9/11/10

Are there lessons for Greece from China's economic development and state capitalism?

  
Τρίτη, 09 Νοεμβρίου 2010 08:24
In the early 1990's the world began to acknowledge China's rising economic power. Fast growing exports allowed China to build a resilient command and control economy and associate economically with important raw materials producers. China has recently concluded deals with Brasil, Russia,Venezuela and France and several African countries. These agreements have allowed China to guarantee supplies of oil, minerals, and other strategic resources that are essential to continued   economic growth.
China’s co-operation with Greece has been shaped by other considerations since Greece does not have these types of resources.
In October 2010 Greece and China signed a Memorandum of Understanding pledging to stimulate investments and purchase Greek bonds at a later date. Greece needs both investments and selling of bonds to help its economy and meet the conditions of the EU/IMF Euro 110 Billion bailout.
China considers Greece an ideal place to invest since Piraeus links Europe with Asia and Africa. Greece provides China with a gateway to Northern, Eastern and Western Europe as well as great possibilities for South Eastern Europe and the Black Sea. Chinese investments are concentrated in sectors such as product assembling, transport and logistics.
China Ocean Shipping Company ,COSCO, is already in charge of a container operation project in Piraeus. We should not underestimate the significant support that Greek shipping provides to China's activities.
The Chinese economic model has a strong export-driven component and relies less on domestic consumption as an engine for growth. The initial focus of their strategy was to some extent to copy Western products but China is moving rapidly away from copying to producing innovative products. Their state directed economy with its relatively closed financial system has allowed China to weather the global turmoil as it was less affected by the economic/financial crisis faced by other countries. It has been quite accurately stated that China has a first-rate economy coupled with a second rate financial system.
China's economic model is at odds with the market economy applicable in most European countries, Greece included. But although China's economic model is not the answer for Greece, some elements of state capitalism as it is applied in China may provide some answers to Greece problem of lack of competitiveness. Given their presence in Greece it is worthwhile to improve our understanding of the strenths of theChinese economy and consider how Greece may benefit from a transfer of technology in sectors that are critical for Greece’s long-term development strategy. This brief note aims at initiating a debate on the issue.

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