(L to R) Marshall Bouton, Daniel H. Rosen, John S. (Jack) Wadsworth, Jr., Orville H. Schell, and Xiaobo Lü discuss likely outcomes of China’s economic reforms for American policy and business. (7 min., 11 sec.)
NEW YORK — At the launch of the Asia Society Policy Institute’s (ASPI) report on Chinese economic reform, report author Daniel H. Rosen said he believes that China’s Third Plenum program of economic reform is on track to deliver GDP growth of as much as 6% in 2020 and to spur “extraordinary growth” in China’s inbound and outbound financial flows.
“In almost any [reform] scenario, lots of capital will flow out of China. The question is whether the world will buy into China,” said Rosen, who is a co-founder of Rhodium Group and a Jack Wadsworth Fellow of ASPI.
The report, Avoiding the Blind Alley: China’s Economic Overhaul and Its Global Implications, was produced by the Asia Society Policy Institute in collaboration with Rhodium Group.
John S. (Jack) Wadsworth, Jr., Advisory Director of Morgan Stanley and Honorary Chairman of Morgan Stanley Asia, said he is “very put off” by the notion that foreign investment in China is a “zero-sum game.”
“If it is a zero-sum game, America loses,” Wadsworth said. “The future for American business in China is going to be more about investing in businesses in China that are run locally, than it is going to be about trying to be a Google or a General Motors investing in plans designed to compete and distribute against Chinese [firms].”
Orville Schell, Arthur Ross Director of Asia Society’s Center on U.S.-China Relations, said the economic reform program has begun at a pivotal moment in the history of the relationship between the U.S. and China.
“This economic reform effort sits near the center of a very extraordinary power shift that’s going on in the larger sense, that I think the United States has not yet fully digested. If this economic reform effort is successful, it’s going to make that shift even more exaggerated,” said Schell.
“I think we’re going to have to readjust if we expect to get to any of the really critical problems that confront the world as common interests.”
Xiaobo Lü, Professor of Political Science at Barnard College, said the greatest threats to economic reform in China are likely to be internal rather than external.
“My worry about the prospects for economic reform have to do with grinding resistance from vested interests,” said Prof. Lü. “I don’t see China looking to use trade agreements such as TPP [the Trans-Pacific Partnership] to force domestic reform.”
Rosen said that China would become an “outstanding candidate” to join the TPP if it can accomplish its reform program.
“With reform, we’ll see more impulses from China Inc. to rationalize its business by operating around the world,” he said.
Commenting on another aspect of reform to China’s cross-border trade and investment policies, Wadsworth noted that in 1995, he believed that it would take seven years before China would permit renminbi in capital accounts to be fully convertible.
“We’re still waiting for it,” Wadsworth said. “And when that happens, anyone who doesn’t get it, will be left in the dust.”