Old dreams give way to new realities

Expectations are running high in China that the ongoing Third Plenum of the 18th Central Committee of the Communist Party of China, which commenced on Nov 9, will clear the decks for meaningful policy changes and further reforms.

There is no doubt that the Third Plenum will be an important milestone for the country. Chinese economists tend to say that the country’s reform, launched in 1978, has so far been an effort of “crossing the river by feeling the stones”. But now, they say, the reform has waded into a “deep water zone” and a new strategy has to be adopted.

What do they mean by “crossing the river by feeling the stones”? In practice, it means to tackle the easy tasks, or to pick the low-hanging fruit. The very first step of the reform, for example, seemed to dismantle the regimented communes and return to farming in small family plots, a practice that has existed for more than 2,000 years.

But now, as most rural adults have migrated to off-farm jobs in distant cities or local townships, the less efficient small family plots will have to be transferred to more farmers capable of operating sophisticated technology and managing large commercial farms. Where are the new farmers going to come from? Where can they find all the technical support and services? This is a difficult task and a major challenge for China.

The challenge exists not only in practice, but also on the level of theory and strategy.

Ever since the late 1970s, most of the global development models have been studied, if not experimented with, in China, ranging from workers’ self-management in former Yugoslavia under Josip Tito, to criticism of the so-called patriarchal state and its economic planning method from Hungary; from the “little dragons” and “little tigers” in East and Southeast Asia, to the technology and Internet-led rise in productivity in the United States.

In the meantime, many books by leading contemporary economists and management researchers were translated into Chinese and sold in their thousands, the authors ranging from Friedrich Hayek to Joseph Shumpeter, from Amartya Sen to Joseph Stiglitz, from Peter Drucker to Philip Kotler, plus many other distinguished people.

Views of major think tanks from the West, whatever their political agenda, also frequently appear in the Chinese press.

All the imported inspirations are useful but have their limits. China has to draw up a coherent strategy on its own, based on its unique experience. The expression “deep water zone” means the beginning of an end, that of easy examples to follow and easy models to refer to. It may also, as it were, be the beginning of something entirely new, or the time for China to start building its own model, which government think tank members often refer to as “topdown design”.

If the “top-down design” from the 2013 Third Plenum is seriously followed, it will, in due course, mature into China’s own model. Although it is still too early to know for sure all the features of the would-be Chinese model, top leaders have already talked of some anchor concepts.

There will be an unprecedented emphasis on sustainability. One only has to check Beijing’s smog levels to understand why. But sustainability means more than just cutting the industrial capacity that is tied to the unbearable emissions. The entire economy has to become based less on heavy industry and more on services.

There will be a focused effort to seek a balance between GDP growth and reform, between the central and local governments and between the government and the market. All government offices will have to learn to regulate together with the market, instead of regulating against the market.

There will be a heightened awareness of vested interests, especially those represented by large institutions, which may hold back market competition and fair distribution of opportunities.

These concepts, once put to work, will yield enormous benefits for China and the overseas investors and traders who are participants in the progress.