As Yale University's Jeffrey Garten put it in a panel today: "There is no easy historical analogy for what is happening now."
Speaking in English, and "as a scholar," Cheng Siwei, Vice Charmain of the Standing Commitee of the National People's Congress appealed to the world to "cooperate with China"... so that China can better cooperate with the world. As his country aims to raise per capita GDP from around $1000 today to $3000 by the year 2020, it is dealing what he calls a "dual economic structure" with "cities like Europe" and a "countryside like Africa." Efforts to "tap the breaks" on recent double-digit growth are necessary, he says, but not because the economy was overheating; rather, because investment was happening too fast, too inefficiently, and not always in the right places.
Qin Xiao, Chairman of Hong Kong's China Merchants Holdings, points out that China has lately been facing many problems that have been heretofore unseen in other economies, and for which classic economic theory has no answers. Problems such as simultaneous high growth and high rates of real unemployment; or "biflation" - inflation and deflation at the same time; or or overheating without inflation.
While Chinese officials reassured Summit attendees that all is under control, other Western economists wondered whether a financial crash or economic downturn might be inevitable at some point, especially given the general state of the world economy. Garten pointed out: "the future prospects for China have nothing to do with the plans." He cautioned everybody against "irrational exuberance" when it comes to China.
Speaking on behalf of the Bush Administration, Kristin Forbes of the Council of Economic Advisers admonished China to do more to embrace free markets and lessen the urge for administrative controls. But no matter who wins the upcoming U.S. Presidential election - and no matter what problems China may face in the short term - panelists at a session on U.S.-China relations agreed that the U.S.-China relationship is likely to be "the most significant relationship in driving the world economy." While there is likely to be a struggle between the U.S. and China for resources, they expressed the hope that the two nations will find ways to create as much of a win-win situation as possible.
According to Garten, the wealthy world is not "remotely prepared" to adjust to China's growth: an increasing number of jobs can be done just as well here in China for a fraction of U.S. and European salaries. The Western developed world will face enormous adjustment problems, he believes. One audience member pointed out in a discussion session that 80% of major software companies are doing research & development work in China. This was unimaginable until recently, and it is a direct threat to jobs in the U.S., Europe and Japan.
Threat or not, the developed world has no choice but to let China in. "Room must be made for China," Garten said. The question is how this will be done, and how orderly - or acrimonious and painful - the process will be. Vice Premier Zeng Peiyan made an appeal: By allowing and helping China to develop and grow, the major powers of the world will be helping to ensure global peace and stability.
Garten believes it is urgent that China should be incorporated into the global structures of economic and financial governance, such as the G7 and IMF.
For more blogging on the China Summit, see journalist Fons Tuinstra's running commentary on his weblog, China Herald.
I found it interesting to read in your blog that the US "admonished" China for continuing to exercise controls over its economy. One media organization said the Americans wanted to put pressure on the Chinese to open up their economy. Read this article in Bloomberg:
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aTeG2HHLHC9U&refer=news_index
and Fons' blog at this address: http://www.chinaherald.net/
Thanks for the interesting blogs!
Posted by: Samantha | September 13, 2004 at 17:20