Foreign Policy Blogs

Will the “China Rising” Narrative run into the Reform Blues?

A post earlier this month noted how well-connected state-owned enterprises in China were stymieing key economic reforms advocated by outgoing Premier Wen Jiabao and questioned whether the country’s new leader, Xi Jinping, would do any better given that the country’s 145,000 state-run companies are a gold mine of wealth and privilege for rent-seeking Communist Party elites.  Indeed, as media reports (here and here) about the extraordinary wealth accumulated by Wen’s and Xi’s own families demonstrate, the economic system is so riddled with nepotism that even these putative reformers are not without serious taint.

Amplifying this point is a just-published Bloomberg News report finding that the most influential families in the party’s power structure have amassed sizeable fortunes through their control of state firms.  According to the report, 26 members of these families ran or held top posts in state-owned enterprises that dominate the economy, and that three individuals either headed or still control companies with combined assets amounting to more than a fifth of the country’s annual economic output.

Reports like this make one wonder whether China’s new crop of leaders can ever muster the political will to reform the state-centric model of economic management that a new World Bank report warns will eventually derail the country’s high-flying trajectory.  Their success or failure will go a long way toward resolving the debate between those who contend that China’s hegemonic dominance is all but assured and those (like this blog — see here, here and here) who believe the sources of U.S. global power are more durable.  The coming decade or so will furnish some important tests about who’s right and who’s wrong in their predictions about the evolving world order.  Stay tuned.

This commentary was originally posted on Monsters Abroad.  I invite you to connect with me via Facebook and Twitter.



David J. Karl
David J. Karl

David J. Karl is president of the Asia Strategy Initiative, an analysis and advisory firm that has a particular focus on South Asia. He serves on the board of counselors of Young Professionals in Foreign Policy and previously on the Executive Committee of the Southern California chapter of TiE (formerly The Indus Entrepreneurs), the world's largest not-for-profit organization dedicated to promoting entrepreneurship.

David previously served as director of studies at the Pacific Council on International Policy, in charge of the Council’s think tank focused on foreign policy issues of special resonance to the U.S West Coast, and was project director of the Bi-national Task Force on Enhancing India-U.S. Cooperation in the Global Innovation Economy that was jointly organized by the Pacific Council and the Federation of Indian Chambers & Industry. He received his doctorate in international relations at the University of Southern California, writing his dissertation on the India-Pakistan strategic rivalry, and took his masters degree in international relations from the Johns Hopkins University School of Advanced International Studies.