Thursday, October 22, 2009

China cannot lead the world - Victor Shih


Beijing Financial Street - overall
Beijing, not yet ready via Wikipedia
Is China going to lead the world? That questions is asked frequently, but Victor Shih is pretty sure in his piece in the Wall Street Journal that China is far from ready.
But leadership does not depend on cash reserves alone. To lay credible claim to a bigger global role, Beijing must show it understands the rules that make a modern economy work and how to play by them. The economic downturn has only shown how far behind Beijing is in this regard. China's market institutions clearly lag those in more advanced Asian and Western countries. Parts of the government continue to blatantly disregard property rights and contracts. Rules are conveniently bent to favor powerful state entities.
Victor Shih goes over a wide range of recent incidents and his conclusion is devastating:
In all these examples, the Chinese government could have chosen to show the world it is willing to respect property rights, enforce contracts fairly and discipline firms that violate the rules regardless of their political connections. Instead rules were disregarded to maintain the facade of relative budgetary balance and SOE profitability, and connected insiders and large SOEs with political influence were once again told that they need not adhere to contracts. Private entrepreneurs and outsiders were reminded that the law means little without political backing.
More at the Wall Street Journal.
shih08_3_1Victor Shih by Fantake via Flickr

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Victor Shih is a speaker at the China Speakers Bureau. When you are interested in having him at your meeting or conference, do get in touch.
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