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China: A Paradox of Duality

Published by USC Bedrosian Center on

by Raphael Bostic

Originally posted on July 3, 2013 @ 5:27PM

This clear progress has been driven by the purposeful policies of China’s authoritarian government. But, much of it has proceeded independent of market forces. So while there are beautiful office towers and condominium high rises across Beijing, many sit empty or not close to capacity. Xi’an, one of China’s many cities of 5 to 8 million people that you’ve never heard of, was even more striking in this regard. (Xi’an’s two thousand year old terra cotta warriors are something to see, though.)

It raised the question of whether government alone can drive growth, and whether it can be sustained. The answer to the first question is clearly yes. The 2009 American Recovery and Reinvestment Act, otherwise known as The Stimulus, clearly created jobs and helped prevent our Great Recession from becoming a second Great Depression. And Europe’s austerity measures have hampered the economic recovery there.

I’m rather doubtful about whether government be the focal point for sustained growth, however. And this is the rub for China. At some point, if it is to become the economic power some say it is destined to be, China must transition and become consumer-oriented and innovation driven. This will mean relinquishing control, and letting people have more self-determination.

Letting go of the reins will be a radical change in China. I don’t think it’s clear whether the government will be willing to do it. If it does, I’m not convinced that it can be managed. The rise of homeowners associations – a seeming paradox in a country where government owns all land – are but one sign that energy is starting to bubble as people get a taste of spreading their wings.

Keep an eye on China. It could get very interesting. The battle for economic supremacy is only just beginning.

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