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Leaders in Beijing will have a tougher job turning around China's economy than their American counterparts.self storage The US also remains a hub for talent.THE year just past saw the world economy stabilise, largely due to the recovery in varying strengths of some of its largest constituents - the United States, the European Union (EU) and Japan. These recoveries were more than sufficient to outweigh continued weakness in emerging markets, most notably the Bric economies of Brazil, Russia, India and China.In the US - the largest and most strongly recovering economy - the surprise was that the fiscal sequestration and government shutdown resulting from the political gridlock in Washington did not hurt growth more than it did.However, things look very different in China, the world's No. 2 economy. For 2013, China is set to record one of its slowest gross domestic product (GDP) growth rates in three decades.Indeed, from a business perspective, there is no question that Chinese President Xi Jinping has a far tougher job ahead of him than US President Barack Obama.China's reformsQUITE sensibly, the Chinese government is seeking to unwind a half-decade of aggressive monetary easing and its resulting inflation and misallocation of resources.The Chinese Communist Party's recently announced reforms show that the government recognises the severity of the challenges the economy faces. It proposes financial liberalisation and reform of land and population policies. But there will be no large-scale privatisation of the state-owned enterprises that have crowded out the private sector and led to poor investment decisions, high indebtedness, and massive excess capacity in industry and housing.Successful implementation of these reforms is by no means assured, given likely resistance from vested interests inside the party and among local government authorities, already feeling the sting of President Xi's parallel anti-corruption campaign. Slower growth and economic restructuring will also inflict pain on segments of an already restive populace prone to frequent spontaneous mass protests, and increasingly incensed by heavy pollution, widening inequality and other ills. This explains Mr Xi's simultaneous crackdown on Internet and other social activism while embarking on economic reforms.Good institutions matterCHINA'S difficulties and the rebound in the US reflect the importance of governance institutions (such as those covering political, legal, financial and commercial institutions) and of a vibrant private sector in propelling and sustaining economic growth. For all of the current political dysfunction in the US Congress, the separation of powers has produced a constitutionally strong executive branch and an independent Federal Reserve that have managed to keep economic recovery going, albeit below its potential.By contrast, decades of rapid GDP growth in China delayed the reforms necessary for efficient resource allocation and self-sustaining growth. At the same time, institutional resistance built up to the reforms now being attempted. Continued dependence on export markets to drive growth is less easy and desirable once wages rise and the currency trades more freely - as both should. The government accepts the need for rebalancing towards domestic demand and services, but this requires a financial, legal and social institutional infrastructure that is not yet in place.The US has institutions that, however imperfectly, underpin its dynamic private sector. They protect and promote a culture and practice of competition, entrepreneurship and innovation. Risks are taken by private capital, generally without burdening the public purse. Not surprisingly, according to an annual survey by the consultancy Interbrand, eight of the world's top-ten leading brands are American (No. 8 Samsung and No. 10 Toyota being the exceptions). Besides being valuable to their shareholders, leading brands such as Apple, Google, Coca-Cola, IBM, Microsoft, GE, McDonald's and Intel have changed how much of the world lives, works and consumes.Talent magnetUS INSTITUTIONS give the country an advantage in the global market for talent as well as capital.My own experi迷利倉nce of this is based on the narrow pool of high- achieving academic colleagues and MBAs of all nationalities, with whom I interact. My Chinese and Indian students (some of whom have landed in America via years of schooling and work in Singapore) believe that in the open and competitive US talent market, they can rise as far as their abilities and ambitions will take them.In America, they are unhindered by the need to "be from the right group" and "have the right connections" that often stand in the way of success in their home countries. The size and flexibility of the US job market also allows for occupational mobility, while the "rules of the game" in employment are considered fair.With respect to lifestyle, young Chinese and Indians appreciate "clean air, clean water, safe food", "lots of space", abundant and accessible nature, and an egalitarian social ethic. Those with or planning to have children mention the often maligned US public and higher education systems as an attraction, and value the greater choices available to children in terms of career and lifestyle.A Chinese professor colleague noted that "my (five-year-old) son thinks he wants to be an auto mechanic when he grows up. I don't mind so long as he is happy, because he can earn as much as or more than professionals, and will be respected and treated as an equal, which would not be the case in China".According to Pew Research's annual survey of global attitudes (37,653 respondents in 39 nations from March to May this year), the Chinese believe by a 46-30 percentage point margin (and Japanese by 67-20 margin) that the US is the world's leading economic power. Americans, on the other hand, believe by a 44-39 margin (contrary to the statistical reality) that China is the global leader.Would-be migrantsAS THE Chinese grow more affluent, almost every corner of the US - even the bankrupt city of Detroit - is flooded with inquiries from would-be migrants, students and investors from China. They are "voting with their feet" as well as their money, for "freedom" and security.One of my former students recently brought his family back to Michigan after five years in Shanghai, while he continues to work there, flying back and forth. Another with a young child passed up a big job offer in Shanghai for a mid-level one in a secondary interior city in the US.A third former student who accepted a big job in Beijing to be close to his parents sent me this message a few months ago: "Now my life has degenerated from my car in the US to a bicycle here, because of the traffic. The haze has grown thick these days and I have already braced myself with an N95 mask. Kind of miss the blue skies and maple leaves in Ann Arbor."More interestingly, my Chinese (and other Asian) students and former students these days seem more inclined than they were before the financial crisis and Great Recession to see the "American system" - including its institutions and business practices - as superior to what they observe and experience in their own countries.In China, as the economy matures, the rationality and necessity of moving towards a "Western", and specifically American, modus operandi is increasingly seen as inevitable and even desirable - even among members of the Communist Party.Some are in my class learning how to be good capitalists. Hence the palpable frustration of managers in China's private sector, both those working for Western multinationals and for local Chinese private companies. Government policies and institutions are increasingly seen as a fetter on private sector development and macro-economic growth.For all that China and the US have changed in the past several decades, their relative positions in the world economy and in global business have not altered much. In terms of economic performance, business results, and as a "model" to be emulated by others, the American version, despite its glaring imperfections, still reigns. And it is the US which will continue to be the main engine of growth for the world economy in the year ahead.stopinion@sph.com.sgThe writer is professor of strategy at the Stephen M. Ross School of Business, University of Michigan, in the US.迷你倉