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2. China 2030: 'It's hard to find a more impressive economic plan anywhere else in economic history.'

February 16, 2018
Bill Overholt
AsiaStrat

China's Crisis of Success—2

'Simple economies and politics have been replaced with immensely complex ones. And you gradually get to a point of complexity, where there is an economic and political crisis of some kind.'

Bill Overholt says, 'China's situation today is a little like that of an entrepreneur, who has invented a good widget, done well in marketing it, the company is taking off, and it's gotten to a certain point where they have to do the IPO.'

  • 'Now, it needs professional accounting and professional human resources and so on. It needs a transformation in order to keep going. If it succeeds at that transformation, take off continues, and if it doesn't, it flops.'
  • 'The core issue for China is dealing with the social complexity that comes with economic success.'

From simple to complex. 'China doesn's have simple infrastructure, agriculture, and government manufacturing anymore. There are thousands of sectors.'

  • 'In the power sector, you have all kinds of different power production systems: coal, solar, wind, hydro. You have conflicts between the producers and the distributors, who are no longer the same companies.'
  • 'There are thousands of software firms in conflicts between the users and the owner, inventors. And, so on.'
  • 'These sectors are big and powerful and assert their interests.'
  • 'China's economy just got too complicated to be managed from a few offices in Beijing anymore.'

'China's leadership recognized the issue; they saw it coming; and they addressed it.'

  • 'They decided, "Instead of trying to make all the major decisions in the NDRC, the National and Development Reform Commission, we're going to have market allocation of resources. It's going to be done automatically by the market, and it’s going to be more efficient."'

'From that premise, like somebody developing a system of mathematical theorems, they deduced hundreds of individual policies to implement that market allocation of resources. They consulted Nobel Prize winners, they consulted all kinds of private sector actors, as well as government officials.'

'The end result was China 2030: Building a Modern, Harmonious, and Creative High-Income Society prepared jointly by the World Bank and the Development Research Center of the State Council.'

  • 'It's hard to find a more impressive economic plan anywhere else in economic history.'

'China 2030 was announced as a report of the Third Plenum, with great detail about what they planned to do after Xi Jinping took power.'

  • But, 'in the politics and implementation, it's gotten complicated.'
Bill Overholt

Bill Overholt

Senior Fellow at Harvard Asia Center
AsiaStrat
  • 21 years' experience running Asia research teams for Nomura, Bank Boston, and Bankers Trust
  • Former Asia Policy Distinguished Research Chair and Director of the Asia Policy Center at RAND

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book

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AsiaStrat

5. Has Xi gone too far?

5. Has Xi gone too far?

China's Crisis of Success—5

Bill Overholt believes 'Xi Jinping may have gone well beyond what the consensus originally intended, and the politicization of the reform may not be exactly what some of the designers of the reform intended.

4. Enter Xi Jinping. The reformer?

4. Enter Xi Jinping. The reformer?

China's Crisis of Success—4

'Second, they realized that these reforms are painful, and so there's going to be a lot of pushback from all the important power groups of Chinese society. So, they used the Anti-Corruption Campaign as a hammer to push aside these groups who were resisting reform.

3. The slower the reforms, the bigger the debt

3. The slower the reforms, the bigger the debt

China's Crisis of Success—3

'What the Chinese have effectively chosen is much slower reform in order to keep the economic growth rate up around 6.7%.'

2. China 2030: 'It's hard to find a more impressive economic plan anywhere else in economic history.'

2. China 2030: 'It's hard to find a more impressive economic plan anywhere else in economic history.'

China's Crisis of Success—2

'Simple economies and politics have been replaced with immensely complex ones. And you gradually get to a point of complexity, where there is an economic and political crisis of some kind.'

1. 'A sense of terrible crisis was a prerequisite for an Asian economic take off'

1. 'A sense of terrible crisis was a prerequisite for an Asian economic take off'

China's Crisis of Success—1

'Why is this sense of terrible crisis a prerequisite for an Asian economic take off? Because it creates a certain political environment.'...'The counterpart, on the economic side, is an economic simplicity.' says Bill Overholt.

China's Crisis of Success

China's Crisis of Success

Bill Overholt and I recently had a discussion about the points he makes in his new book, China's Crisis of Success. Here are five key points, each corresponding to a section below.

The Rise of China: How Economic Reform Is Creating a New Superpower by Bill Overholt, published in 1993, was called 'nonsense' and 'too optimistic.' How did that work out for the reviewers? 

Now, almost three decades after The Rise of China, Bill believes that China's future has become 'much more uncertain.' And, he addresses his concerns in a new book, China's Crisis of Success.

Bill outlined some the key points from his book recently in an interview with me. And, I have conveyed these below. As you will see, I have let Bill speak for himself. 

Bill was right in 1993. 

Is The U.S. Ceding Global Leadership To China?

Is The U.S. Ceding Global Leadership To China?

Hard on President Trump's 'American First' inaugural address, Xi Jinping gave a rousing paean to globalism at the World Economic Forum. And, immediately the hot question became: 'Is the U.S. ceding global leadership to China?'

Yes and no, says Bill Overholt of the Harvard Asia Center. Yes, the U.S. is ceding global leadership. No, China won’t replace the U.S.

What will replace the U.S. is ‘G-Zero’, a world with no single global leader. Not China, not the U.S.

So, can his critics lay this outcome at President Trump’s feet?

Why A Trump–Kim Jeong Eun Summit Could Work

Why A Trump–Kim Jeong Eun Summit Could Work

'What President Trump has done is to signal we are willing to move away from this formula that the North Koreans have to give up everything in their nuclear program before negotiations - only then we'll talk with them. I admire our U.S. negotiators, but that formula is simply absurd.'

Bill Overholt

Bill Overholt

Senior Fellow at Harvard Asia Center
AsiaStrat
  • 21 years' experience running Asia research teams for Nomura, Bank Boston, and Bankers Trust
  • Former Asia Policy Distinguished Research Chair and Director of the Asia Policy Center at RAND
AsiaStrat

AsiaStrat

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book
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