BusinessWeek Article, “Broken China" - My Review

(http://www.businessweek.com/magazine/content/07_30/b4043001.htm)

As a long-time subscriber and fan of BusinessWeek, I would say that this article is pretty good. However, I do not agree with its main premise - If China does not clean up its act it is going to short-circuit its inexorable march toward superpowerdom. Much like Gordon Chang's The Coming Collapse of China, there is nothing much new here that has not been said a million times by skeptics and dragon slayers alike. Yes, China is big, corrupt, unwieldy, polluted and run by heavy-handed technocrats...And it has been for all of its 30 years of reform. Much like almost everything in the news about China, it is never as good as advertised or as bad as advertised. That is they are neither on the cusp of taking over the world tomorrow nor collapsing under their own weight.

That said I couldn't agree more with the underlying logic of the piece.To understand China, its markets, its government and what that all means for your, fill in the blank - company, product, country – you have to understand the policy making processes and the underlying incentives of the system. While the author does not attempt to explain what this alignment of incentives in modern China really means outside of the cursory bureaucrats only care about GDP numbers mantra, it is refreshing to see that at least he gets it enough not to give us canned responses like the dictums of the market economy will necessitate changes and democracy is just around the corner. (Although my all-time favorite response of people who know just enough about China to be dangerous is the hackneyed "Guanxi" is important in China response.) A great example of my alignment of incentives theory at work is the very pro-China quote by UTI CEO George David as juxtaposed to the critical-of-China quote by Carl Walter the Managing director of JPMorgan Chase. UTI, the owner Carrier, has been selling commercial air-conditioning units in China for 20 years and is one of the most profitable American enterprises to ever do business in China. JPMorgan on the other hand continues to run at an aggregated net loss in almost 20 years of trying.

That's all for now....