What Google tells us about China

Google's showdown with the Chinese government cannot help but trouble those who care about freedom of information in the world's most populous nation. But it should calm the nerves of those who dread the day that China rules the world. No matter how the Google episode ends, it strongly suggests that that day is further away than many now believe.

I refer, of course, to those in the West who have grown used to hearing China's footsteps getting louder and louder behind them. Given China's huge population, the consistently bionic strength of its economic growth, and its government's bare-knuckled approach to international trade and commerce, it can seem only a matter of time before the Middle Kingdom leaves Middle America in the dust.

By and large, Chinese analysts know it's not so simple. Free, oppressed, or somewhere in between, Chinese dominance would still require bringing the whole of its labor force into roughly the same century, which means pulling a good hundred million people out of extreme poverty. In addition, China would have to build—which is to say, fund—an enormous, heretofore-negligible social-safety net, without which it cannot hope to increase its domestic-consumption rate, and vastly expand its public education system. It would still have a rapidly growing elder population supported by a rapidly shrinking labor force—and no apparent impulse to forestall this demographic crisis with immigration.

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All that is the easy part, because at least it is clear. What the Google scenario really highlights is something as intangible as it is undeniable: China's age-old push-and-pull between openness and insularity. As if to mock the description of Chinese rule as “authoritarian,” this tug often finds expression in jousting between branches and levels of government, which sometimes seem to have no awareness of each other's existence. For foreigners building businesses in China, it is not unusual to be feted by the government's economic-development boosters one minute, and harassed by the immigration or security authorities the next. Corruption, which takes myriad forms, is both increasingly forbidden and persistently required. It's no coincidence that the ranks of the Chinese pushing hardest for the rule of law include small-business owners and entrepreneurs, who have bitter, first-hand experience of the government's ability to annul contracts, confiscate land, and impose arbitrary penalties.

Right or wrong, many businesses will put up with an awful lot in the way of dubious atmospherics if there is a fortune to be made—and in a country of 1.3 billion, there are fortunes just waiting to be conjured. But what size and style of fortune?

To put it crudely, when China was dirt poor and isolated, it did well to position itself as a cheap place for companies to make cheap stuff, provided they absorbed any and all official absurdities. But as China has risen, so have the stakes: salaries, living standards, and the expectations of workers and employers alike. It is getting more and more expensive to do anything in China—and that's before the yuan is revalued upward, as it someday will have to be.

This makes sense. It is to China's great credit that over the years, it has evolved from simply the land of low-cost production to the land of the lucrative market. A growing number of countries can produce goods and services as cheaply, or more so, than China. But no place on earth offers more potential consumers.

For the Chinese, then, the game is to grow an educated consumer class that can compete for the world's best jobs and consume the world's best products.

Does China want to do that?

Yes.

Is China willing to risk the reforms necessary to do that?

Clearly, Google has its doubts.