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Betting on China: Chinese Stocks, American Stock Markets, and the Wagers on a New Dynamic in Global Capitalism by Robert W. Koepp

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Chapter 7

Continuing the Bet

Accountability and Adaptability

The Tartar conquerors did not change the manners of the conquered nation; on the other hand, they protected and encouraged all the arts established in China, and adopted their laws: an extraordinary instance of the natural superiority which reason and genius have over blind force and barbarism.

—Voltaire1

Evolving Accountability

The situation of the United States pressing its case to allow for auditor inspections in foreign territories is not without historical irony. Nor is, more broadly, Chinese resistance to foreign pressure to conform with Western norms.

The United States once was—like China today—a high-growth, developing economy. From the late nineteenth to early twentieth century, low-paid, hardworking American laborers helped the United States build up a world-leading manufacturing base. America accomplished this largely at the expense of the industrial power of the world’s dominant economy of the era, the United Kingdom. By 1914, American factories were cranking out 36 percent of global manufacturing output, roughly the same share that the United Kingdom had occupied in the 1870s. Over those years that United States ascended, the UK’s industrial output shrank to less than half its previous level.2

As the UK’s industrial base eroded, the country increased its capacity for more advanced economic activities such as financial services—a situation roughly analogous to the United States of 100 years later. Going into ...

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