A Loyal Reader has added further depth to Jane Golley’s piece on China’s “great balancing act” and Hugh White’s comments. They write:

As my former HOM would have said, the argument is “completely fallacial”.

Seeking equidistance between China and the US will only serve to reduce our leverage over both. We get more out of both under the current arrangement.”

The big question to come out of this then is what exactly are the “current arrangements” (emphasis on “current” as against 1996-2007)?

Comments?

Author: Ryan Manuel

John Garnaut’s piece in the SMH argues that ‘making taxes more equitable is China’s biggest challenge’.

Garnaut, using an article by Justin Yifu Lin in the recently-released China Update book, argues that ‘perhaps the answers.. lie with a market-driven “primary” distribution of resources’.

He sees this as solving Lin’s dilemma of a price system which is not ‘sufficiently and flexibly reflecting the relative scarcity of every Factor’ of production. Huang Yiping, as reported in Garnaut’s article, suggests that ‘prices for labour, capital and land are still significantly depressed’.

But the ‘market driven primary distribution of resources’ suggested by Garnaut is far from feasible at present. The problem is that you can’t really have market-driven distribution of resources, especially labour, when the hukou system (of household registration) artificially distorts the market for labour.

Read more…

Author: Ryan Manuel

There were different visions in the debate about the response to global challenges from China’s rise at the ANU China Update. In focusing on the challenge of sustainable development, Jeff Sachs argues for focus on creating a technological solution and worrying afterwards about how the costs will be distributed. Wing Thye Woo, on sustainable development, and Fan Gang, on international economic imbalance, see a more multipolar world requiring better international institutions to deal with the challenges. Richard Rigby sees Chinese policymakers coming to these global challenges through managing domestic politics and coming to appreciate the feedback of international impact on successful domestic politics.

Is Development Sustainable?
Jeffrey Sachs sees the world as having to move from industrial development to sustainable development.

Wing Thye Woo is bullish on the need for global cooperation and solutions. He says solutions can only come from global cooperation, based on ‘enlightened self-interest’ A reformed and invigorated UN still provides the best chance of effecting a global bargain on climate change and sustainable development. Read more…

Author: Ryan Manuel

The keynote address to the China Update forum this year was given by Professor Jeffrey Sachs [see the video]. Sachs’ speech raised major questions: firstly, how does the world go from ‘industrial development’ to ‘sustainable development’? Secondly, what should then be expected of China?

Industrial development to sustainable development
On the first point, Sachs’ argument has two major tenets. The first is that global economic convergence will lead to Asia being central to global order. He thus envisages a highly multilateral world order. The reason for this shift is that the ‘keys to economic development have been solved’. Central to this premise is his belief in the ability of technology to achieve development. Development, he argues, in this sense was made possible through globalisation, growth and technology transfer. Our knowledge of this, and the adoption of this model by developing countries, means that the economic challenge of what has to be done to become rich has been addressed.

But, we have as yet failed to answer what we have to do about fixing the environment. Sachs believes that current economic models lack an integration of ‘nature’ with growth’. Our current models of development revolve around ‘using’ natural ‘resources’. Development has been industrial rather than sustainable. Rather than solving the Malthusian ‘ problem, we have postponed it and intensified it. Current high food and oil prices are thus a sign of structural problems rather than speculative behaviour.

Read more…

Author: Ryan Manuel

There has been a big shift in the structure of world power, away from the unipolar world, towards a world in which there are at least four major players including China.

This was the headline premise in the roundtable that launched the ANU’s China Update yesterday. What follows is a window on the main issues raised in the first round of discussion. There will be posts elaborating on these and other issues over the next week. Those wanting the full analysis should go straight to the famous book that traditionally accompanies the China Update each year.

The global economic system is going through a particularly complicated period of structural change.
The three major elements are:

• the US financial crisis
• the specific post-Bush domestic US challenges: trade imbalances and a weak dollar
• rising worldwide energy and food prices.

The third point is contested– largely due to an inability to pin down exactly what these high prices are driven by. Are they temporary supply and demand imbalances and speculative behaviour in markets or do they reflect emerging long term structural constraints?

The judgment is that while, the short term market behaviour interacts with longer term structural constraints, we now have to deal with fundamental changes in the structure of the world economy.

These changes are occurring in the context of other uncertainties. The need for energy security clashes with the need to deal with climate change. Economic growth in China (India and other developing countries) is a major factor in both. Complications arise from the interaction between domestic policy and international affairs, intertwined in a more open and globalised world. Read more…