StatGuy2000 said:
I don't want to drag this discussion any further off topic, but is it really true that China is more friendly to risk taking and entrepreneurship than the US as of this moment (perhaps the fact that you live in Hong Kong may colour your outlook on this)?
Of course, being overseas creates a selection effect.
Also Hong Kong does color my outlook a lot, because PRC is learning a lot from Hong Kong. In Hong Kong, the real power is held by a very small number of families that live on the Peak, and for that most part the politicians are just there for entertainment. Hong Kong has very strong free speech, but a lot of that is because holding a demonstration just let's people vent anger without really changing the system.
From what I read, and from reports of people I know who traveled to China, much of the economic growth up until recently has been drive by state-owned enterprises (many of whom squeeze out small-scale entrepreneurs) or enterprises which are technically "private" but have significant degree of control and direction from the state or the Communist party (which are more or less synonymous). This includes the many business opportunities you point out that exist in China at the present moment.
OK. Government pumps massive amounts of money into state-owned enterprises and infrastructure projects, but what happens is that money "trickles down" to small scale private enterprises. For example, government orders that a high speed railway is built, and puts massive amounts of money into that. OK you just have a bunch of construction workers that are hungry. At that point, you have people setting up food carts and cheap restaurants. Once the construction workers go home, you have lots of service industries.
If you want start a high technology business, you *will* have to make some sort of deal with the government. You find some son or daughter of some connected official and put them on your board or give them some job doing whatever. But once you make the deal, then at that point the system is interested in having your business succeed, because if you don't make money, the son or daughter of the connected official doesn't make money.
The other thing is that what ends up happening turns out to be rational. Your business has some connected employees, but every other business does too, so who wins turns out to be because of business reasons. The other thing is that there is a "market" for princelings. You will need a princeling in your company, but it turns out that some princelings actually have good skills, so if it's a choice between hiring an idiot princeling and one with brains, you hire the one with brains. Curiously, US universities play a part in this. If you have a choice between hiring a princeling with a Harvard MBA, and one without. You hire the one with the MBA since it means that Harvard has "certified" that they person isn't an idiot.
And the money is there.
It's very odd. The state-owned enterprises don't squeeze out small-scale entrepreneurs. They squeeze out large-scale entrepreneurs. Ironically, by squeezing out large-scale entrepreneurs, they make life easier for small-scale entrepreneurs.
Same thing with the Internet companies you highlight such as Baidu. Of course, all of this could change.
In China, the Communist Party runs everything. However, the Communist Party has figured out that without entrepreneurs, they are going to end up like the CPSU. So as long as you don't challenge the party and "pay your taxes" (both official and unofficial), they want your business to succeed. It's actually funny to hear about a "corruption negotiation" because it really is a negotiation. There are lots of corrupt officials in China, but the corruption is "pro-business" because if they demand too much, and your business goes under, they get nothing.
Also, I think that the system is pretty stable. I can imagine a situation in which the Communist Party gets "overthrown" but what will eventually happen is that people just change their name cards from "Communist Party" to "New Democratic Communists-are-evil Party" and things will go on as before.
This matters for science and high technology, because the system is moving past dim-sum carts and into solar panels. What depresses me is stuff like the Solyndra situation. The DOE had a grant program for renewable energy, but it got killed because of allegations of corruption. In China, you have payoffs and "corruption" that is 1000x times worse than anything in the US, but in the end solar panel factories get built, and China is starting to corner the market there. Same for high speed railroads. Yes it might be a bad thing that large amounts of construction funds go into official pockets, but in the end the railroad got built.