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Transcript: China’s biggest barrier to development? Trust

An employee yawns as he works at a garment factory in Humen township, Guangdong province.


KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to Timothy Devinney from Leeds University.

We see China has had enormous growth over the last 10 to 20 years. You have spent a lot of time there. Are there limits to growth in terms of China's future?

TIMOTHY DEVINNEY – I think any of us who have, let's say, expended long periods of time and energy on China have seen what is probably a really profound millennial type of event. The level of developmental change, the level of economic growth, the level of even aspects of social change in China over the last 25 years have been pretty astounding. It's actually a bit of a privilege to live [there]; it would be like living in the United States during the real changes in the U.S.

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But there are certain real problems that the Chinese have, which go beyond even the limits of institutional development and whether it is a democracy, and other types of things like that. China, for example, has a heavily aging population, it has a heavily skewed distribution of population, and it has a very fragile tax base.

One of the real big problems in China are the transfers amongst areas – many of the cities and townships in China are effectively bankrupt, or will be near bankrupt, because they don't have a tax base to develop. There are real concerns about how China transitions from a fundamentally manufacturing economy, which is not one which is inconsistent with the Communist government's viewpoints of the distinction between economic activity and political activity.

As soon as you move into areas where you start looking at the value that comes from information-based economies, that comes from not the exploitation of excess labour, but the exploitation of ingenuity and brain power, this requires a very big change fundamentally in how you approach people in your society. If you restrict information, you restrict economic development. If you restrict individuals' ability to socially experiment, you restrict innovation.

So the big limits that are there are not many of the ones around institutional development because the Chinese have been pretty savvy about being able to change their institutions. I think that the next big change will be whether at some point they will be able to, let's say, trust their citizens and trust the individuals who make up the economy to make very independent decisions which are more decisions than just getting rich.

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