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Economy
In reply to the discussion: Weekend Economists and the Accidental President December 13-15, 2013 [View all]xchrom
(108,903 posts)14. A Coming Golden Age for American Companies in China?
http://www.theatlantic.com/china/archive/2013/12/a-coming-golden-age-for-american-companies-in-china/282352/
Will recent reformsand a new treatymake it easier for U.S. firms to compete in China? (Shannon Stapleton/Reuters)
At the recent Third Plenum political gathering, the Chinese Communist Party (CCP) made headlines around the world by committing to a greater role for the market and for competition in Chinas government-directed economy. Whether and when the Party will translate that rhetoric into reality is a critical question for the future. But a vital related question is this: Will the Party allow American companies to competefreely and fairlyin China?
In its Plenary announcement, the CCP said that in the future the market should have a decisive role in resource allocation, instead of a basic role as set forth in past Party pronouncements. Though seemingly innocent, this linguistic shift was, in fact, a big dealand possibly even radical. In an important related point, the Party also indicated that market reforms would constrain the powerful State-Owned Enterprises (SOEs) which are subsidized, promoted and controlled by the Chinese government. Private Chinese businesses will be allowed to compete more directly against SOEs and to help reform them, and management of these companies will be made more professional and separated from government.
The potential for American companies to compete more freely in China is a fundamental issue in a related Chinese government action: on-going negotiation of a China-U.S. Bilateral Investment Treaty (BIT). In theory, this treaty would allow U.S. companies to invest with fewer restrictions in a much broader range of important Chinese industries, such as autos, financial services, transportation, chemicals and energy. It would also diminish Chinese favoritism for domestic businesses, especially the SOEs. The U.S. would reciprocate by allowing greater Chinese investment in American sectors and companies, unless clear U.S. national security interests were threatened.
Although there are many obstacles to the BIT, the newly announced Chinese market reforms improve its prospects. An influential segment of the CCP now believes that market pricing and competition will accelerate the innovation needed to sustain economic growth and liberty, both considered integral in avoiding political instability. This is a new form of an old strategy: Use growth to satisfy the people, suppress broad movements for more accountable government, and maintain CCP control. And competition, innovation and growth in the economic sphere would be more robust with unconstrained internationalnot just Chineseplayers operating in the nations economy.
Will recent reformsand a new treatymake it easier for U.S. firms to compete in China? (Shannon Stapleton/Reuters)
At the recent Third Plenum political gathering, the Chinese Communist Party (CCP) made headlines around the world by committing to a greater role for the market and for competition in Chinas government-directed economy. Whether and when the Party will translate that rhetoric into reality is a critical question for the future. But a vital related question is this: Will the Party allow American companies to competefreely and fairlyin China?
In its Plenary announcement, the CCP said that in the future the market should have a decisive role in resource allocation, instead of a basic role as set forth in past Party pronouncements. Though seemingly innocent, this linguistic shift was, in fact, a big dealand possibly even radical. In an important related point, the Party also indicated that market reforms would constrain the powerful State-Owned Enterprises (SOEs) which are subsidized, promoted and controlled by the Chinese government. Private Chinese businesses will be allowed to compete more directly against SOEs and to help reform them, and management of these companies will be made more professional and separated from government.
The potential for American companies to compete more freely in China is a fundamental issue in a related Chinese government action: on-going negotiation of a China-U.S. Bilateral Investment Treaty (BIT). In theory, this treaty would allow U.S. companies to invest with fewer restrictions in a much broader range of important Chinese industries, such as autos, financial services, transportation, chemicals and energy. It would also diminish Chinese favoritism for domestic businesses, especially the SOEs. The U.S. would reciprocate by allowing greater Chinese investment in American sectors and companies, unless clear U.S. national security interests were threatened.
Although there are many obstacles to the BIT, the newly announced Chinese market reforms improve its prospects. An influential segment of the CCP now believes that market pricing and competition will accelerate the innovation needed to sustain economic growth and liberty, both considered integral in avoiding political instability. This is a new form of an old strategy: Use growth to satisfy the people, suppress broad movements for more accountable government, and maintain CCP control. And competition, innovation and growth in the economic sphere would be more robust with unconstrained internationalnot just Chineseplayers operating in the nations economy.
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