We highly recommend Fareed Zakaria’s Newsweek piece today on China. It contains the usual, put very well:

To get a sense of how completely China dominates low-cost manufacturing, consider Wal-Mart. Wal-Mart is America’s—and the world’s—largest corporation. Its revenues are eight times those of Microsoft, and make up 2 percent of America’s GDP. It employs 1.4 million people, more than GM, Ford, GE and IBM put together. It is legendary for its efficient—some would say ruthless—efforts to get the lowest price possible for its customers. In doing this, it has used technology, managerial innovation, but, perhaps most significantly, China. Last year Wal-Mart imported $18 billion worth of goods from China. Of Wal-Mart’s 6,000 suppliers, 5,000—80 percent—are in one country, and it isn’t the United States…..

When historians look back at the last decades of the 20th century, they might well point to 1979 as a watershed. That year the Soviet Union invaded Afghanistan, digging its grave as a superpower. It was also the year that China began its economic reforms. They were launched at a most unlikely gathering, the Third Plenum of the 11th Central Committee of the Communist Party of China, held in December 1978. Before the formal meetings, at a working-group session, the newly empowered party boss, Deng Xiaoping, gave a speech that turned out to be the most important one in modern Chinese history. He urged that the regime focus on development and modernization, and let facts—not ideology—guide its path. “It doesn’t matter if it is a black cat or a white cat,” Deng often said. “As long as it can catch mice, it’s a good cat.” Since then, China has done just that, pursued a modernization path that is ruthlessly pragmatic and nonideological.

The results have been astonishing. China has grown around 9 percent a year for more than 25 years, the fastest growth rate for a major economy in recorded history. In that same period it has moved 300 million people out of poverty and quadrupled the average Chinese person’s income. And all this has happened, so far, without catastrophic social upheavals. The Chinese leadership has to be given credit for this historic achievement.

And the unusual and witty:

Having abandoned communism, the Communist Party has been using nationalism as the glue that keeps China together. And modern Chinese nationalism is defined in large part by its hostility toward Japan….

How to handle China? The best guide is to listen to what French President Jacques Chirac says, and do the opposite.

Zakaria’s piece also contains a link to an 80 page article by Joshua Cooper Ramo on China, available from the Foreign Policy Centre in London. We’ll report back on that after we finish reading it.

We have been among those saying China looks too good to be true, and those things that look too good to be true usually aren’t. We have pointed out the problems with real estate speculation, banking and governmental corruption, credit problems, a missing generation of executive management (courtesy of the Cultural Revolution), and an emerging trade crisis, brought about in part by China’s (and others’) low prices and the structural inadequacies of the Western European economies. These problems are all real and serious, and the failure of France and Germany’s economies to perform at this point in the global economic cycle is ominous.

Yet China has shown itself to be often extremely pragmatic in dealing with its development issues. We shall see whether the cat continues to catch mice.

This entry was posted on Sunday, May 1st, 2005 at 9:02 am and is filed under China, General, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.