China's Communist leaders like to point out that American-style democracy is chaotic, and that western capitalism causes manic booms and busts. Yet they're borrowing heavily from the American playbook as they remake China's huge, state-dominated economy.
China recently announced a series of reforms meant to speed the transition from a fast-growing yet still-spottily developing nation to a wealthier and more mature economic powerhouse. Among other things, new policies are meant to scale back Beijing's role in the economy, open state-run industries such as finance and energy to more private businesses, and provide more ways for foreign investors to participate in the Chinese economy. Eventually, market forces would set interest and exchange rates, which are now controlled by the government.
Chinese companies--often owned or partially controlled by the government--have also been splurging on western firms lately. Chinese meat processor Shuanghui International Holdings announced it is buying Smithfield ( SFD ), the big U.S. pork producer, for $4.7 billion. And the Chinese investment firm Fosun International is part of a group buying the French resort company Club Mediterranee ( CU.PA ), allowing the troubled travel firm to focus more on upbeat Asian travelers rather than Europeans besieged by recession.
China has tried before to liberalize its economy, with varying degrees of success. It has clearly become integral to the global supply chain, making it the world's leading producer of many goods. Virtually every big multinational company has operations in China, with some of them earning impressive profits there.
But China still remains handicapped by shortcomings more typical of a banana republic. "There's no guarantee China is truly going to become a developed economy along the lines of South Korea or Japan," says Nariman Behravesh, chief economist at forecasting firm IHS Global Insight. "For China to continue to evolve, they've got to make some major changes and become a freer, more market-based economy."
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Michael D. Shoesmith
Social Networking Director
Ministry Coordinator
PPSIMMONS/CGM
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