I still believe China should focus more at home e.g. agriculture and farming. This will not only upgrade the living standard of the rural population it will create jobs. Furthermore 1.3 billion people in China need food.

While I would agree that China has important role in the 21st century, and so does Asia, there will be many important regions, and those multinational companies that are placed in all of them will be the ones that thrive.

I would even argue that multinational companies decide what will be of the 21st century more than many nation states.

P.S. don’t forget the importance of India (demographics are far, far better than those of China). I would also argue that North America is in a position no different than it was in the 1970 and 80s. It will reinvent and bloom again. Even Europe will remain important (just look at all those MNCs that have their headquarters in Germany, UK, Netherlands, and France), and the Middle East, perhaps even Latin America/Africa will have their importance. It is after all a global world.

http://chinesepolitics.blogspot.com/

I am no lawyer but perhaps if the Chinese government could put out a request to bid to Chinese firms specifying the terms and conditions / procedures that Chinese firms would need to access funds it could be structured in a way to not cause grief. For instance, Chinese firms are asked to respond to the government bid by issuing commercial paper and corporate bonds in US dollars that are then made freely accessible to anyone wanting to acquire them but perhaps only of interest to the Chinese investment pool. This way the lending to the Chinese firms would be less likely to run into an legal quagmire and the lending remains relatively transparent. It would also set out a limited time period that the Chinese firms would have to turn their operations into a global presence with government help (making it well known to the world when the government strings would be cut).

Furthermore, the SOEs would in unison need to take bold steps toward privatization. For instance, Any Xie proposed the idea of giving shares of SOEs to Chinese citizens.

http://english.caijing.com.cn/2009-04-01/110131506_4.html

I think that his idea might have some merit. Lets say for instance, that every citizen in China was eligible for a certain number of coupon vouchers. They could use these vouchers to convert to shares in any of the SOEs over a specific time period. The conversion from coupon value to share price of the SOEs would be determined by market forces. If people were interested in Company A more than Company B then it would take more coupon value to buy the same amount of shares. Once the citizens had shares in the SOEs they could be freely traded, with some people cashing them in, using their funds to increase consumption now, and others buying-and-holding.

“…These industries have absorbed hundeds of millions of unskilled workers and it is a hidden “unemployment system” that has fueled torrid growth, …”

“Take the case of “clearer rural property rights” (and liberalising cereal imports) the idea is not to encourage peasants to sell their land to a bunch of loan sharks and to end up being landless serfs à la Brazil. Not at all. Clear property rights will facilitate pricing of these “frozen assets”.”

You’ve really touched on the core issue of China’s modernization, i.e., how to convert the hundreds of million rural population into more productive citizens, via industrialization and urbanization. China would still be a developing country if majority of its population still live in countryside – it doesn’t matter if Beijing and Shanghai are world-class metropolis or not.

That’s why export industries afford China a historical opportunity, without which China will still achieve its modernization goal albeit at a slower pace. The export sector employment, as you correctly pointed out, are mostly low-skilled and labor-intensive jobs. Construction (property and infrastructure) and service are two other most common jobs for rural migrant workers.

China’s hundreds of million of migrant workers are in a gray area now: officially they don’t have a legal resident status in the city they work and therefore are not covered by the welfare system (education, health care and social security); on the other hand, they work and consume in the city and don’t really belong to the countryside of their official residence.

I think the current government policy regarding urban residential status should be really re-considered and re-designed to encourage the migrant workers to settle down and acquire residential status and be covered by the urban welfare system. The policy should be similar to the immigration policy in developed countries: as long as the applicant meets certain criteria of income, asset and length of employment, he or she should be granted the resident status, along with his/her family. Actually, some provinces and cities are adopting the more or less the kind of policies, but the thresholds are usually pretty high. What is needed is a national policy that deals with inter-provincial issues such as portability of welfare benefits and rural land ownership.

The “clearer rural property rights” issue is also a critical one. The benefits associated with clearer rural property are easy to understand in theory, but in reality it’s a lot messy. The rural property rights is China’s de facto rural welfare system and China is a country in short of arable land and government strictly regulates the use of rural land for any other uses. The barrier to allow peasants freely transferring property rights is pragmatic, not ideological.

The solution, as so many other seemingly unsolved problems in China, is to allow local experiments and be open-minded; the problem will gradually not be such an acute one as economy grows and more people are absorbed into the urban economy and consequently eases the constraint.

Which takes us back to one of the key topics we’re discussing in this thread, i.e., it’s important to maintain economic growth as so many constraints and structural problems are either directly associated with the level of development or can be significantly relaxed by economic growth.

“Development is the hard truth,” as Deng Xiaoping pointed out before and was broadly accepted in China.

This is indeed a wild idea. Just take a look at Ping An Insurance’s investment at Fortis Bank. The China government has got its fingers burnt with their investment at Blackstone.

Take a look at Tamasek Holdings in Singapore. The Chairman of Tamasek happened to be The First Lady of Singapore and she got fired by Lee Kwan Yew who happened to be her father in law!!