CK, As a foreigner living on the edge of China for many years now, in Hong Kong which is of it but not really, I'm kind of sick of it in terms of all the hoopla and rampant nationalism. But I respect what's happening and firmly believe that it's for real in terms of the economic path they're on (as I do for the broader Asian region as a whole). Of course there are imbalances and bubbles, and some will eventually blow up big as they do anywhere, so there will be bumps along the road, even craters at times maybe. While I have no love for the Communist Party, I have a lot of respect for the abilities of the leadership of the central government. They're quite savvy, methodical, keen to analyze what's happened elsewhere, and very fixed on their goals with a long view that governments elsewhere just aren't able to take.
There's no democracy of course, though economically that makes the country able to move forward a lot easier than say in India for instance. The trade-off for the people is prosperity and nationalism - as long as people feel they have a chance to prosper and that the Chinese are becoming a force to be reckoned with, then by and large there doesn't seem to be an urgency to have democracy. So I don't see the government nationalizing gold for instance as that's the kind of thing that would get the people riled up and upset the chase for prosperity. No, the government wants the people to do well, to build up a domestic consumption story and diversify away from the dependence on exports.
Where the threat is from the government is more towards foreign companies doing business there. It is still a highly managed economy with the state having its hands in a lot of industries. And while it obviously welcomes foreign participation, it's also quite clear that its goal is to build up domestic companies and expertise. It's been quite clever that way in terms encouraging joint ventures, transfer of knowledge, etc. So the danger to foreign companies isn't nationalization, but getting used then shunted aside, or outcompeted amid a playing field that might be stacked against you.
But generally speaking the challenge is more from the people themselves, in terms of the local entrepreneurs and a market place that wants to see domestic brands rise to the top. For instance, when Google announced that it might pull out of China, while some decried, albeit carefully, the setback to freedom of expression, others cheered the potential demise of a foreign player. The attitude being why should we have to use a foreign search engine and not have one of our at the top? After being down for so long, nationalism is very strong in China and the elixir that the Communist Party has cleverly tapped into, draping itself in the flag. So from a business perspective, it's an environment that is open but also hungry to bolster its own. In the end though, that describes a lot of countries really, if not all I suppose.
The biggest problem for China from a business perspective is corruption, particularly at the lower levels of government, and a very opaque legal system, which doesn't provide a solid framework. As for democracy, it will come eventually - but barring social upheaval, it will be on a very slow road. The current premier has said he didn't think it would happen for 25 years (and even then presumably just the first baby steps). And I read an interesting article about how they were studying places like Mexico, Egypt and Canada, for examples of "democracy" where one party managed to dominate elections over long periods of time. That's why the Communist Party has been quite clever in setting itself up as the party of economic progress and nationalist advancement, so that by the time a multiparty system comes, it ought to have a decided edge over new parties that will struggle to establish themselves across a large and regionally disparate country.
And good leaders help - I firmly believe that if you had open elections tomorrow, the current Premier, Wen Jiabao, would win in a landslide. He's very competent, has the touch for retail politics and is well liked. The test of all these things will be when the country and economy hits real bumps in the road, and a lot could go wrong, with social unrest not at all uncommon throughout the country all through these boom years, which could always spiral out of control. But the current leadership apparatus is quite savvy, much more so than in other communist parties that made the transition, and they may just be able to navigate those waters.
Anyway, that's my ramblings on China before going to bed. Hope this was of some interest.