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George P. Shultz on China and Bosnia

by George P. Shultzvia Hoover Digest
Tuesday, January 30, 1996

Hoover fellow and former Secretary of State George P. Shultz recently spent a morning talking about the challenges posed to U.S. foreign policy by China, one of the biggest countries on earth, and Bosnia, one of the smallest. Shultz answered questions put to him by Hoover fellow Peter Robinson.

RED FLAG OVER HONG KONG

by Alvin Rabushka, Bruce Bueno de Mesquita, David Newmanvia Hoover Digest
Tuesday, January 30, 1996

On July 1, 1997, the British Crown Colony of Hong Kong will cease to exist, becoming instead the Hong Kong Special Administrative Region of the People's Republic of China. Will the new Hong Kong continue to flourish or stagnate? Hoover fellows Bruce Bueno de Mesquita and Alvin Rabushka and their coauthor, David Newman, assert that we will all be able to learn a great deal by watching the value of a single, critical item, the Hong Kong dollar.

Korea Opens Its Markets . . . Slowly

by Jongryn Movia Hoover Digest
Tuesday, January 30, 1996

Reporting on two Hoover conferences on Korea, Hoover fellow Jongryn Mo asserts that Koreans are, slowly, opening their markets. And growing feisty.

China's Economic Revolution and Its Implications for Sino-U.S. Relations

by Ramon H. Myersvia Analysis
Wednesday, November 1, 1995

In the next few decades Sino-U.S. relations will be strongly influenced by four issues: economic friction, international security interests, human rights, and conflicting claims by Taipei and Beijing over sovereignty to Taiwan. Economic friction and international security concerns will dominate as China's economic and military prowess grows.

The prospects seem bright for China's economy to become productive and sustain annual growth rates of around 8 percent because in 1992 the Chinese Communist Party decided that the majority of its 150,000 state-owned enterprises would be restructured by the year 2000. This means changing property rights to corporatize the state-owned enterprises and creating a market economy for them to operate in. If China's leaders successfully carry out this revolution, China will not only have a large, prospering middle class but become a major military power.

To anticipate these developments, the United States should now forge a close working relationship with the People's Republic of China by taking the following steps: establish annual summit meetings and a hot-line communication between Sino-U.S. leaders; create a high-level Sino-U.S. committee of officials and experts to manage potential economic friction; expand scholarly exchange programs; encourage local government exchanges. These overarching arrangements will facilitate communications, enhance mutual understanding, build confidence, and reduce tensions between the leaders and political elite of both countries.

Taiwan and the United Nations: Conflict between Domestic Policies and International Objectives

via Analysis
Wednesday, November 1, 1995

For reasons of nationalist sentiment and in hopes that it might help prevent People's Republic of China (PRC) military action, public opinion in Taiwan is strongly in favor of seeking U.N. membership. Responding to this sentiment, both major political parties, the ruling Kuomintang and the opposition Democratic Progressive Party (DPP), eagerly support the idea. But consensus ends there.

To promote its program of ultimate de jure separation from China, the DPP wants to apply as a new member called Taiwan even though it understands that new members can enter only with approval of the Security Council in which the PRC holds a veto. The government wants a General Assembly (GA) study committee formed in hopes that it will recommend amending GA resolution 2758, which expelled the Republic of China (ROC) in 1971.

The Taiwan government's approach is half right: any General Assembly can amend or revoke a resolution adopted by one of its predecessors. But even if a study committee were formed--and two previous assemblies have declined to create one--the PRC would have one of the seats and, because such committees operate on a consensus basis, would be able to block such a recommendation.

Given that there is no court that will decide the matter, the best, indeed only, way to amend resolution 2758 is by direct appeal to the assembly. This can be successful if the ROC can accumulate a working majority of its voting members. The author argues that this can be done by working through the specialized agencies within the U.N. constellation to demonstrate to Third World countries the valuable contributions Taiwan can make to their hopes for development and thus enlist their support.

Books

The Kazakhs: Second Edition

by Martha Brill Olcottvia Hoover Institution Press
Friday, July 7, 1995

The major events that shaped the present day Islamic nation of Kazakhstan.

Has China Lost Its Way?: Getting Stuck in Transition

via Analysis
Saturday, July 1, 1995

If China is to become an economic superpower in the next century, financial markets will be essential to arbitrage risk. Such markets may fail to develop because of uncertainty over the role of government. Efficient financial markets will require that the Chinese Communist Party reduce its political leverage over economic decisions and decision makers.

Not every newly industrializing country has well-functioning liquid financial markets in which investors can diversify their risks. Nor do all developing countries have efficient legal systems in which a broad range of property rights can be enforced. China, for example, has experienced considerable growth without either liquid financial markets or an efficient legal system by using intermediaries--officeholders who construct broad exchange networks that are based on relationships rather than on formal institutions. The reputation of individual power brokers and the strength of their connection to party power centers provide the system's coherence. The capital requirements for future growth, however, may surpass the capability of these intermediaries, putting the system under severe strain. To overcome this strain, alternative methods of contracting agency relations that will require considerable elaboration of the legal system are needed. A rule- compliant, constitutionally grounded society and economy must be established so that contracts can be maintained independent of the personal authority of power holders. The danger of not acting is a liquidity crisis, intensified by the absence of institutions to reduce risks.

China's Transition to Markets-Market Preserving Federalism, Chinese Style

by Barry R. Weingastvia Analysis
Wednesday, February 1, 1995

This essay studies the relationship between decentralization and the success of economic reform in China. It begins with a theory about the relationship between the types of decentralization and economic performance. We argue that a particular form of decentralization, called market-preserving federlism, Chinese style, provides a critical component of the political foundations for market success in China.

After discussing the evolution of federalism, Chinese style, during the first fifteen years of reform (1979-1993), we turn to the political foundation of economic reform. We argue that economic success hinges in part on an important aspect of decentralization, notably, that it provides for the political security of the reforms. By creating alternative centers of power at local levels, decentralization established forces that could help resist attempts by the central government to compromise the reforms.

China's form of decentralization has served the critical purpose of creating markets at time when political resistance to economic reform remained strong and when the durability of the reforms was important. Nonetheless, federalism, Chinese style, remains incomplete, accounting for some of the anomalies surrounding China's success. It lacks some national public goods such as enforcement of a common market and a unified monetary system, and the system needs to be institutionalized via a set of rules underpinning the market. We also observed that aspects of the problems facing modern China are not unique but have historical precedents in the economic development of the West. To this end, we highlight some important parallels between the economic and political problems facing the early United States under the Articles of Confederation (1781-1787) and those of modern China.

Books

One Korea?: Challenges and Prospects for Reunification

via Hoover Institution Press
Monday, August 1, 1994

A distinguished panel of scholars from around the world convened at the Hoover Institution in June 1993 to assess prospects for a reunited Korea. Scenarios for reunification identified at that conference are presented in this volume.

Books

Two Societies in Opposition: The Republic of China and the People's Republic of China after 40 years

via Hoover Institution Press
Friday, March 1, 1991

The essays in this book employ a multidisciplinary approach to systematically compare the People's Republic of China and the Republic of China on Taiwan.

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