Thomas P.M. Barnett

■"Search is on for a different pattern of growth," by Richard McGregor, Financial Times, 8 November 2005, p. 1 (Special Report China).
■"Failure to reform threatens to derail future growth: Unlike more developed economies, China relies almost exclusively on the banks to oil the wheels of its economy," by Francesco Guerrera, Financial Times, 8 November 2005, p. 4 (Special Report China).

■"A potential threat to stability? The government has created popular expectations without fulfilling them," by Mure Dickie, Financial Times, 8 November 2005, p. 3 (Special Report China).

■"Business to be had beyong Beijing," by Andrew Yeh, Financial Times, 8 November 2005, p. 5 (Special Report China).

■"A global power made in China," by Simon London, Financial Times, 9 November 2005, p. 9.

■"Chinese leaders give less time to CEOs of multinationals," by Richard McGregor, Financial Times, 9 November 2005, p. A1.

■"FBI helping Chinese police on pirated goods," by Andrew Yeh and Richard McGregor, Financial Times, 9 November 2005, p. 6.

■"China arms embargo moves off EU agenda," by FT reporters, Financial Times, 9 Novvember 2005, p. 6.

I have got to start reading the Financial Times every day. It's just that good, especially on China. The special report on China on the 8th is absolutely fantastic.

The article on how China seeks to rebalance it's growth trajectory is full of great analysis and tidbits galore of the sort I love to store away:

Alongside the gradual liberalization of the financial system, China's private sector has supplanted state industries as the most important driver of economic growth in the past few years. Privately owned and managed companies generate nearly two-thirds of non-farm GDP, according to a recent OECD report.
The Paris-based organization said the number of state-controlled companies had halved since 1995, from 300,000 to 150,000.

By contrast, local private companies increased output fivefold and foreign enterprises threefold between 1998 and 2003, compared with an increase of just 70 percent in the state sector over the same period.

Even better is this:

Many Chinese economists support a significant revaluation as well, although not on a political timetable dictated by the US. They argue a revaluation would help reduce the capital inflow into China, which is forcing the People's Bank of China to mop up more and more dollars to keep the currency stable.

China is set to have about $1 [trillion] in foreign exchange reserves by mid-2006, a serious waste of financial resources, according to local economists who believe the money would be better spent on improving the health and education systems.

The best route to this? Increase domestic consumption. Since Chinese are expected to pay their own way on a host of things the government used to provide (housing, education, medical), they tend to save a lot. That leaves the new rich. And that's why China's Alan Greenspan, Zhou Xiaochauan, says, "This may be morally questionable, but it is a fact that the purchasing power lies in the high-end group." In an economy that needs to create 20 million new non-farm jobs every year, you better have an economic elite that spends.

Deng Xiaoping, meet Ronald Reagan.

But all those rich people will want some government for their money. They'll want courts that ajudicate, not politicize. They'll want protection for their money. They'll want contracts enforced and property respected.

As the vice president of China's Supreme Court puts it, Xi Xiaoming, says "The status of courts in the life of the people is rising."

What does he mean by that? China's courts handled several hundred thousand cases a year a couple of decades ago. Now those 4,000 courts handle five million a year.

That's what I mean when I say good markets make better governments. It's the rising transaction rate that drives this virtuous circle.

It drives the growth of the insurance market (now third largest in Asia). It drives Chinese legal authorities to work with our FBI to cut down on pirated goods within the economy.

And all that economic potential attracts political suitors.

A senior Pentagon official recently noted, "[French President Jacques] Chirac gave a speech in Shanghai about a year ago where he talked about the necessary rebalancing of the grand triangle among Europe, Asia and America. In other words, the strength of China is good for Europe. I didn't like that too much."

Well buddy, nobody frickin' asked whether you like it or not. My God, what world do these people live in?

Better on China's failure is the work of little minds. Contingency planning is about covering your ass from failure. Strategic planning is about exploiting pathways of success.

We need to get strategic on China, because everyone else is but us, and it's starting to show.