Paul -
It is ironic that perhaps the Chinese leadership enjoys greater freedom of action in facing their economic difficulties than do the leaders of "democratic" Japan, with their deeply entrenched conglomerates and ministries, and their mutual aversion to change, deregulation, and competition. China may make their own mistakes, but they have learned from recent history and do not intend to repeat the mistakes of Japan. They are preparing to embark on a radically different course, and it will be interesting to see how much strength the devaluationist and/or statist opposition can muster. It's plain that those at the top do not wish in the current circumstances to devalue the yuan.
I don't think China can any longer be considered communist in the sense that we have understood it for the most of this century, ie under the Soviet system or under Mao. They have clearly embarked on the establishment of a market economy, and are preparing to accelerate that transformation. The essence of the Chinese leadership may more properly be understood, I think, as nationalistic, rather than being blindy devoted to communism idealogically. They are faced with difficult challenges in their current economic predicament and that of Asia, but as Li has said, they also have their eyes open to the opportunities inherent for them in the todays Asian crises. There is no doubt that the opportunity which they seek is to become the dominant economic power in Asia, and that means possession of the dominant currency, which means supporting the strength of the HK dollar and the yuan. They have sensed the weakness of the Japanese, who are mired in unprecedented difficulties with the problems of their Asian debtors, and they mean to take advantage of it.
The Chinese leadership were wise enough to recognize some years ago that they were in danger of being irrepairably condemned to third rate status by the increasing technological superiority and economic dominance of the West, and that their communist economic system had proven inferior, offering them little hope of catching up. Rather than remain mired in the past, the more forward amongst them decided to embark upon the path to power, and if that meant adopting the western economic model, and heaving the old one over the side, so be it. The challenge would be for the Party to maintain political control while simultaneously allowing greater economic freedom. Now it appears that they are prepared to go further, and indeed to throw overboard many of the benefactors of the old system, civil "servants" and state-run enterprises, and "allow" them to go it on their own. The problem is, of course, that many of these people do not wish to be "allowed" and prefer their current system of govt guarantees to the freedom to succeed or fail on their own merits. The immediate future of China will likely depend on the outcome of this forthcoming struggle. |
