China is the Asian giant that everyone worries is starting to topple over. It doesn’t take a subscriber to “sky is falling” sites like Zero Hedge to see this. Even when China is in the news for its innovation, it can’t seem to catch a break. Witness the recent report about a Chinese genetics firm planning on going all Gattaca and harvesting a crop of genius babies. The media response was naturally one of being collectively aghast at Brave New World experimentalism. But China is much more complex than the standard storyline can account for. A place to go to appreciate the nuance is the Asia Society.
The ongoing debate there over Chinese economic doldrums and what to do about it just got a lot more interesting. The bullish Yale professor and former chairman of Morgan Stanley Asia, Stephen Roach, listed a five point plan for Chinese economic reform that he thinks will be adopted. In the other corner is Jim Chanos of Kynikos Associates, a respected short-seller (he bet against Enron during its halcyon days). Chanos doesn’t see too much hope for an economic model hinged on the decision making of “seven guys in a room.” If only these seven guys were genius babies!
But, seriously, Roach’s list of five reforms that need rapid enacting doesn’t seem far fetched. These cover reforming the residential permit system, continuing with urbanization (By 2030, China’s urban landscape should consist of 225 cities with at least a million residents), liberalizing interest rates, funneling dividends from cash-rich state owned enterprises (SOEs) into more open market ventures, and doubling down on incentives for consumer spending. If China can make the shift to greater consumption and more growth in the service sector, then these soon-to-founded cities might be pleasant places to live in.