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China's Summer Davos: The Elephant in Tianjin

I imagine the roster of RSVPs for this year’s confidently titled “Annual Meeting of the New Champions 2012” in Tianjin, China is daunting for even the most preeminent global thinkers. The event is one of several offspring of the World Economic Forum’s premier event, Davos, named after the Swiss ski resort where it is held each year. A so-called “summer Davos” or “mini Davos” has been held annually in Tianjin since 2007. It is the most successful of the spin-offs, in no small part because it is held in China, the country with the world’s second-largest economy, and offers attendees a chance to swap ideas with their Chinese counterparts.

At any given time, one might wander into a panel session to find “new champions” discussing, debating, and frankly dishing on the world’s socioeconomic landscape. It’s the sort of place where one might bump into someone like the prolific columnist Tom Friedman, wearing his backpack and wandering the halls as if he’s a college freshman searching for the right lecture hall on his first day on campus.

Topics are wide-ranging and the discussions far-reaching. From Paul Kagame, the President of Rwanda, discussing driving global competiveness to Min Zhu, the Deputy Managing Director of the International Monetary Fund, sharing his ideas on the global power shift to Marc Spiegler, director of Art Basel Switzerland, speaking on the state of the arts in Asia, the three-day conference is unique in China for the sheer concentration of leaders and variety of topics discussed.

This year, the topic that arose in the majority of discussions was China’s economic downturn.

The world is used to operating under assumptions of continued double-digit growth in China. But China’s economy is slowing down. GDP this year is at 7.5 percent. Imports are down. Electricity output, an indicator of robust production, is falling. Still, the government’s official numbers do not declare an imminent crash. The question is whether or not those numbers are reliable. Under China’s one-government system it is impossible to know for certain if the government is tweaking information to maintain stability or not.

According to Premier Wen Jiabao, who gave a lengthy and very positive review of China’s performance on the conference’s opening night, China is on target and in supreme economic health.  But the IMF’s Zhu Min put it this way, “We think China’s economy is in the stage of a soft landing and the overall development is stable.”

But China’s economy wasn’t the elephant in the room at Tianjin. As these men and women discussed the direction the world will take, and how we can best address the many challenges ahead, they repeatedly returned to the importance of innovation and transparency. Again and again, the point was made that reliable, shared information, from the most local level to the most global, is essential to the health of the world community. A close second is investment in individual communities as communities, driven by strong local governments in tune with the needs of their own people.

The elephant in the room was this: China is currently operating in opposition to, and is inherently hard-wired against, those very concepts.  

Consider the following examples from a lively discussion on population growth titled “The 7 Billion Challenge.” Shirley Ann Jackson, president of Rensselaer Polytechnic Institute, broke down the three most important areas of concern for every nation: food, water, and energy. China is grappling with all three. The most worrisome, arguably, is energy.

According to Wang Boming, an economist and currently the editor in chief of Caijing magazine, China is consuming six times the energy of Japan, three times the energy of Germany, and twice the energy of the US. The average per capita annual income in China is around $5,000. That number is expected to rise as global population increases to an estimated 9.3 billion by 2015.

“What if the per capita income reaches thirty thousand dollars a year?” asked Wang. He envisions China’s already heavily populated urban areas becoming only more so, bursting at the seams and taxing an infrastructure that can’t handle it. “That would put even more enormous pressure on China’s energy.”  

That pressure could theoretically be a business opportunity for other countries. But because China still operates under traditionally secretive guidelines, there is no way to know if the country is sharing accurate information on energy consumption.

Wang’s suggestion is to pull back and conserve. “China is too much the world’s factory,” Wang said. “We need to decrease heavy industrial production.” But there is no way to know if the government is planning to follow his advice. As evidenced by Wen Jiabao’s speech, the information the world does receive is consistently rosy. We do know that industrial production, which has driven China’s growth in the last decade, could now be turning into a liability. What’s far less clear is what the government plans to do about it.  

In China it is practically government policy not to talk about the negative. But if the world doesn’t know the worst of it, it can’t plan to make the best of it. That was the elephant in the room in every discussion in Tianjin. And it’s the risk the world takes in doing business with a country that is so adept at keeping secrets.

 

Photo Credit: World Economic Forum 

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