Economic Uncertainty in China

The almost universal assumption is that China is a rising dragon that someday — perhaps someday soon — will overtake the United States. But notwithstanding China’s impressive growth rates, there is trouble on the horizon — something that is suggested by this New York Times article — which reports on the growing unease among foreign companies trying to do business in China. As the article notes:

Foreign companies doing business in China are increasingly feeling as if the deck is stacked against them.

That echoes the concern of some American businessmen in Tokyo, to whom I talked last week. They complained about how unpredictable business conditions are in China- – subject to the whims of shortsighted, corrupt cadres, who are intent on lining the pockets of well-connected countrymen even at the expense of cheating major investors. Japan, by contrast, has its own barriers to business but, these executives report, is a much more welcoming, less worrisome place in which to grow a business. Another American investor with whom I talked recently mentioned that he had just invested in a major real-estate project in India — something he would not do in China, because he has no confidence in that country’s future.

None of this is meant to dismiss China’s prospects. Wherever I went in Asia there was talk about growing Chinese power especially as manifested in its ever-more-capable armed forces; its naval ships are acting in increasingly aggressive ways toward Japan, the United States, and other states. But the Chinese quest for economic growth — the underpinning of its military power — will be endangered unless it can develop a genuine rule of law that will assure foreign and domestic investors of its long-term prospects.