The conventional wisdom is that China is steaming through the global financial crisis by building on the momentum generated by its 30-year boom. Indeed, ever since it sailed through the last big global crisis--the Asian contagion 10 years ago--Beijing has been feted for uniquely steady helmsmanship in financial storms. So perhaps it's natural for forecasters to assume that the Chinese supertanker of state is not turning sharply now, particularly since it continues to grow rapidly even as other economies sink in the recession. Yet this crisis is different--bigger and more damaging than any seen in generations--and it is exposing limits and forcing change in just about every key piece of the China model: the supremacy of the one-party state, the smart economic management, the export-driven growth, the emerging consumer class, the burgeoning private sector, the headlong focus on growth at any environmental cost, and the drive to build world-class companies. What follows is a look at why these common assumptions about China are increasingly inaccurate or just plain wrong.
Yet this crisis is different--bigger and more damaging than any seen in generations--and it is exposing limits and forcing change in just about every key piece of the China model: the supremacy of the one-party state, the smart economic management, the export-driven growth, the emerging consumer class, the burgeoning private sector, the headlong focus on growth at any environmental cost, and the drive to build world-class companies. What follows is a look at why these common assumptions about China are increasingly inaccurate or just plain wrong.
The pro-market faction worries that the liberalization of financial markets and the privatization of strategic sectors (which include most of the richest industries such as banking, telecoms, and construction) are being forgotten in favor of "bridge to nowhere"-style projects. Even government officials now admit that 60 percent or more of the stimulus money has ended up in stock and real-estate markets, fueling worries about dangerous new asset bubbles.
China bulls would argue that China, where 40 percent of villages still have no paved roads to the nearest market, has a huge demand for more paving projects. Yet bears would ask how much China gains from connecting poor villagers (China's per capita GDP is still only $2,000, and much less in rural areas) to the market. "Take a drive on one of those new rural highways; you won't see many cars," says Ming Huang, a finance professor at Beijing's Cheung Kong business school and Cornell University.
