The U.S. and China: Global Economic Twins

Which country is worried about anemic innovation, slow tech upgrades, social tensions and low capital efficiency?

Where has the gap between rich and poor widened sharply, with the result that “the mood became somber and subdued in 2010,” as “a lack of innovation and creation” are proving to be “the economy’s Achilles heel”?

And where, while income distribution has been skewed in favor of the rich for too long, has the government failed to provide decent public goods?

And which country suffers from the collusion between government officials and businesspeople to the point that the public resents it — and labels it “capitalism of the rich and powerful”?

And where are the prospects for real reform hollowed out by the political reality that the “beneficiaries of specific reform policies have morphed into vested interests, which are fighting hard to protect what they have”?

That country’s big test, for 2011 and beyond, will be “breaking this unholy alliance.” Otherwise, the concept of meritocracy — a prerequisite for good governance — “has been eroded by a political culture of sycophancy and cynicism.”

And yes, while that country “has generated admiration and envy” around the globe, it now has to contend with “suspicion and outright hostility.”

If you have thought all along that these prescient words were describing the challenges the United States faces as it enters 2011, you would be close, but not quite on target.

The giveaway as to why such an assumption is wrong is the reference to “social tensions.” Americans, by and large, do not like to express such tensions.

A further giveaway could have been that, on a hopeful note, the author of the analysis excerpted above includes a reference to his country’s “strong fiscal position” in the full-length version of his article, arguing that gave it “a window of opportunity” to successfully implement much-needed reforms.

At this point, you would probably not be surprised to learn that all the points above were made by a Chinese author and concerned China’s near- and medium-term challenges.

What should be a real surprise, however, are four factors: First, the article, entitled “A Different Road Forward,” was written by Yu Yongding, not just one of China’s top economic thinkers, but also a former member of the Monetary Policy Committee of the People’s Bank of China, the country’s central bank.

Second, the article appeared in late 2010 in China Daily, the government-run English-language newspaper.

Given that both the timing and venue of publication are not really left to chance in China’s official media, it is an indication of the seriousness of that debate in China — all the more so as 2011 marks the beginning of a process of pivotal changes in China’s leadership, with a new generation of leaders coming to the fore.

Third, the Chinese leadership, widely stereotyped in the West as eager to sweep difficult issues under the rug, is evidently letting this debate rise up.

Now, there are those who are convinced this is done exclusively for the cynical purpose of demonstrating that there is more than a semblance of debate in China.

That is a hard case to make, however. Prime Minister Wen Jiabao has expressed some of those very same concerns about the need to link economic development with political reform, most significantly during his speech in Shenzhen in August 2010.

Fourth, from a global perspective, all of this is unmitigated good news. After all, the world’s two most significant nations are, astonishingly, both confronted with the same issues of economic fairness and political transparency and accountability.

While the two nations are at very different levels of economic development, their implicit competition over achieving more economic balance is a worthy contest to have — much better and more constructive than, say, competing militarily.

As this battle unfolds, it won’t just be experts in comparative politics who will get kicks out of analyzing the unforeseen parallels and cross-ideological coalitions that will undoubtedly emerge.

In short, it’s a brave new world we’re entering in 2011. And the visit of China’s President Hu Jintao to Washington this week could not have been timed more auspiciously.

It will feature two very elegantly groomed men, both very focused on portraying a youthful image, side by side. While one, Obama, is graying, Hu is said to be keen on dyeing his hair to cover up the gray.

Such comparisons aside, Hu is widely viewed as a smooth-looking enforcer of Chinese conservatism, while Obama is increasingly portrayed as an eager adapter of positions embraced by the well-to-do.

With the nerves of much of their respective populations lying bare, one thing is for sure: Political labels will not count for much. Hard, real-life choices need to be made.

The only thing confounding many non-Chinese, and non-American, observers of this dual bataille royale is that the ultimate outcome currently seems as unpredictable in one country as it is in the other.

Truth be told, there is a lingering suspicion in much of Europe and Latin America that, for all the Byzantine infighting to come, the outcome may be more progressive in China than it will be in the United States.

If that happens, then the United States will indeed take “a different road forward.”