Business Opportunities and the Chinese Economy as it Faces its Fourth Turning Point

|China

Today, one cannot discuss the world economy without mentioning China. It is believed that, over the course of the quarter of a century or so leading up to this point, when it holds such great influence, China has experienced three major turning points.

No one would deny that the first – and the biggest – turning point was the institution by Deng Xiaoping of the policy of “reform and opening up” (late 1978). At that time, it was only just over two years since the “Cultural Revolution” had ended. The departure from a Soviet-style planned economy and the radical change to a path aimed at economic development with the market economy and the introduction of foreign capital and technology as the driving force was a great accomplishment brought about by the faith and political leadership of Deng Xiaoping. However, although some areas, such as special economic zones, experienced a boom at first due to investment from regions such as Hong Kong, ordinary cities still suffered from the legacy of the era of the planned economy. The author spent some time in Beijing in 1985, at the beginning of the era of “reform and opening up”, when one required ration coupons called “liangpiao” in order to eat out, the restaurants were all state-owned, and everywhere closed at 8pm, leaving the city in pitch darkness. This was just 20 years ago.

The second turning point is thought to be the “Southern Tour Speech” (nanxun jianghua) by Deng Xiaoping in 1992. The introduction of foreign capital plummeted in the wake of the Tiananmen Square incident in 1989 and there was a political comeback by the “conservative wing”, which frustrated the fledgling process of “reform and opening up”. Those of us involved in business with China found that our work evaporated and we became despondent. During this time, a drastic political struggle was probably underway, but despite his advanced years, Deng Xiaoping mustered the last of his political ability and succeeded in putting the process of “reform and opening up” back on track again.

The third turning point was China’s accession to the WTO at the end of 2001. With firm resolve, China selected the path of development as a member of the global economy. As a result of its commitment to promoting further opening up following many years of stringent negotiations concerning its accession, China was able to achieve its long-awaited entry into the WTO. It is almost five years since then, but although China has a few problems, it is fulfilling its commitments more or less on schedule. I would venture to say that the rapid development and globalization of China’s economy during this period needs no explanation.

And I think that China is now facing its fourth turning point. We can say that, over the last quarter of a century, China has generally forged ahead on the path of “economic development first”. However, we have now reached a situation in which it is not possible to overlook the adverse effects, such as growing income disparities, environmental destruction, and widespread greed and corruption. The Hu Jintao administration has enlisted the slogans “a harmonious society” (hexie shehui) and the “scientific development concept” (kexue fazhan guan) in its attempts to achieve a shift towards a sustainable, balanced economic development model. The rights and wrongs of this will determine the historic assessment of the Hu Jintao regime, which will enter its second term in office next autumn.

For Japan as well, there is no question that the stable development of its neighbor China is extremely important, both in political and economic terms. Japan also has experience of overcoming the adverse effects of high economic growth. Japan’s current ODA to China will cease in fiscal 2008, but there are still many ways in which Japan can cooperate with China in the arenas of politics, diplomacy and the economy. Fortunately, diplomatic relations between the two countries, which had previously been something of a stumbling block, are rapidly changing for the better. Just as was the case the previous three times, we private companies should take this fourth turning point as an opportunity and should focus their energies on the promotion of business in fields where Japan has an edge, such as the conservation of energy and resources, environmental conservation, distribution, service industries, and content. Furthermore, this will inevitably contribute to the expansion of reciprocal relationships. As someone involved in business with China, I take great pleasure in being able to work in these areas.

[Translated by ERINA]