Valentin Schmid China Uncovered
Valentin SchmidValentin Schmid is not a man to mince his words.
During that time Valentin has frequently been impressed by the ingenuity of the Chinese people he has met. He admires their hard-working approach to life.
What he does not believe in, however, is the “backward economic model” he says the Communist Party of China has placed on the country. And he’s not afraid to say so.
“Chinese growth is no miracle,” Valentin told an Asia Scotland Institute audience at the University of Edinburgh Business School. “The country might hold the record for the fatest GDP-growth over the last three decades or so, coming from a very low base, but a miracle always means that something cannot be explained by any type of normal theories.
“This can be explained: after 40 years of Communist rule the country was barren and crisis-stricken after the Cultural Revolution of the 1970s.
“It had extremely cheap and abundant land and labour in the early Eighties, favourable demographics, and it could potentially reap the benefit of urbanisation if there was technological improvement – which it then did thanks to Deng Xiaoping, who opened up the economy and instituted reforms that set the country off to its massive growth path, as we have seen.”
However, Valentin is convinced that China, now arguably the world’s largest economy, is about to hit the buffers.
He believes China will face a financial crisis within the next three to five years, the result – he says – of the country’s corrupt system of one-party rule and state-controlled enterprise and banking.
Political upheaval may follow, perhaps heralding the fall of the Communist Party. And Valentin thinks it will be the Chinese people who will have to pay the price for this collapse.
Xi Jinping, president of ChinaDuring a fascinating 30-minute presentation, Valentin backed up his view with some startling facts and figures. He had strong words about China’s debt levels. He was uncompromising about the effects of corruption and cronyism. (Scroll down to watch a video of Valentin’s presentation.)
“The whole economy is basically structurally inefficient,” Valentin said. “I blame it on the Communists who have a very bad record in innovation… because Communist ideology is penalising people for taking risks, and innovating certainly means taking risks.
“And the education system is still very backward, which is why most of the smartest people and the richest people still want to come to the United States to be educated – and then they want to stay there.”
Yet Valentin remains hopeful. He believes that a financial crisis could also be a catalyst for positive change, bringing to an end one-party rule and ushering in a society where ordinary Chinese people are rewarded for hard work and risk-taking.
“I hope Xi Jinping [president of China] will continue his reforms not just to strengthen his own foothold on power but to actually transition China to a democratic system and just reform everything,” Valentin concluded.
“Ideally they’d do everything in one fell swoop. When they have the crisis [they could] reform the political system, reform the financial system, launch a new currency, and then basically start from scratch.
“Obviously that’s talking best case scenario. And it’s certainly possible.”
Valentin is a graduate of the University of Edinburgh. You can follow him on Twitter @vxschmid
The Epoch Times is an independent, global news source that has been publishing on China since 2000. Follow @EpochTimes
Our thanks go to the University of Edinburgh Business School for kindly hosting this ASI event