As we move to the Chinese New Year of the Horse I wish you a Happy New Year and invite you to look at this and more articles on chinaglobalimpact.com, where I write a little more frequently and widely.
The article below, from the Guardian, explains the rationale of an economy, like the Chinese, that combines planning and the market.
China uses the phrase “Socialism with Chinese Characteristics” which brings to Western minds ideological battles which have raged for 150 years. If we read this article we can get beyond the ideological labels to the underlying realities of what is needed to develop economies.
The Chinese would say developing economies require more micro management and state investment to boost the capability and ability to export to build the economy.
Then, as it matures and begins to plateau more emphasis on building domestic consumption and macro management. But the role of planning, visions and missions which influence access to and use of key and scarce resources, such as energy, power and transport, is a constant.
The new Reform Commission of China, headed by President Xi, and including Premier Li, is an acknowledgement not only that transition needs to be made to happen, but the range of the market is also key. The references in recent speeches about sustainability, capacity utilisation and the environment are all evidence of a supervening short, medium and long term plan.
In his recent speech David Cameron began to outline the elements of the British plan to rebalance the British economy which involves recognising that other nations might be better managers of British manufacturing. But he outlines the need for plans. This goes through to infrastructure and to the role of the financial industry. It also impacts the role of social justice and the Welfare State. All are a combination of planning and market forces. When either predominates there are negative consequences.
At times of global or national challenge planning might need to play a bigger role, ensuring resources are well used, and that assets are protected. But if planning overtakes everything the ultimate example is the Soviet Union. If the market takes over then we have crises like the recent financial one. Constant attention is required.
China is always focusing on the balance between the two forces as it moves towards its medium term goals of 2021 and 2049. It leads to tensions in China during change, and that causes uncertainty for foreign business and national and regional policy makers. But if we read and listen carefully the supervening messages are there and clear. If we listen to tittle tattle, academics and media whose experience is limited, then business and policy makers can easily be wrong-footed – nb GSK and RTZ and others.
Chinese socialism and responsible capitalism have much more in common than those words would historically suggest.
On the International front Prime Minister Abe again showed he is an adventurist when he compared Germany and the UK relations before the First World War with current relations between Japan and China. The UK was an Empire and Germany challenged it. Japan is not an Empire and Abe’s sense that it is should worry us all.
Thank goodness most Japanese have good memories of the evil that wars produce, and, hopefully, can constrain him from provoking trouble. But the U.S.A. is, for now, the key to controlling Abe. But he might go where Japan went before the Second World War and try to strike out, independently, for Asian resources, based on a military approach, using China as cover.
China is responding in the South China Sea to the American agenda of Obama, and China will continue to offer the U.S.A. reasons for pursuing a peaceful relationship, but the tension is there and real, and best overcome by trade and investment.
Japan, and other nations, may get drawn into the game and be pawns, but let Ukraine and Syria be a lesson of the results of major power clashes. All the conflicts of the post second world war period result from misjudged assumptions of global power balances, and the world is as far from peace today as it was 20 years and 60 years ago, perhaps further.
So how does business manage a global tension of this type? By asserting its agendas sensibly but clearly. Davos needs to become more of a pathway as well as a centre for big speeches. Politicians in the West need to hear that what business needs is more business, and this gives people what they need – a secure future.
Happy New Year.
Chairman, The 48 Group Club