CHINA
DEBATE
Join PRO
Log in

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

February 16, 2018
Bill Overholt
AsiaStrat

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.

Political Fear. 

'The Asian Miracle countries are all countries that were scared out of their minds.'

  • 'Japan after World War II. South Korea after the Korean War. Taiwan after the Chinese Civil War. Singapore after a very traumatic separation from Malaysia. And, China, after what I call a "bad hair" century - a  terrible series of crises and wars, ending with the Cultural Revolution.'

'Why is this sense of terrible crisis a prerequisite for an Asian economic take off? Because it creates a certain political environment.'

  • 'The leaders are so scared that they're willing to take great political and economic risks. And, to do bigger things, more dangerous things than a normal leader would.'
  • 'The people are conditioned the same way. They're scared that society is going to collapse. That their kids won't have anything to eat. They're willing to accept more stressful change than people in a normal, unfrightened place would accept.'
  • 'The leaders offer policies and tell the people, "You need to know this is going to be terribly disruptive. And painful. But, it's going to save our society."'

Economic simplicity. 

'The counterpart, on the economic side, is an economic simplicity.'

  • 'These countries' economies, when they're getting started, are basic agriculture, weak infrastructure, and some very primitive manufacturing.'
  • 'Even the government can figure out what to do in that situation initially: stimulate growth, build infrastructure, and open and marketize the economy.'

'The Asian Miracles have a succession of models, starting with Japan, each asking: How we can create a great economic take off? The common answer:'

  • 'Gradually open the economy to foreign trade and foreign investment'. 
  • 'Gradually marketize the economy by allowing market prices and other market phenomena to work.'
  • And, build infrastructure like crazy.'

'This works for quite a while because politically it's relatively simple.'

  • 'That doesn't mean there aren't terrible political struggles, that doesn't mean there isn't a resistance, but it's not the way it would be in Britain, or the  US, or China in normal times when people would push back against these tremendous, rapid changes.' 

'So, all this works for a while. And then, success comes.'

  • 'And, then you gradually get to a point of complexity, where there is an economic and political crisis of some kind.'

'Successful economic modernization has eliminated the fear that once energized the  Asia's Miracle Economies.'

  • 'Simple economies and politics have been replaced with immensely complex ones.'

'Economic and political complexity are two sides of the same coin.'

  • 'The rise of large, rich, efficiently organized economic sectors is the same as the rise of large, rich, powerful interest groups with conflicting interests of immense complexity.'
  • And, this creates the crisis of success.
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

All Analyses by

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