Russian lesson for Chinese reforms

In Asia Times, Qiu Xin wrote: “As China and draw closer economically, especially in energy cooperation, Chinese economists are studying the two nations’ sweeping, but very different economic reform models. ”

China undertook massive privatization in the 1990s but many of its state-owned-enterprises (SOEs) are non-performing, deeply indebted and profoundly in need of overhaul. Chinese economists urge a closer assessment of Russia’s massive privatization, known as “shock therapy” or the “big bang” model, and what they see isn’t always reassuring for China.

These questions of reform models are even more relevant in the wake of Russian President Vladimir Putin’s first state visit to China during his second term from October 14-16, putting the Sino-Russian relationship in the world spotlight. On the agenda for both China and its former socialist ally, energy cooperation was top priority, though China did not receive a commitment for an oil pipeline that it covets. Over the last couple of years, China has been plagued by an energy shortfall and thus has been pressing Russia to build a long and costly conduit to channel crude oil to its northeast. Russia appears to be holding out, possibly in favor of Japan, though the final decision has not been announced.

Still, China is looking closely at Russia’s economic reform models, though they are fraught with problems and have given rise to oligarchs who have not spread the wealth to those who need it the most in an economy that is rich in resources but far from robust. China, making the transition from socialism to a market economy, has its own huge state enterprises, conglomerates, private economic titans and mandarin oligarchs who benefit enormously from their proximity to power – and who also don’t have the welfare of the masses at heart.

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