March 28, 2024

Can China’s Economy Survive China?

When writing about China’s economy, Western media has often
portrayed the country in unfavorable terms. Over the last two decades,
headlines have painted China, now the second largest economy in the world, as a
looming threat, a “sleeping dragon” or a nation of ruthless intellectual property
pirates.

During a lunchtime discussion at the China Hands Reunion
earlier this month, three panelists chatted with guests about the truth of
those stereotypes and the direction of China’s economy.

Orville Schell, director of the Center on U.S.-China
Relations at the Asia Society, said the country is homing in on a long-term economic
model built on a foundation of state-owned enterprises and authoritarian
capitalism, but its system remains in an unstable transition.  

“I’m dubious about it. But I have to say I’ve been
dubious for 20 years, 25 years, and yet it has cohered,” he said.

In high-tech sectors, China’s innovation has not yet
caught up with that of the U.S. or neighboring technology giants like South Korea
and Japan. Pete Engardio, an OPC award winner and senior writer at The Boston Consulting Group who covered China for BusinessWeek, was skeptical that the country could soon
catch up.

“The reform era in China has lasted longer than the pure
Communist era,” he said. “They’ve been reforming for 35 years after that. It’s settling
into a model, barring really drastic changes in the political system, and we’ll
continue to be puzzled by it.”

But John Bussey, assistant managing editor and executive
business editor of The
Wall Street Journal,
was more optimistic. He said China would eventually get its
footing and emerge as a competent rival in those industries.

“You have 1.3 billion people with big aspirations, so they’ll be right at the top of the curve. It’s only a matter of time. They’re already much further up the curve than anybody thought.”

Engardio added that China is playing a long game in its quest for tech innovation. “The one way they’re going to get there is by acquisition,” he said. “China builds large-scale operations that squeeze out companies in the bottom part of the market, and then buy companies with good technology that can no longer compete.”

“This is a system that shouldn’t work,” Schell said. “Who among us stood in Tiananmen Square in 1989 thought they’d get this thing back together again?”