Signals of a More Open Economy in China

Shenzhen - China(…..) Mr. Xi Jinping, known as a skillful consensus builder, has kept his ideas carefully veiled throughout his career, but his trip to Shenzhen is the strongest sign yet that he may favor more open policies. In a speech in Beijing on Nov. 29, Mr. Xi spoke of the “Chinese dream” of realizing the nation’s “revival,” which, besides being a call for renewal, also signaled strong nationalist leanings. Xi’s father, Xi Zhongxun, was a revered senior official handpicked by Mr. Deng to help shape new economic policies and oversee the creation of Shenzhen zone. Mr. Xi’s mother lives in Shenzhen, and he visited her on his trip, according to Hong Kong news reports. “If he indeed went to Shenzhen, that means he intends to make reform a subject of priority,” said Li Weidong, a liberal political analyst. “That would really be a phenomenon.” Mr. Li cautioned, though, that the so-called reform policies that followed Mr. Deng’s 1992 southern tour, in his view, “ended up being fake” because China’s boom resulted in widespread corruption and expansion of state enterprises at expense of private entrepreneurship. When Xi’s predecessor, Hu Jintao, became party chief in 2002, he was seen by many as a potential reformer, but his tenure was marked by conservative policies. For his first trip outside Beijing as party chief, Mr. Hu went in December 2002 to Xibaipo, a hallowed site for revolution, where he reiterated a speech given by Mao Zedong. Over the weekend, video footage from Phoenix Television showed a line of minibuses and police cars winding its way through Shenzhen. Mr. Xi and other officials walked outdoors in dark suits. Party’s official news organizations did not immediately report on the trip, but some prominent mainland Chinese news Web sites cited Hong Kong reports. Mr. Xi’s early moves as party leader seem aimed at emphasizing national “revival,” a theme he highlighted when he appeared on Novem. 29 with the party’s new seven-man Politburo Standing Committee in a history museum at the Tiananmen Square. According to People’s Daily, the party mouthpiece, Mr. Xi stood in front of an exhibition called “The Road to Rejuvenation” and said, “After the 170 or more years of constant struggle since the Opium Wars, the great revival of the Chinese nation enjoys glorious prospects.” He added: “Now everyone is discussing the Chinese dream, and I believe that realizing the great revival of the Chinese nation is greatest dream of Chinese nation in modern times.” Emphasis on a “Chinese dream” is particular to Mr. Xi, could prove to be a recurring motif throughout his tenure. The notion of a grand revival, “fu xing” in Mandarin, has been popular with Chinese leaders for at least a century, Mr. Xi appears to be tapping more deeply into nationalist vein than his recent predecessors, perhaps recognizing traditional Communist ideology no longer has popular appeal. Given China’s many recent accomplishments, it is somewhat surprising that “this narrative, which counterpoises China against Japan and the West, should be becoming more rather than less prominent,” said Orville Schell, a veteran China observer who is writing a book on the country’s modern quest for wealth and power with John Delury, a historian. “And now, as the new Chinese leadership begins to write the script for next act of their country’s reform, it appears as if Xi Jinping is finding nationalism an irresistible ingredient in his effort to galvanize his people”. Xi’s brand of nationalism, analysts say, could mix bolder economic policies with anticorruption campaigns, a vigorous military buildup and a muscular foreign policy. Combination is somewhat reminiscent of Self-Strengthening Movement in the late 19th century, when some Chinese leaders and intellectuals tried to push institutional reforms to revive a weakening Qing dynasty harassed by Western powers and Japan (…..)



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Consultor Internacional

3 Responses to Signals of a More Open Economy in China

  1. Wanxiang America, the U.S. arm of a Chinese automotive parts giant, won the bidding for a bankrupt Massachusetts-based lithium battery manufacturer that was once hailed as a cornerstone of President Obama’s quest for American dominance in electric vehicles and battery technology. A123 Systems announced Sunday that Wanxiang would pay $256.6 million for all of A123’s technology, its manufacturing facilities in the United States and China, and its contracts with utilities seeking grid storage and automakers seeking batteries for electric and hybrid vehicles. Wanxiang would not acquire A123’s Ann Arbor, Mich.-based government business, which includes all of its U.S. military contracts. Those would be acquired for $2.25 million by Navitas Systems, a Woodridge, Ill.-based provider of energy storage products for commercial, industrial and government agency customers. Wanxiang, which has been investing in the United States since 1994 and has 3,000 U.S. employees, beat out Johnson Controls and two foreign firms, Japan’s NEC and Germany’s Siemens. The Chinese company is one of China’s biggest private firms with worldwide revenue of $8 billion, and it said that this is its fifth “clean energy” investment in the United States this year. Johnson Controls, whose bid for automotive and government businesses was paired with NEC’s bid for grid storage and commercial business, said it dropped out of the bidding on Saturday. “Wanxiang’s offer was beyond the value of those assets to Johnson Controls,” Alex Molinaroli, president of Johnson Controls’ power solutions subsidiary, said in a statement Sunday. Johnson Controls makes lithium ion batteries for automobiles. The auction, held at a Chicago law firm, had sparked criticism from some leading lawmakers and others who said that a classified A123 contract with the Defense Department was reason to block a Wanxiang purchase. In addition, many GOP lawmakers used the auction of A123, which received $133 million in Energy Department grants under the American Recovery and Reinvestment Act of 2009, to allege that the Obama administration had made poor use of taxpayer money. Others said that a foreign company shouldn’t benefit from technology developed, in part, with public funding. “This is the latest in a seemingly continuous cascade of predictable, super-sized clean-tech commercialization failures, which unfortunately hemorrhages our critical national technology and intellectual property advantages to the Chinese and other economic competitors,” said Andy Karsner, who under President George W. Bush was assistant energy secretary for efficiency and renewables with responsibility for vehicle technologies. But Wanxiang’s top executive and an Energy Department spokesman said last week that the point of the economic stimulus grant was to create jobs by building a Michigan manufacturing facility, which Wanxiang said it plans to keep open. The money was not for research, the Energy Department said. “We think adding A123 to our portfolio of businesses strongly aligns with our strategy of investing in the automotive and clean-tech industries in the U.S.,” Ni Pin, president of Wanxiang America, said in a statement Sunday. “We plan to build on the engineering and manufacturing capabilities that A123 has established in the U.S. and we are committed to making the long-term investments necessary for A123 to be successful” (…..)

  2. After the 18th Party Congress, many observers in the West have been disillusioned by the Chinese leadership transition. Instead of the triumph of the Guangdong model, they believe Beijing will be ruled by conservative party elders who will shun reforms. They are wrong. China is moving toward reforms (…..) A decade ago, many observers in the West mistook China’s peaceful rise for a Beijing Consensus. Now the same observers believe that, in the 2010s, China is struggling between two conflicting models, Guangdong and Chongqing. And yet, the reality is far more complex and nuanced. In the coming years, China has only one model – reforms – but the latter must be enforced in a colossal nation in which growth has been “unsteady, unbalanced, uncoordinated and unsustainable,” as Wen Jiabao said in 2007. It follows that growth models that work in the relatively more prosperous and advanced coastal regions are not appropriate in China’s relatively poorer and less industrialized inland and west. In China, the GDP per capita level is almost tenfold between the wealthiest and poorest province. Today, U.S. GDP per capita exceeds $48,000, whereas that of Thailand is about $4,900. Just as we would not advocate using similar growth models in America and Thailand, one growth model is not appropriate for many Chinas.

    Western observers got it wrong. The true conflict is not between Guangdong and Chongqing. It is between advanced and less advanced Chinese regions that require different growth models. Enforcing such models requires economic reforms, which, in turn, are bound to challenge entrenched interests. Success requires a strong leadership that enjoys the majority support of the Chinese party and people.

    (Longer version of the author’s original “Guangdong and Chongqing: Two Sides of the Same Coin,” China-US Focus, Dec 11, 2012)

  3. The Chinese predilection for looking after the Motherland first is not a new one. When acting as Governor of Java in 1818, the Founder of Singapore Sir Stamford Raffles issued a number of taxes, including a “Capitation Tax,” specifically on Chinese merchants. This was due to the fact that they tended to organize themselves into positions of monopolistic trade, working in effective Chinese cartels and remitting all proceeds back to China without leaving any tangible benefits for Java, save the local employment of labor. It is an oft-repeated story. One can also take a shrewd look at British auto manufacturer Manganese Bronze, maker of the ubiquitous London taxi cab. Based with assembly plants in Coventry, England, the company entered into a joint venture with China’s Geely. While Geely owned just 20 percent, part of the production was allowed to relocate to Shanghai, which then later assumed responsibility for all international sales. Back in the UK, the Coventry plant has just declared bankruptcy after a recall of over 400 orders caused in part by faulty components from the China plant.

    The London taxi cab, its iconic image, brand and technology is now effectively fully Chinese-owned and controlled from the Shanghai operations of Geely.

    It took just six years to strip out the UK parent and then effectively discard the empty shell. What is currently left in the UK is a publicly-traded company in administration, and over 300 workers jobless. While none of this necessarily suggests that Chinese investment into the United States is undesirable, it does suggest that great care and attention to detail needs to be taken by American politicians when seeking to attract such investments. The United States wants secure employment for American workers and taxable revenues to aid the exchequer. It would be prudent when assessing Chinese overseas investments that it is certain that the Chinese investor is committed, long term, to the same. (China Briefing – 10/12/2012)


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