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To fly from New York to Beijing, as I did this week, is to enter a looking-glass world. Eight oclock in the morning becomes the same time in the evening. One transfers from a country aggrieved at China to one aggrieved at the US.
The latest cause of tension is the dispute about rare earths filed at the World Trade Organisation by the US, Japan and the European Union, which was announced at the White House by Barack Obama. The US president insisted with a flourish that China should not be allowed to break the rules by imposing quotas on the export of such minerals.
The rare earths case is a sideshow to the big challenge facing China to shift from being the low-wage producer of manufactured goods for the rest of the world to a developed economy with a vibrant, open consumer market. But it shows how the credibility it gained from its Made in China policy over the past three decades has expired.
It needs to seize the next opportunity, not just to engage with the rest of the world but to lead it. The benefits of insisting that it is a developing nation that is too poor to play a leading role in institutions such as the World Trade Organisation, or fully to open its economy to global competition, are diminishing and the risks are evident.
China has plenty of arguments on its side. The hostility it faces for taking the jobs from other countries is a sign of how efficiently it did what they wanted in the first place provide access to a low-wage workforce. It has steadily engaged with institutions such as the WTO and the Group of 20 to a degree unthinkable under Mao Zedong.
But Maos dictum was to seek truth from facts and the fact is that China isnt trusted and has brought some of this distrust on itself. It stands on the brink of transforming from one of the worlds poorest countries into its biggest economy. That requires it to integrate further with the rest of the world, not to become alienated.
I observed the rare earths dispute from an unusual venue the Central Party School of the Chinese Communist Party, which was founded by Mao himself in 1933, just before the Long March. The school, where senior Party officials are trained in ideology, and how to run the country, now has a campus in the north-west of the city, nearby the Summer Palace.
The fact that it was co-hosting a seminar on Chinas development with Wilton Park, the conference agency of the UK Foreign Office, speaks volumes about Chinas greater openness to the outside world. It provided an insight into the thinking of Chinese officials, business leaders and academics as the countrys rate of growth slows and trade tensions deepen.
Although it may overtake the US as the worlds largest economy by 2020, and is certain to do so by 2030 if it can maintain its growth trajectory, they emphasise that its people are still poor. The International Monetary Fund estimates Chinas gross domestic product per capita at $5,200 91st in the world and just above Angolas.
As a developing country, it cannot play a leading role in global development, they insist. That is for members of the Group of Seven, which it still has not joined. As one official puts it: China is a big country but it falls short of the capabilities required to be a leader.
I find this implausible. The existence of the school shows how carefully China trains and nurtures its governing elite far more so than most countries. They have plenty of domestic challenges but they could also turn their minds to corralling the WTO and G20 if they wished. They are manifestly capable of doing two things at once.
More likely, they see tactical advantages to sticking to the line that China is a developing nation that participates but does not lead. It gains more time to comply with WTO requirements and they do not risk provoking the US and others further by taking a public stand.
It is too late for that. China is the primary trading partner for many countries and is crucial to any WTO effort to navigate past the stalled Doha round and restart multilateral trade talks. A display of false modesty about its abilities and influence prolongs the delay and encourages disputes.
China has plenty to gain by assuming a leadership role, apart from respect. If, for example, it permitted multinationals to compete more equally with state-owned enterprises, it could ease some of the current tensions over trade. It would also be, in Wen Jiabaos phrase, a win-win.
Chinas SOEs dominate many industries, aided by access to soft loans, free land and official backing the chairman of an SOE often doubles as its in-house party secretary. They cannot lose and you cannot win. You are not permitted to beat them, says Derek Scissors, a senior research fellow at the Heritage Foundation in Washington.
China aims in its latest five-year plan to shift from low-value manufacturing to more sophisticated goods and services. The simplest way to do that is to encourage competition and to permit foreign-owned companies to set up locally and sell to its consumers. That would alter the structure of the economy and educate a generation of Chinese managers.
It would mean a loss of central control but China showed its willingness to take such radical steps before in its initial round of economic reforms under Deng Xiaoping. The question now is whether it gets trapped in a defensive posture or seizes the lead again.
China must stop its poor-country pretence - FT.com
Please dont ask china to lead we are not shinning and incredible we are still poor
The latest cause of tension is the dispute about rare earths filed at the World Trade Organisation by the US, Japan and the European Union, which was announced at the White House by Barack Obama. The US president insisted with a flourish that China should not be allowed to break the rules by imposing quotas on the export of such minerals.
The rare earths case is a sideshow to the big challenge facing China to shift from being the low-wage producer of manufactured goods for the rest of the world to a developed economy with a vibrant, open consumer market. But it shows how the credibility it gained from its Made in China policy over the past three decades has expired.
It needs to seize the next opportunity, not just to engage with the rest of the world but to lead it. The benefits of insisting that it is a developing nation that is too poor to play a leading role in institutions such as the World Trade Organisation, or fully to open its economy to global competition, are diminishing and the risks are evident.
China has plenty of arguments on its side. The hostility it faces for taking the jobs from other countries is a sign of how efficiently it did what they wanted in the first place provide access to a low-wage workforce. It has steadily engaged with institutions such as the WTO and the Group of 20 to a degree unthinkable under Mao Zedong.
But Maos dictum was to seek truth from facts and the fact is that China isnt trusted and has brought some of this distrust on itself. It stands on the brink of transforming from one of the worlds poorest countries into its biggest economy. That requires it to integrate further with the rest of the world, not to become alienated.
I observed the rare earths dispute from an unusual venue the Central Party School of the Chinese Communist Party, which was founded by Mao himself in 1933, just before the Long March. The school, where senior Party officials are trained in ideology, and how to run the country, now has a campus in the north-west of the city, nearby the Summer Palace.
The fact that it was co-hosting a seminar on Chinas development with Wilton Park, the conference agency of the UK Foreign Office, speaks volumes about Chinas greater openness to the outside world. It provided an insight into the thinking of Chinese officials, business leaders and academics as the countrys rate of growth slows and trade tensions deepen.
Although it may overtake the US as the worlds largest economy by 2020, and is certain to do so by 2030 if it can maintain its growth trajectory, they emphasise that its people are still poor. The International Monetary Fund estimates Chinas gross domestic product per capita at $5,200 91st in the world and just above Angolas.
As a developing country, it cannot play a leading role in global development, they insist. That is for members of the Group of Seven, which it still has not joined. As one official puts it: China is a big country but it falls short of the capabilities required to be a leader.
I find this implausible. The existence of the school shows how carefully China trains and nurtures its governing elite far more so than most countries. They have plenty of domestic challenges but they could also turn their minds to corralling the WTO and G20 if they wished. They are manifestly capable of doing two things at once.
More likely, they see tactical advantages to sticking to the line that China is a developing nation that participates but does not lead. It gains more time to comply with WTO requirements and they do not risk provoking the US and others further by taking a public stand.
It is too late for that. China is the primary trading partner for many countries and is crucial to any WTO effort to navigate past the stalled Doha round and restart multilateral trade talks. A display of false modesty about its abilities and influence prolongs the delay and encourages disputes.
China has plenty to gain by assuming a leadership role, apart from respect. If, for example, it permitted multinationals to compete more equally with state-owned enterprises, it could ease some of the current tensions over trade. It would also be, in Wen Jiabaos phrase, a win-win.
Chinas SOEs dominate many industries, aided by access to soft loans, free land and official backing the chairman of an SOE often doubles as its in-house party secretary. They cannot lose and you cannot win. You are not permitted to beat them, says Derek Scissors, a senior research fellow at the Heritage Foundation in Washington.
China aims in its latest five-year plan to shift from low-value manufacturing to more sophisticated goods and services. The simplest way to do that is to encourage competition and to permit foreign-owned companies to set up locally and sell to its consumers. That would alter the structure of the economy and educate a generation of Chinese managers.
It would mean a loss of central control but China showed its willingness to take such radical steps before in its initial round of economic reforms under Deng Xiaoping. The question now is whether it gets trapped in a defensive posture or seizes the lead again.
China must stop its poor-country pretence - FT.com
Please dont ask china to lead we are not shinning and incredible we are still poor
