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Saturday
May192007

As China joins the world, it learns by scandal

It seems like a lot of bad things are coming out of China nowadays, whether it's some new super flu, counterfeit drug, tainted pet food or air pollution that reaches our West Coast. You may be wondering whether it was such a good thing for China to rapidly embrace globalization if all its negative externalities start becoming America's internalized problems.

The best crises are the ones you hear about because that means the international press got a hold of them. That's important for several reasons.

First, those already affected or at risk get the information they need to protect themselves.

Second, once the problem is tracked back to China, Beijing's put on public notice that whatever rule laxness exists over there simply cannot be tolerated anymore. In effect, China's connectivity to the global economy is put at risk by threats of quarantine, bans on exports, cessation of investment flows and so on.

A generation ago, such threats would elicit yawns from China's ruling elite, but now, with the Communist Party's entire legitimacy riding on continuous economic expansion, they're taken with utmost seriousness. For example, when SARS struck five years ago, Beijing's initial reaction was the classic, Soviet-style stonewalling, but when that posture backfired, unprecedented - but still limited - transparency resulted.

With each crisis since, China's transparency grows little by little, coupled with faster appropriate responses by the government.

In short, China's government is starting to act more like a business that recognizes its reputation is often its most important asset in a "flat world," where fierce competition means that your mistake today will allow somebody else to insert themselves between you and your customer at the start of business tomorrow.

Don't believe me? Talk to any American beef exporter that found itself permanently dislodged from long-held overseas markets by the Brazilians or Australians the day after the words "mad cow" and "U.S. ranches" scrolled across cable news networks' screens last year.

Third and most lastingly, whenever China's rule sets are found lacking on a particular subject, a flood of new, more stringent ones tends to be forced upon its industries by its overseas economic partners and international regulatory bodies. By and large, China's leadership welcomes this difficult, scandal-fueled process because it enables them to import rules from abroad that their political system is not yet capable of developing sufficiently on its own.

China's decision to join the World Trade Organization in 2001 reflected Beijing's long-term strategy of importing rules, but it's not enough, as the country needs as many sources in this process as possible. Let me give you some examples.

Each time China suffers one of these scandals, its elite grows more comfortable with the role of the nation's increasingly activist press in this process. Without a doubt, too many topics still remain off-limits to the press, like anything pointing to high-level corruption in the party, but with each crisis, that leash grows a little bit longer.

Anticipating the need to be more proactive, Beijing's leaders are committing a lot of resources to grow a public policy sector that lies outside - but remains intimately connected to - the government. This generational task involves growing a universe of think tanks, blue-ribbon commissions and industry associations that actively participate in drafting new rule sets for the development challenges that lie ahead.

I've had the privilege of interacting with numerous Chinese experts involved in this effort, primarily in national security, and I can say they're approaching this gargantuan endeavor as the task of a lifetime - which it is.

But, yeah, in the meantime, we should expect the Chinese to remain Chinese, meaning they'll look out for themselves first and foremost, making difficult rule-set adjustments as slowly as possible and always with an eye to enhancing economic competitiveness.

But have no doubt that China's increasing connectivity to the global economy means it must act ever more responsibly vis-a-vis its vast web of suppliers and consumers, whether it's not turning a blind eye to Sudan's Darfur crisis or not dragging its heels on international responses to global climate change.

Each time the world jumps down Beijing's throat on the smaller panics, we're conditioning China's leaders toward accepting a larger leadership role in globalization. As long as we focus on shared solutions rather than just the shame-and-blame game, we'll get the ally we deserve for the many challenges ahead.

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