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This post is part of Blinkist's books-in-blinks series. The series provides key messages from books that you might not have time to read in their entirety.
Here are the key messages from Dealing With China by Former US Treasury Secretary Henry M. Paulson, Jr, which Mark Zuckerberg chose in 2015 as part of his Year in Books.
In explaining his choice, he said:
"Over the last 35 years, China has experienced one of the greatest economic and social transformations in human history. Hundreds of millions of people have moved out of poverty. By many measures, China has done more to lift people out of poverty than the whole rest of the world combined.
I've been personally interested as a student of Chinese culture, history and language. I'm looking forward to reading Paulson's perspective on what China's rise means for the world."
Who should read this book:
- Anyone interested in the rise of China on the international stage
- Politics buffs keen to learn more about US foreign policy
What is it about?
Dealing With China (2015) reveals China’s journey to becoming the economic superpower it is today.
These blinks explain the advantages and disadvantages of this rapid growth, and offer insights into how the US and China should work together to face today’s global challenges.
Who is the author?
Henry M. Paulson, Jr. is a former United States Secretary of the Treasury.
He brings many years of experience in dealing with China, first as CEO of investment bank Goldman Sachs and later as Secretary of the Treasury during the presidency of George W. Bush.
He is Chairman of the Paulson Institute, an independent think tank that promotes sustainable growth in the United States and China.
SEE ALSO: China is making a big bet on 'soft power'
What’s in it for me? Find out how China became an economic powerhouse, and what that means for the US.
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If you need a reminder of how quickly China has grown, consider this: When it started its economic rise, the internet was in its dial-up days. Yet in just over 30 years, China has modernized its economic sector and has become the second-largest economy in the world.
How did this happen? What does it mean for the rest of the world?
These blinks explain the steps China took to transform a mostly centralized, communist economy; how the US changed its communication strategy toward China; why we can’t turn a blind eye to China’s internal problems; and where China’s meteoric rise encountered some speedbumps.
In these blinks, you’ll learn:
-why Chinese universities couldn’t produce good business managers;
-how California’s coastline is directly linked to China; and
-what China did to make their banks and oil companies more competitive in global markets.
China’s unrivalled economic growth is the result of sweeping reforms.
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If you’d have speculated in the late 1970s that China’s economy would grow to be one of the largest in the world, few people would have believed you. Yet today, it’s the reality. So what’s the secret behind China’s unexpected and unparalleled growth?
It all started with the introduction of western economic ideas. After Chairman Mao Zedong’s death in 1976, Deng Xiaoping came to power and, over the following two years, developed several new economic initiatives. The purpose of these initiatives? To open China up to the global marketplace.
The results of these initiatives were extraordinary. Within a few years, hundreds of millions of Chinese had already been lifted out of poverty. By the early 1980s, China’s GDP was increasing by 10% per year, on average.
At the core of this explosion in economic activity was one particular policy: providing state-owned enterprises, or SOEs, with more authority. Although they were still required to meet planned quotas set by the central government, SOEs were now allowed to sell their goods and services on the open market with flexible pricing.
Another crucial aspect of Xiaoping’s economic plan was the creation of special economic zones (SEZs). These served to rekindle the dormant Chinese entrepreneurial spirit by granting foreign and Chinese companies lower tax rates, loosening import and export restrictions and providing easier access to foreign investment. Lenovo and the beverage company Hangzhou Wahaha Group were both founded in this period.
SEZs worked as economic laboratories where China could experiment with economic practices already common in the west, such as competition for construction contracts or incentive pay for workers.
Prior to these initiatives, bright and business-minded people could rarely put their abilities to good use in the jobs they were handed. But the reforms led to the creation of more companies, as it had become possible to start your own. Soon young entrepreneurs were popping up like mushrooms!
Restructuring the telecom industry was a critical step in the modernization of China’s economy.
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While these initiatives encouraged business in China, influential economic events around the world inspired Chinese business people too. One such event was the massive deregulation and privatization spearheaded by Margaret Thatcher in England between 1985 and 1990.
Privatization in China proved to be a godsend for slacking state-owned companies, run by people with little knowledge of modern business practices and laden with debt by the mid 1990s. By selling shares of these companies to the public and international companies, capital was raised and SOEs were improved, because they had to adopt global accounting standards.
The first sector to undergo privatization was the telecom sector, led by the SOE China Telecom.
Between 1992 and 1996, China spent more than $35 billion on telecom infrastructure, which saw the number of people with a fixed telephone line skyrocket from 11.5 to 55 million. But the system was by no means economically efficient. By the latter half of the 1990s, infrastructure spending was depleting more capital than the national telecom company could generate on its own.
Using the 1996 privatization of Deutsche Telekom, which raised over $14 billion, as the blueprint, China Telecom’s privatization goal was to raise $2 billion. But the Chinese telecom industry was far more complicated than Germany’s – it took over 350 full time accountants to get an accurate grasp of the situation!
Nevertheless, when the company finally offered stocks to the public via an IPO in October 1997, it doubled expectations, raising over $4.2 billion. The successful privatization of China Telecom opened the door to competition in the Chinese telecom sector. By 2008, China had three large, competitive national carriers. In this way, the entire industry was privatized. Where a single telecom company had stood, there were now many that could compete against each other.
See the rest of the story at Business Insider
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