The recent launch of a Shanghai free-trade zone and the development of Shenzhen's Qianhai special economic zone to facilitate freer trading of the yuan and greater convertibility of the currency for investment purposes serve as reminders of what the US can learn from China.
"Industrial policy" is anathema to some Americans, but all it really means is putting some focused thinking and long-term planning into solving the country's most intractable challenges, particularly regarding manufacturing. As long ago as 1791, Alexander Hamilton argued in favour of such thinking in his Report on the Subject of Manufactures.
While US lawmakers fret over how much to allow China to invest in the US, they might consider how to adopt at least two of China's more successful long-term policies.
First, special economic zones. While crumbling Detroit slides into bankruptcy, possibly to be followed by other American cities, US officials would do well to review the spectacular success of China's first special economic zone, Shenzhen. A special economic zone for Detroit could bring much needed investment and jobs back to the Motor City. That prescription might also help the New York City boroughs of the Bronx and Brooklyn, as well as districts in New Orleans, the south side of Chicago and South Central Los Angeles.
Second, strategic infrastructure investments. China has invested in roads, bridges, high-speed rail lines and even whole communities built from scratch. While some analysts argue that it has overinvested in such projects, the fact is that the US has not undertaken most of the infrastructure investments promised by President Barack Obama that the country needs for economic growth.
For example, it must improve port facilities to accommodate new supertankers that will begin to pass through the Panama Canal once its expansion is completed in 2014.
As Republicans and Democrats lock horns in Congress over spending ceilings and budget deficits, health care, energy policy, gun control and immigration reform, not to mention the shutdown of the entire US government, the main lesson they should learn from China is the need to develop a multi-year strategy that takes into account the country's infrastructure and employment needs in much the same way as China's five-year plans, which provide a comprehensive outline of where the country needs to go in its economic and social development.
Such planning is not incompatible with liberal market capitalism. For the sake of increasing the US employment rate, boosting gross domestic product and rebuilding its economy, the US should not ignore these valuable lessons.
Robert T. Grieves is chairman and CEO of Hamilton Advisors Limited