China, the sleeping giant referred to by Napoleon, woke up a while ago. The effects are still too early to tell, but of immediate importance is how this emergent Asian power is changing track in a manner that may prove to be a wake-up call for all globalisers. It may even lead to an undoing of Thomas Friedman?s ?world is flat? thesis, whether it?s turtles or hares to the finish line. China is boosting the domestic dimension of its economic success in a large-scale effort that could have repercussions on the economic dynamics of the world. The country plans to adopt a fresh set of measures that restrict foreign investment directly into its corporate sector, even as it leverages its treasure chest of $1.2 trillion in reserves to create a sovereign fund that invests in overseas assets. Three measures to restrict foreign investment could change the global capital flow matrix. First, China intends to triple the list of sectors exclusive to Chinese majority ownership. In manufacturing, new restrictions are to be imposed on factories that make finished goods exclusively for export. Currently, according to an HSBC report, foreign entities fully own 300,000 factories in China; such fulsome foreign ownership has already led to social disharmony. In a flat world, ownership is irrelevant as long as people at large get jobs and there?s prosperity all around. In an ownership-sensitive world, it?s not that simple. The Chinese yearn for assets, and are recognising that there are owners of capital, and there are toilers. Little wonder its stock market has been on fire. Second, joint venture equations are to be reshaped in favour of local players. And third, foreign entities will find their access to China?s financial sector circumscribed.
This nationalistic fervour will unsettle globalisers who have marvelled at China?s success model so far. But a country that is abandoning an ideology that had tried to erase the very concept of private ownership is likely to display peculiar attitudes towards what is essentially the core of capitalism. Those who catch on, prosper. The rest are left behind. So, paradoxically, the dazzle of capitalism seems to be leading China towards measures that Indian observers associate mostly with dirigiste economics. All this, even as China?s sovereign fund snaps up foreign assets. That?s globalisation with Chinese characteristics.
