Thursday, August 27, 2015

China at the Crossroads of Reform

China is at the crossroads between a path that goes left and one that goes right. To the left is political stability that pulls from the bag of old fashion communist economic policy while to the right is a path that forces Chinese businesses to be compete without as much government support. The process of reform will become more apparent as time moves forward. Recent market corrections are an opportunity for Chinese businesses to reach out to American companies for collaborative partnerships that expand both economies.

Both mentalities come with some risks. Communist approaches provide for control and stability but ultimately lead the country to less wealth and growth. Something closer to communism with capitalistic overtones has been used to try and manage parts of the economy through one lens and other parts of the society through another. Until now officials were able to keep the balance.

The Chinese leadership should be commended for the past couple decades and their ability to raise their position from market followers to market leaders. Their primary advantage was the cheapness of their labor and abundance of resources. They had a hungry population willing to work hard do what it takes to succeed. Labor mixed with modern manufacturing led the day.

That situation is changing and countries have found parity in manufacturing thereby damaging the fundamentals of the Chinese economy. The same policies that helped push the economy forward through centralized control are the same policies that led to today's market correction. How they approach this issue will determine China's future its long-term stability in an international market.

America on the other hand is growing and appears to be on solid financial footing. Protecting American intellectual property rights, investment opportunities, and fair cross-border trading policies will connect the two economies closer and bring greater stability for both. Chinese-American partnerships will need fair Chinese policies that protect the interests of both parties while ensuring international partnerships have an open regulatory environment to succeed.

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