Chinese Entrepreneurship

Mark Bagshaw
Professor of Management & Leadership
Marietta College

It appears that the various levels of government in the GPRD are doing a good job of getting out of the way and letting the market work its creative—and destructive—magic.  Indeed, as a one-time start-up business owner myself (classical music on CD by direct mail in days before the Internet), it strikes me that local and regional governments in the Greater PRD are permitting, condoning, and participating in an unsurpassed level of laissez-faire or “cowboy” capitalism on both large and small scales.  Why? Because they can:  The relation between levels of governments and the overlapping of their jurisdictions continues to be problematic for China; but, until captured and tied down by the enforcement of an encompassing and impartial legal structure that transcends their own jurisdictions and authority, or until forced by unequivocal directives from a central authority to prevent or circumscribe laissez-faire, local and regional authorities  encounter no substantial short-term disincentives to permitting, condoning, and participating in the “cowboy” capitalism game. 

In fact, there are genuine incentives at the local and regional level to play fast and loose in the game of capital acquisition and growth because that is a way both to be seen as providing more local jobs and to maintain or increase control over local lending institutions and the allocation of tax revenues.  Where’s the incentive to follow some overarching guidelines, or to cooperate with other authorities, if it is going to mean foregoing economic opportunities for local or regional constituents, and reducing the amount of revenue that can be allocated to capital projects within the local or regional jurisdiction?

However, along with the capacity for great leaps forward in village, township, county, city, or provincial GDP that laissez faire implies, comes an equal capacity for enhanced levels of enterprising charlatanism and unreflective wholesale risk-taking with the public weal that, over the long term, can wreak considerable damage.  By way of  illustration, over our four-week tour of the region, our group had our own limited powers of observation augmented by the frequent witness of our  lecturers, who repeatedly described capital project boondoggles and white elephants, created on a massive scale, by local and regional authorities:  new container ports standing idle, recently opened major airports operating at less than 25 percent of capacity, recently built and under-booked trade and exhibition centers, all built to increase local employment and to attract new business—justified, partly, on the theory that if you don’t build it, they won’t come; and partly on the cultural assumption that projects must be built on a massive scale to signify the strength,  power, and capability of the local or regional authority, and consequently, its desirability as an economic partner.

Of course, no one will deny the need for attention to infrastructure to assure that the GPRD develops to its full business potential.  And yet, unless there is greater voluntary cooperation to rationalize and coordinate the creation of major infrastructure projects, greater centralized coordination of such projects will be a near-term necessity and cannot be far off.