice.

Simultaneously China is transforming its population from overwhelmingly peasant in 1978 to 80 percent urban, and the peasant farmer is being replaced over the next 10 years by cooperatives and large scale farming, and agriculture moving to 95 percent food security and the import of other agricultural products. A huge transformation with big effects on global supply and demand.

If Africa can avoid being drawn into pointless wars it will be the biggest beneficiary but already the spoilers are in Africa disrupting the new trends. 70 percent of the world’s undeveloped cultivatable land is in Africa.

The second force is to make China fair – to slow the flood of red wine and expensive cars, and for the shareholders and holders of office and power to become modest in the benefits they seek and take. A revolution in values is following a decade of focusing on wealth creation in the emerging private sector. The Chinese are not moving back into old clothes and dim lights, but the space between those who have taken value, and those who produce it, will be narrowed and the benefits of wealth will be more evenly split. It is Scandinavia and Germany rather than the U.S.A. and UK.

Many in China who have been allowed and encouraged by the Party to participate in the new market economy, and have been self-centred and indulgent, can read the value system of the Chinese Dream, adapt, become more modest and commit to the general good, or they will slowly be moved aside, not sent to labour camps or anything like that.

But the Chinese value system of modesty will become the norm.

Xi is for real. But Xi is not solely in charge. He sits at the apex of constitutional power but also has to respect a substantial power base within the Party and elders who want a prosperous Asian-based China that goes about its life modestly. They want a peaceful China but strong internationally so it can safeguard its national development. As Japanese Prime Minister Abe and others will find out, China can be strong and tough when challenged but a very attractive partner to neighbours and major powers who work with them.

The Party is very deep and committed to the long-term development of China from 1978 to its goals of 2049. It will adjust its plans and policies to realities but it is on a journey and not reacting solely to changes in its environment. This makes China different from other nations and signals Xi’s work from those of other national leaders.

China knows its plans feel threatening to the U.S.A. and some other countries, which may fear for the world leadership or their economic power. China does not seek those goals, but its path and that of others do not ally easily, and it remains to be seen if the U.S.A. and EU can see that China’s path provides big commercial opportunities for them as well.

China has yet to reveal that its markets will open considerably in the next three years but Apple has already seen that. The Chinese are prepared to accept foreign companies to take big shares in their market so long as they allow big Chinese shareholdings and they pay taxes and respect Chinese laws and innovate in China.

Never has the world faced a crossroads quite like this. Abe and his American backers feel that China is to be challenged now before it grows too strong. The wise ones are thinking differently. An Asian Association which collectively secures military stability and economic development is the big challenge for the U.S.A. and Japan, but is a target which China is pursuing and whose characteristics will emerge more clearly in the next five years. I do not expect an Asian Euro but I do expect an Asian Security Agreement and an Asian Common Market to unfold over the next 10 years.

It is the right way forward – an Asian union of security commitments that are linked to opening trade and capital markets can work for all, including the U.S.A. and EU. Or we can have old-fashioned thinking and the Chinese are ready for that. If the opposition attacks China, it is ready for what comes and will hit back. The world is too interconnected to allow the military game players their moment.

I think the U.S.A. knows well that they need the China market to recover their own economy broken by irresponsible capitalism of unregulated financial markets. Now is the time for the U.S.A. to see China as a real opportunity and to seek Asian security not control, and seek open capital and trade and investment markets.

The UK can be a huge beneficiary of it and the Chancellor’s visit is an example. His communique showed the way, and I would guess it is a test that the U.S.A. is watching very carefully. It is a test of how China going global can be accommodated and used by the West to the advantage of both, focusing on China’s priorities and the needs of development in the UK. These new steps are really very breath taking, and could well herald a completely new era in UK-China relations so long as both sides carefully nurture and manage the process and avoid unnecessary conflicts.

This is a period when major corporate leaders and policy makers have to revisit their China strategies and plans and completely re-write them.

Happy 2014

Stephen



Categories: Africa, Economic policy, USA

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