SPEAKING
FREELY China, EU share same
ills By Emanuele Scimia
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here
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The Chinese socialist market economy
and the European social free-market are at a
crossroads. On different bases, China and the
European Union are both urged to liberalize their
own economies - something that Chinese bureaucrats
and the "overregulated" Germany are going to
counter.
In an interview with Time
Magazine in March 2005, President of the Czech
Republic Vaclav Klaus candidly admitted that the
EU reminded him of the Council for Mutual Economic
Assistance (COMECON), the organization by which
the Kremlin controlled
the Soviet bloc's
economies from 1949 to 1991.
For
euro-skeptic Klaus, the EU and COMECON, while
distinct from an ideological point of view, share
some structural characteristics, such as the
underlying principle of organizing the control and
regulation of their state members' economic
policies.
Seven years on, Klaus' remarks
about the EU's resemblance to COMECON have turned
out to be not so provocative given the
similarities between two recently released
documents which at first glance should not have a
great deal in common: the "China 2030 Report",
published on February 27, and the joint letter
from 12 EU governments to European institutions
titled "A plan for growth in Europe", dated one
week earlier.
From different starting
points and prospects, both papers prescribe very
similar recipes to deliver economic growth in
China and Europe over the next years, and all of
these in essence aim at opening up respective
markets.
The China 2030 Report, a joint
effort by the World Bank (WB) and the Development
Research Center of China's State Council (DRC),
suggests to Beijing's rulers that they speed up
the country's transition toward a mature market
economy.
According to the report, appeals
for China to enact structural reforms so as to
promote a market-based economy are "compelling",
since Chinese economic growth risks declining from
now to 2030 (to 5-6% per year against an average
of 10% over the past 10 years). And this even
though the report's authors stress that the
expected slowdown probably will not prevent China
from becoming the world's largest economy by 2030.
To bring about economic liberalization,
among the other prescriptions, Beijing should
redefine the role and heft of its state-owned
companies, dissolve monopolies and oligopolies in
strategic industries, diversify ownership, reduce
entry barriers to private firms and facilitate
access to finance for small and medium
enterprises.
The WB and DRC do not
recommend measures to privatize state-owned
enterprises, aware that the Chinese ruling elite
would find that hard to digest. On the contrary,
they advocate separation between ownership and
management, with independent asset-management
firms overseeing the companies controlled by the
state.
If liberalization with regard to
China means the completion of its long path to
free-market economy, about Europe it translates
into the enhancement of the EU single market.
Faced with a growing unemployment rate,
which in January hit a record 10.7% in the
eurozone and is a drag on the recovery from the
current sovereign debt crisis, some European
countries - among them three heavyweights, the
United Kingdom, Italy and Netherlands - have
devised their own strategy for growth in the old
continent.
The proposed plan hinges on the
conviction that fiscal austerity alone cannot
treat the financial woes sweeping through Europe.
Indeed, EU state members should renovate their
economies, foster competitiveness and adjust trade
imbalances. One important step to strengthen the
single market should be the removal of
restrictions that limit access to the services
sector. Services now make up about 80% of the
European economy, and their market needs to be
opened up.
Attention to small firms is a
key topic as much in China as in Europe. In this
regard, the European institutions are invited to
scale back the burden of the EU overregulation,
which represents a structural obstacle to the
small and medium enterprises' businesses. Beijing
and Brussels are both recommended to liberalize
their energy markets.
In a preview of the
China 2030 Report, the Wall Street Journal
underscored that already, before its publication,
it had prompted strong opposition from bureaucrats
who managed China's state enterprises. Such rumors
were confirmed by Hong Kong's South China Morning
Post on February 28. According to the SCMP's
commentary, for China's top brass policies turning
to economic liberalization would be much less
attractive than financial repression, since "the
very features of China's economy that the World
Bank believes should be reformed - a privileged
state sector enjoying preferred access to cheap
capital - are exactly the levers with which the
Communist Party has maintained its economic
primacy over the last two decades despite the
massive changes that have swept the mainland".
In the fight between opposing supporters
and opponents of China's state capitalism, backers
of the status quo appear to be maintaining the
lead. Hu Shuli, editor-in-chief of Caixin Media,
underlined on March 3 how it had proved difficult
over the past decade and beyond to curb the
importance of state-owned capital in China's
strategic industries. She reminded readers of the
"desultory" implementation of the request that in
1999 the fourth plenary session of the Communist
Party's 15th Central Committee had made to reduce
the state-owned capital's role in all industries
but those considered as essential.
As
inside the China's multi-faceted political
microcosm, even within the EU there is resistance
to economic liberalization, notably by the most
"Chinese" of the European countries: Germany.
Indeed, alongside its dynamic export, Germany has
an overregulated services sector with barriers to
entry. Ironically, these are detectable flaws also
in Italy, Spain or Greece - states that are
suffering economic setbacks and have been under
the fire of Germany's financial rigor over the
past two years.
The German government of
Chancellor Angela Merkel - like the executive of
French President Nicholas Sarkozy - is not a
signatory of the letter backed by 12 EU prime
ministers. The French-German idiosyncrasy toward
deepening the EU single market in regard to
services, as well as the digital and energy
sectors, has succeeded in outlining a new
geopolitics of power in old Europe.
For
once, the Berlin-Paris axis has been pushed aside
by a (still) fluid and patchy coalition comprising
the debt-ridden Italy, Ireland and Spain, the
euro-dissident UK and euro-skeptic Czech Republic,
the financially intransigent Netherlands, Finland
and Sweden, and the newcomers Poland, Estonia,
Latvia and Slovakia.
The Chinese socialist
market economy is light-years away from the
European social free-market and is certainly
experimenting with a singular stage of
development. Yet, taking into account all
political, economical, historical and
socio-cultural distinctions, in their own way both
China and the EU are called on to recalibrate
their policymaking.
This parallel
recalibration could result in a rise in the
already advanced Sino-European economic relations,
as invoked in the letter by the 12 European
premiers urging growth in Europe: a perspective
that fits well with the World Bank and DRC's
recommendation for Beijing to seek "mutually
beneficial relations with the world by connecting
China's structural reforms to the changing
international economy".
Emanuele
Scimia is a journalist and geopolitical
analyst based in Rome.
(Copyright 2012
Emanuele Scimia)
Speaking Freely is
an Asia Times Online feature that allows guest
writers to have their say. Please click here
if you are interested in
contributing.
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