Archive for Wednesday, February 22, 2006

China embracing free-market system

February 22, 2006

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That the Chinese support the free-market economic system to a greater extent than people in other countries, according to a new poll by GlobeScan, would come as no surprise to anyone who has visited their country of late.

China's enthusiastic, rapid acceptance of capitalism stands in stark contrast to its early experience under communism, symbolized by the merciless ravaging of the free-wheeling city of Shanghai.

Until 1949, Shanghai substantially set the pace for the rest of China. As described by Pamela Yatsko in "New Shanghai: The Rocky Rebirth of China's Legendary City," it was the "city of firsts for China: the first electric trains, the first stock market, the first night clubs, the first movie industry." It was also a city of superlatives, she writes, with the tallest buildings, the largest number of banks, the most clever entrepreneurs, the best products, the most free press, the grandest gambling dens, the fiercest gangsters and the most stylish citizens.

That all came to an end when the communists gained power. They immediately took aim at Shanghai, dismantling its free-market system and using city resources to assist in developing other areas of the country.

For that reason, decades later in 1997, when Hong Kong was scheduled to return to the Chinese fold, many people feared the worst. After all, they had only the example of Shanghai to suggest how a free-market city might fare under communist rule. Fortunately, their most dreadful worries never materialized, and many of the people who fled Hong Kong with their assets eventually returned.

Now, it appears that Shanghai may have the last laugh, as the city positions itself for pre-eminence not just in China but in all of Asia. Shanghai's aggressive surge has energized competitive spirits in other parts of China, especially Hong Kong.

I was amused, in a conversation with former Hong Kong Chief Executive Officer Tung Chee Hwa some years ago, to hear him describe the Hong Kong-Shanghai relationship. Tung, who was born in Shanghai, initially described the ties as competitive and complementary, in that the city's resurgence stems partly from Hong Kong's investments there. Indeed, he declared, China needs lots of Hong Kongs and Shanghais. But his last word on the matter was the most telling; he asserted that Shanghai would never catch up with Hong Kong.

I will leave that debate to the two cities in question. Meanwhile, China - which has not entirely embraced capitalism - has yet to realize its full economic potential. In the future, when the Chinese economy will be driven almost entirely by the private sector, China's global clout will expand exponentially.

That thought probably scares people who already have jitters over China's imposing position in the global marketplace. They have seen how China, despite its unveiling of economic reforms just a generation ago, has managed to progress to the point that it does not need to develop certain businesses the old-fashioned way; it can afford simply to buy them.

If China had remained staunchly communist, its economic prowess would demand caution. But, as I have maintained for years, communism has less relevance in China with each passing day. With economic reforms expanding and political change slowly following, communism will recede further from the scene.

I also see as unlikely the possibility that China could suffer a meltdown within this decade, as described in "The Coming Collapse of China," by Gordon Chang. When I discussed that thesis with Chang shortly after his book was published, it was plausible. China had just emerged from a gung-ho decade of growth. Pressure from within and outside China was mounting, with indications that it could cause severe disruption.

China has proven adept, though, at maneuvering through recent economic crises. I have every expectation that it will defy forecasts of a meltdown, that its economic miracle will continue to unfold and that more Chinese voices will sing the praises of capitalism.

John C. Bersia, an editorial writer for the Orlando Sentinel, is the special assistant to the president for global perspectives and a professor at the University of Central Florida.

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