This recent commentary from Dr. Jianguang Shen, Mizuho Securities (China development forum 3) includes the most comprehensive explanation of Chinese thinking outside the financial services area, I have seen.
Because the financial services industries dominate the commercial world of the West, in particular its commercial media headlines, we have become focused on financial reform in China. It is important, very important, but it exists, in China, to serve the agricultural, manufacturing and service sectors, as opposed to being a profit centre entirely of its own. This is what happened particularly in the USA and UK, but as can be seen in the Euro problems, also across Europe.
China has retained its focus on agriculture and manufacturing, on urbanisation and welfare. In this analysis of the China Development Forum there is an explanation of the revolution in Chinese manufacturing that is on its way, and provides huge opportunities, and why the doom merchants of German-China trade and investment are wrong.
Chinese manufacturing will globalise and integrate in ways no one is expecting. This analysis hints at what is to come. The core of this is that the socialist mantra that control of the means of production has a new meaning, which I first discussed with the Leading Group on the Economy – the core Party leadership on the economy – in 1997 with my friend, Keith Bennett.
We saw then that the breakup of the SOE’s was imminent, but we saw the early signs of something else. That was their response to my assertion that regulation combined with strategic shareholding could be adequate to give state leadership of the means of production. That means the state did not have to own everything and control everything, and that provided companies behaved with a social conscience, paid their taxes and innovated at the world’s edge, then the identity of the shareholders was not vital – they could come from many sources, including foreign. The test would be that which I have just written.
So we have seen the emergence of strategic shareholders and regulators, the key to Party control. The next step will be the releasing of these companies on to the sea of the market and not government control. They will be guided by several mechanisms which will keep the economy from straying too far from its core mission – delivering an increasing standard of living for its 1.4 billion people through careful development, protected from ill and unexpected winds.
Never doubt the existence of core policies, seek them out and test the assertions you have, or hear, against them.
The Party and State have a very sophisticated end plan in mind but the feeling of the stones as they go forward will impact the form of the destination. But its main features are clear – a medium sized economy sustaining 1.4 billion people. It will be unique and its development will provide huge opportunities to the world, because China’s leaders know that Chinese alone cannot achieve their goal.
This is a great time for dynamic thinking, and this report shows the edges of why China is going where it is going.