China - Ripe for Attention or Revolution

The Shell Fellow in International Transformation Jonathan Story updates his award-winning case study on the awesome challenges facing the new generation of Chinese leaders. The phenomenal boom in its economy has made it a global economic player, with increasing regional and international political clout. But Story also draws attention to some of the systemic inadequacies that may yet disrupt the country's recent stratospheric growth.

by Jonathan Story
Last Updated: 23 Jul 2013

In November 2002, 56-year-old Hu Jintao assumed the Chinese presidency in an orderly transition. His predecessor, Jiang Zemin, was 20 years his senior. Hu's generation of leaders clearly represents an untested -- and often largely unknown - changing of the guard. And while Jiang's generation of senior Communist Party apparatchiks may still have considerable influence well behind the scenes, the latest leaders are shouldered with the awesome duty of maintaining China on a sustainable course, even accelerating the pace, as it becomes a global economic, and perhaps political, juggernaut. Their ultimate success or failure will have profound impact on the power dynamics of the 21st Century.

The Shell Fellow in International Transformation Jonathan Story updates his award-winning case study for a second time in his efforts to provide a concise, yet comprehensive overview of the dynamics that have and continue to shape modern China - some of which have their roots in bygone millennia.

Story details the five phases of China's foreign relations since the People's Republic's founding in 1949. In the past two decades, Beijing's desire to modernise its economy has stood as the prime motivator underpinning its foreign relations. Recent years have seen the Chinese economy boom at a phenomenal rate, elevating it to its current status as fourth largest in the world, and growing almost exponentially in both size and potential.

The author also considers the effects of remarkable series of reforms that followed Mao Tse Tung's death in 1976 - especially in agriculture, industry, international trade and investment, and the growth of a substantial domestic consumer market. The average income of Chinese employees has increased by a phenomenal 14.8 percent in the past decade, due in large part to changes in China's income distribution channels. By 2002, at least 320 million Chinese households enjoyed annual incomes of at least $1,000. This has created new markets for foreign firms, many of whom now face tough competition from fast-rising Chinese rivals.

But Story also draws attention to the systemic inadequacies that may yet disrupt the country's recent stratospheric growth. These include: the deficiencies of the banking sector, the environmental challenges, urban and rural disaffection with the regime, the imbalances in wealth, the under valuation of the currency-in fact a long list of problems facing the ruling communist party. The nation's rulers have grown increasingly worried that this widening chasm could undermine its authority over China's 1.3 billion people irrevocably.

Story's main theme is that these broader dynamics at work in China's transformation are the stuff from which corporate policy has to be made for foreign companies operating there. Every dimension of corporate activity in China is affected. (This is the main thesis of Story's book, China: The Race to Market, Pearson's 2003.)

INSEAD 2004

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