Saturday, May 26, 2012

One Reason China is Doing Better Than the West. is That Communist China May Be Better at Capitalism Than the West

China, Taiwan and the Island of Pingtan (What Island?)

In the United States and Europe when economic growth is 2% there is cause for celebration.  If that were the growth rate in China, it would be cause for utter and complete dismay.  For years China has had economic growth far better and stronger than the western countries, and while one factor is that higher growth rates are possible because of the lower base, that is not entirely the explanation.

A part of the explanation is that while China officially still adopts the economic religion of Communism, more and more they are taking the best aspects of capitalism and applying it to their own economy.  They have a sovereign wealth fund that invests in businesses, they have huge state supported infrastructure projects and they are creating a large middle class and a much smaller mega-wealthy class.  The weird thing, they still call all of this Communism.

The relationship between China and Taiwan is complex and beyond the scope of this post, but one aspect of it does deserve attention because it illustrates how good China is becoming at capitalism.  China and Taiwan, usually enemies, are working together to develop a small island, Pingtan which is off the coast of China and near Taiwan.  The island had the a source of contention between the two countries, but not today

Pingtan officials now try to play down the past. They focus instead on the island’s 100km (60 miles) of sandy, mostly undeveloped, shoreline, hoping it has the same pulling power as the beaches of Hainan, a (much larger) tropical island off the southern coast that has become the playground of China’s rich. There are plans to build five-star hotels, golf courses and yacht clubs.

Yeah, Mao’s Little Red Book did talk extensively of five star hotels and yacht clubs as being the core of Communism. 

But development is not all China and Taiwan are doing that is aping capitalism.

The island would be a duty-free enclave, with business taxes lower than most of China. Residents could open bank accounts in Taiwan dollars and drive Taiwan-registered cars (a ferry service to the Taiwanese city of Taichung started up in November). In an exhibition hall devoted to Pingtan’s plans, a map showing how the island might look in 2030 shows a road across the strait linking it to Taiwan. Officials do not say whether this would involve a tunnel or a bridge, but at around 100km in length, either would be the longest of its type in the world.

Exactly how is this different than what would be done if the area were under the control of the U. S.

This is not to say all of this will happen; there are significant political issues to get over.  But the plans provide a good insight into how China is thinking, and it is thinking like a Western nation might think about development.  Except it is thinking about doing it better.

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