An iconic billboard in the quintessential boom city of Shenzhen features Deng’s famous statement that China's “basic line will not waver for 100 years.” If Deng was right, we are less than one-third of the way into the era of “reform and opening.” But four challenges identified by Premier Wen Jiabao in 2010, that growth becomes “unbalanced, unstable, uncoordinated, or unsustainable,” threaten the boom. The key to balance lies in increasing the consumer share of GDP, allowing China to create a modern consumer economy. Stability will depend on the government's ability to address grievances as the gap between winners and losers widens. Coordination is the great test facing the ruling Communist Party, of whether it can manage the politics of growth without fundamental changes to the system. Sustainability is an issue that has global implications, as citizens of a warming planet watch anxiously to see if China is successful in greening the boom. The fifth great challenge, left out by Premier Wen, may be the external one: whether the world is successful in making room for China.
James Rice, the CEO of CSM Global in China, has lived and worked in China since graduating college in 1991. Prior to his posting at CSM, Rice was vice president and country manager of Tyson Foods in China. He has also played a key role at numerous brand-name companies including Danon, Kimberly Clark, and Tyson, by designing and executing successful strategies for doing business in China. Rice is a governor of the American Chamber of Commerce in Shanghai and has also served as a member of the Food Processing Editorial Advisory.
It's not going to affect the nature of , the nature of Chinese growth up until now has been to see some kind of a market opportunity. Invest in there somebody early on makes a lot of money. Then a whole lot of people come in and then you have over-investment in that industry and this cycle is the case whether it's real estate, stock market, ginko leaves and on and on and on. Some of these guys are going to get burned, the real estate guys, and the export guys, and then they'll identify another opportunity and they'll be back into it. So, I think they cycle will stay the same.
It depends now if the Chinese government can find the economic management tools. Because, right now, they're sort of in a middle place, where it's not a socialist economy, so five year plan, command and control, price controls for example which the Chinese government have tried to use or demanding soybean producers to increase their output. These are old socialist system economic management tools. They tried them and nobody would listen, they don't work. And on the other side you have the capitalist management tools where you have money supply and interest rates and the Chinese government has manipulated money supply and interest rates and they don't work either. So, China is right in between these two things. Kind of like a ship bobbing in the sea with no rudder. But eventually they'll get more towards the capitalist system where those kind of economic tools work.
So I would guess, the boom and bust are the over-invest and the under-invest and the make lots of money and the don't make lost of money. This cycle has been going on for 20 years, that'll keep on going, Chinese government will probably be able to manage the economy better so they can narrow down those cycles. I think you've seen that in more mature economies, like Europe for example, the highs are not so high and the lows are not so low. Eventually China will get there.
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