Many think that the social issues and welfare of China are the sole problems of China…in fact, I would argue just the opposite. China’s social stability is directly tied to “global growth” and stability. How can this be?
China’s top down approach to capitalism where the state manages the countries economy in a capitalistic format has worked well for many years, but there have been disruptions. Many only see the strong GDP numbers from the financial markets and the new projects that China is developing from the media, but underneath is still a developing country as they are part of the BRIC countries. The BRIC states have amazing potential, but they are still developing and struggling with the many issues of growth and capitalism.
What happened to China’s economy in 1989 in Beijing when Tianemen Square revolt occurred? The Chinese GDP plunged to 2.5% for two years…thank goodness their economy was not nearly as big then. The consumption power that China now wields is tremendous and if there is social social unrest, it will bring this economy to its knees and hobble many others. Even the US will feel the effect.
It is important that the US guides its partners in the right direction, but only gradually. We cannot expect a baby to walk before it crawls so we cannot expect China to jump before it can run.
Currently, China’s economy is slowing down and maturing gradually…we should not be worried as this is normal for all maturing economies, but we must foster the right economic policies and social standards for their country. This requires Americans to step out of their comfort zone and to practice cultural sensitivity (to the right degree…so please do not take my advice out of context).
Keeping the social stability in China is a matter that the world must be concerned with.
by Stephen Perl, MBA, MS
CEO of PMF Bancorp
Author: Dancing with the Dragon (2012)
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