Translating New Leadership into New Opportunity
In the next few days, Americans will exercise one of the sacred rights that makes the United States a great democracy—they’ll head to the polls to vote for president in the general election. Two days after the close of the U.S. election, China’s highest ruling body, the Standing Committee of the Politburo will also be formed. The contrast between the two processes is as dramatic as any drama can depict in terms of the level of participation and transparency.
This was a topic discussed at the China Institute Executive Summit in New York City last week with great interest by political analysts and journalists. From an economic point of view, I want to point out that the U.S. model of a government “of the people, by the people and for the people” is powerful and persuasive. While we may debate how the three components should be done as the economy evolves, the principle is simple and clear. As China is moving toward a meaningful representation of middle-class, the level of participation at an individual level and the small business level becomes critically important, especially at this juncture in time when the country’s growth model is facing structural headwinds in demographics and productivity growth.
China is an economy in transition. The fluid nature of urban migration and rapid transformation of economic structure created daunting challenges for statistical measurement. China is also a relatively open economy – the very reason of its growth success. Foreign enterprises produced more goods and sold more goods in China compared to Japan, an economy about the same size, but eight times richer on a per capita basis. Yet China is often considered a poster child of protectionism. This may be a result of a combination of government policy in favor of indigenous industries, different models, and a lack of transparency in government roles in the marketplace.
When the world is increasingly operating on an enterprise based global system, the sovereign based governance system must adjust to reflect it. It is a time to update the economic accounting which was established in the early twentieth century when transactions were done at arm’s length. It is also a time for policy makers to recognize the reality and design policy instruments to promote prosperity and growth sustainability under the context of an integrated global commerce. We will see how the two new leadership teams in the U.S. and China can work together to address these challenges.