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Expert Roundtable 2: Should China Be Feared?


This summer, BusinessWeek brought together 13 of the smartest people we could find for an online roundtable on the past, present, and future of China and India (see below for a list of participants). On each of eight days, we posted a new question. Economics Editor Peter Coy moderated the discussion. The experts communicated both with us and with each other on everything from geopolitics to generation gaps. Now we're sharing the discussion with you -- and invite you to offer your comments. Please note that not all 13 participated every day, and comments have been edited for style and clarity.

Is China's rapid rise good for the rest of the world? Or something to be feared? Or some of each?

Subroto Bagchi

No, I do not think anyone should be afraid of China's growth.

If 1/6th of world's population will get a better life, it is good for the planet. Gone are the days when growth, hegemony, and unilateralism were synonymous. We will increasingly live in times in which sustainability and connectedness of things will be better understood. Consequently, China will have to play the game, per the rules.

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Donald Straszheim

China is more opportunity than threat. The best assurance of global growth and geopolitical stability is for increasing globalization and interdependence. [The thinking should be] I cannot afford to attack my partner. This is the fundamental reason for favoring China's WTO entry on Dec. 11, 2001. China is far from a market economy, but they are making great progress, with more to come.

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Oded Shenkar

China's rapid rise is good for China and for the rest of the world. However from a business perspective, China is both a threat and an opportunity. Many companies will not be able to meet "the China price" and will have to restructure or exit the market, while others will benefit from opportunities in the Chinese market and from China outsourcing. The bottom line is that companies should rethink their business model so as to develop and sustain a competitive advantage in a global environment where China is a major player.

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Viveca Chan

China's growth is certainly good for the world. There has been concern in both developed and less developed countries over "the China price" as a threat to taking away jobs from their countries. This is like seeing a glass that is half empty instead of half full. From a positive perspective, China offers consumers goods at more affordable prices and encourages consumption. It also forces less developed countries to improve their competitiveness and more developed ones to move upstream.

China's growth will not pose a threat because the Chinese culture is about harmony. As a superpower, China is very tolerant and does not impose its values or standards on other countries. It has a history of working comfortably with other nations, as long as they do not interfere with Chinese domestic policies or affect their economic interests. So China's growth is good for the world.

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Jiang Li

China's rise is certainly good for the rest of the world. A better life for 1.3 billion people is the biggest contribution to the stabilization of the whole world. The so-called "China price" is not due to China being developed but to its being not developed. In long term, the rise of China will finally put China on the same [plane as] developed countries and therefore eliminate any threat in product prices.

The rise of China is also benefiting the economy of the rest of the world. Take tourism. Tremendous [numbers of] Chinese people visited neighboring countries like Singapore, Malaysia, and Thailand. Now the huge Chinese tourist army is expanding to Japan, Australia, and Europe. Besides tourism, Chinese people are also spending wealth on their children's education overseas. This spending directly stimulated the economy of the related countries and in some sense returned the wealth to those countries.

China still has many things to do [to become a] developed country. Efforts need to be made to popularize education [and toward] environment protection and sustained development of industry and agriculture. In any sense, China is not a threat to the rest of the world.

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Wang Yong

No. The world should not fear China's rise. Let me first discuss if China's rise is a threat in economic perspective.

China's economic miracle is more of a globalization story. China's rapid development has taken place in the global network of interdependence. China's growth has relied upon international investment and trade much more than any rising country ever did whether it was the UK, U.S., Germany, or Japan.

A post-WTO China has doubled its import and export volume within three years, mainly because more investment flows in and the Chinese markets are much more open. Shanghai is widely [perceived as] China's economic capital and the center of innovation, but over half of Shanghai's export comes from foreign-invested enterprises.

Contrary to the American perception, China's foreign trade is generally in balance. The American public should know this. It means that China is not only an export machine, but also a tremendous market for imports from its major trading partners -- the U.S., EU, Japan, and Southeast Asia. [For those countries, this has meant] jobs, profits to companies, revenue to governments, as well as more choices to customers, both in developed and developing countries.

That is why developing countries are not scared of China's rising, though they are more likely to face the competition of Chinese exports.

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Saurav Adhikari

China's rise is to be feared as much as India's, should India become a global economic power. That is the natural corollary to this question.

Frankly "with great power comes great responsibility," and I think so far China has used it well with saber (both military and economic) rattling more than any visible manifestation.

Another contrarian view is that as China grows so must its ability to deal with other lower-cost nations. So rather than fear China I think the world must learn to accept its power and respond to it.

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Subir Gokarn

The general tone of the comments is that Chinese economic ascendancy is not something to be afraid of but it does have implications for global governance mechanisms. I tend to agree with this view.

From an Indian perspective, with some expectation that India will also somewhere along the line approach China's share of world GDP, the rigidity of global institutions is a cause for concern. The UNSC is perhaps the most visible manifestation of this, but generally speaking, history is a far more important determinant of global influence.

For growing economic power to translate into more significant contributions to global solutions, institutions have to adapt. They don't show too many signs of doing this at the moment. The danger, going forward, is that emerging economic powers will look outside collective mechanisms to exercise and expand their influence. This will be harmful to both individual and collective interests.

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Wenran Jiang

Overall, the world has responded positively to the rise of China. While the U.S. has shown anxiety over growing Chinese strength from military to commercial, the rest of the world seems to think differently. As demonstrated by a number of cross-nation opinion polls, most countries, including most industrialized countries, view China more favorably than [they do] the U.S. In fact, most fear the U.S., not China. Furthermore, most developing countries prefer a stronger China to balance the U.S. in world affairs, although most Western countries don't want that.

Now the question of "what ought to be." China's rapid economic expansion raises serious questions about the sustainability of traditional development paradigms. It is good that China is improving its living conditions for most of its people, and hundreds of millions have been lifted out of poverty. The Chinese people also have every right to enjoy greater wealth and consumption just as people in rich countries do.

But let's look at the facts: If every Chinese person's daily consumption of oil is the same as that of people in the U.S. , China alone will require some 80 million barrels of oil per day the daily oil consumption of the entire world. That is difficult to sustain, if possible at all. Moreover, we have not even considered the impact of India and others who are catching up fast in their energy consumption.

The West, especially the U.S., must confront this fact not as a China threat but as a common development problem. The world has to work on solutions to alternative and renewable energy, with possibly a change of paradigm on our lifestyle and energy consumption patterns.

Another concern about China's development is the tremendous cost of its modernization program. Even the Chinese themselves have realized this and are currently engaged in a heated debate on this topic. In producing about 4% of the world's annual GDP, China consumes 10% of the world's electricity, 20% of its copper, 31% of its coal, and some 40% of its cement. In generating every ton of iron and steel, major Chinese iron and steel producers consume 40% more energy than the world average.

And there is the damage to the environment, an issue I would like to see as a question from Peter and more attention from this panel. China's rivers are now running black. China is also the second-largest contributor to global warming, not on a per-capita basis but that does not matter. So the world should be fearful about these developments when it comes to the environment and resources, because we are one and the earth replaces nation-state borders.

That being said, the solution does not lie in preventing China or India or the developing world from becoming economically strong or depriving them of the right to "happiness." The U.S., if it really wants to maintain its lead position as a great power, has to do more to facilitate the efficient use of energy and resources in China, India, and other developing countries. Of course, the challenge is to start at home.

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Madhav Bhatkuly

China's rise through the productivity growth of its people should not be feared. However, what perhaps should be is China's rise through the pricing of some of its products. Increasingly, most China watchers believe that neither financing costs nor infrastructure costs are being passed on to buyers. This has perhaps translated into China's banking system. The extent of the impact that a messy banking system straddled with bad loans will have, when this perceived anomaly is corrected, remains unclear still. The correction itself is inevitable.

China will have to raise prices at sometime, and Chinese banks will have to cleaned up at some time. Until then, the pace of Chinese growth through subsidized financing and infrastructure is already impacting the world in the short run -- either though a greater dislocation of global manufacturing than there ought to have been and/or through prices of commodities. This aspect of Chinese growth needs to be fearfully watched.

The Participants

Saurav Adhikari

Corporate vice-president for strategy, HCL Technologies

India

Subroto Bagchi

Chief operating officer, MindTree Consulting

U.S. and India

Rajni Bakshi

Activist and author

India

Madhav Bhatkuly

Managing partner, New Horizon Investments

India

Viveca Chan

Group chairman & CEO, Grey Global Group

Hong Kong

Subir Gokarn

Chief economist, Crisil Ltd. debt-rating agency

India

Wenran Jiang

Associate professor and associate chair

Department of Political Science, University of Alberta

Canada

Jiang Li

Research Manager, Media Communication Group, Microsoft Research Asia

China

Arun Maira

Chairman, Boston Consulting Group (India)

India

Oded Shenkar

Professor of management and human resources, Ohio State University Fisher College of Business

U.S.

Manoj Singh

CEO, Deloitte, Asia-Pacific Region

Hong Kong

Donald H. Straszheim

Chairman & CEO, Straszheim Global Advisors

U.S.

Wang Yong

Associate professor, School of International Studies

Director, Center for International Political Economy, Peking University

China


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