Sunday, July 15, 2007

China’s strengths and weaknesses

· An article that is worth a read is “Broken China” by Pete Engardio that appeared in today’s ET.

· All of you know by now my admiration for the communist giant China and the critical attitude towards our own communists for their not being practical the way China had always been. There is an old Telugu saying which when translated into English roughly means “distant hills always appear smooth.” So would the case with many things that we perceive in real life. China’s is no different. It has its own strengths and problems. The challenge lies in trying to adopt the strengths without their attendant problems, to the extent possible.

· Some of the problems in the Chinese model are:

o A glaring administrative failure. A bureaucratic system that seems almost impervious to reform.

o A political structure that gives party officials down to even the smallest villages, huge influence over many facets of economic life.

o An ‘unstable, unbalanced, uncoordinated and unsustainable’ economy, as told by its own Premier Wen Jiabao.

o An over reliance on exports, weak domestic consumption, and a primitive financial system.

· But some of these very problems have some inherent strengths in them:

o It has given China a $1.2 trillion foreign reserves – the most every amassed by any country.

o The political structure ensures that projects which take a typical four years in the presumably efficient West, get completed in less than a year in China.

· To read this article you can use the e-paper of The Economic Times. Follow this link and choose page 5. You need to be registered to read these articles. Registration is free.