Asia: China's moment of truth
China has a future rich with potential: a liberalized currency, an open capital account, state lenders and technology giants offering innovative banking services to a vibrant private sector. But Beijing’s leaders face a growing problem: a two-speed China. Now is not the time for them to drag their feet over reform.
When Mao Zedong died in September 1976, China was an economic basket case, lacking virtually any financial link with the outside world. In the 40 years since, the country has changed beyond all recognition – or expectation.
A currency then worth little more than the paper on which it was printed, now seeks global recognition. What was once a monolithic state has been sliced and diced, creating cash-rich corporates with a remit to acquire assets around the world. Development banks born in Beijing operate as lenders of first and last resort to struggling sovereigns from Latin America to sub-Saharan Africa. And a nation that once struggled to feed itself now spawns technology firms capable of anything – even undermining the state banks that funded the last four decades of staggering economic growth.
These are astonishing times for China. A country that dominated global trade for centuries before losing its way has the chance do to so again. Within a decade, Beijing could be in possession of some or all of the following: an open capital account and a fully liberalized exchange rate; a diversified economy dominated by services and domestic consumption; and a full set of globalized banks and corporates with a presence in every important market.