China needs to fo­cus on so­cial wel­fare

Global Times US Edition - - ASIANREVIE­W -

The Us-launched trade war against China has moved to the realm of sci­ence, tech­nol­ogy, fi­nance, and many other in­dus­tries. The Trump ad­min­is­tra­tion’s in­ten­tion to de­cou­ple from China has been in­creas­ingly ob­vi­ous.

As a ris­ing in­dus­trial power, China has al­ready oc­cu­pied vi­tal parts of the global in­dus­trial chain. The ten­dency of the US, the world’s largest con­sumer mar­ket, to de­cou­ple from China will cer­tainly have a mas­sive im­pact on China’s de­vel­op­ment.

Many Chi­nese schol­ars be­lieve that the key to China’s re­sis­tance to the US de­cou­pling lies in fur­ther re­form and open­ing-up. Through re­form and open­ing-up, China will be able to in­ject vi­tal­ity in its mar­ket, in­no­vate bet­ter, and de­velop closer re­la­tions with the rest of the world.

China is on the right path. But to move in this di­rec­tion, it must fo­cus on its so­cial wel­fare sys­tem.

Ja­pan’s econ­omy was hurt by US crack­down in the mid1980s. Whether or not the “lost decade” was caused by the Plaza Ac­cord in 1985, the Ja­panese econ­omy took a bad beat­ing.

In this his­tor­i­cal con­text,

Ja­pan’s eco­nomic de­vel­op­ment slowed down sharply. But no large-scale or con­tin­ued so­cial un­rest was seen. Nev­er­the­less, so­cial in­sta­bil­ity caused by eco­nomic down­turn is com­mon­place in many de­vel­op­ing coun­tries.

The so­cial wel­fare sys­tem that Ja­pan built since the 1960s helped keep so­cial un­rest at bay. The sys­tem not only sta­bi­lized Ja­panese so­ci­ety, but also helped com­pa­nies pros­per, en­abling them to be­come world lead­ers in prod­uct de­vel­op­ment and in­no­va­tion.

At the be­gin­ning of the “lost decade,” Ja­pan adopted a new eco­nomic five-year plan from 1988 to 1992, and be­gan to build an af­flu­ent liv­ing en­vi­ron­ment. The coun­try also op­ti­mized its dis­tri­bu­tion sys­tem to make it fair, and com­pleted the shift to a do­mes­tic de­mand­driven econ­omy. In the 1980s, Ja­pan’s so­cial se­cu­rity in­vest­ment dou­bled, reach­ing nearly 70 tril­lion yen from only 30 tril­lion.

The in­dus­trial giant’s com­pet­i­tive­ness dur­ing this pe­riod stemmed not only from scaledup in­vest­ment in en­ter­prises and train­ing man­power, but also from the coun­try’s sta­ble busi­ness and so­cial struc­ture, all of which are in­sep­a­ra­ble from Ja­pan’s so­cial wel­fare sys­tem. The cur­rent ri­valry be­tween China and the US is typ­i­cal of in­tense com­pe­ti­tion among ma­jor pow­ers. It is com­pe­ti­tion over sil­i­con chips, tal­ent and even dif­fer­ent po­lit­i­cal and so­cial sys­tems. The spat be­tween the eco­nomic giants shows how dif­fer­ent their sys­tems are.

In his ar­ti­cle “For­get China – it’s Amer­ica’s own eco­nomic sys­tem that’s bro­ken,” pub­lished in The Guardian on June 23, for­mer US sec­re­tary of la­bor Robert Re­ich noted that “The two sys­tems are fun­da­men­tally dif­fer­ent. At the core of the Amer­i­can sys­tem are 500 giant com­pa­nies head­quar­tered in the US but mak­ing, buy­ing and sell­ing things all over the world… At the core of China’s econ­omy, by con­trast, are state-owned com­pa­nies that bor­row from state banks at ar­ti­fi­cially low rates. These state firms bal­ance the ups and downs of the econ­omy, spend­ing more when pri­vate com­pa­nies are re­luc­tant to do so.” He also said “The sim­ple fact is Amer­i­cans can­not thrive within a sys­tem run largely by big Amer­i­can cor­po­ra­tions, or­ga­nized to boost their share prices but not boost Amer­i­cans.”

The piece ar­tic­u­lated the key to China-us com­pe­ti­tion – which sys­tem can bet­ter pro­mote the gen­eral well­be­ing of its peo­ple.

In re­cent years, the Chi­nese gov­ern­ment has been com­mit­ted to im­prov­ing the so­cial se­cu­rity sys­tem, em­ploy­ment train­ing sys­tem, and ur­ban and ru­ral liv­ing en­vi­ron­ment. The poverty al­le­vi­a­tion pro­gram across the coun­try has turned out to be fruit­ful, which demon­strates China’s in­sti­tu­tional ef­fi­ciency.

Lift­ing more peo­ple out of poverty and mak­ing sure they have at least min­i­mum so­cial se­cu­rity ben­e­fits, can af­ford to see a doc­tor, do not need to spend too much of their sav­ings on their chil­dren’s ed­u­ca­tion, and have an apart­ment to live… may seem not as im­por­tant as de­vel­op­ing high­tech prod­ucts such as sil­i­cone chips. But these fac­tors can pre­cisely de­ter­mine the longevity of a coun­try’s eco­nomic and sci­en­tific strength as well as its re­silience in the face of ex­ter­nal shocks. The au­thor is a se­nior edi­tor with Peo­ple’s Daily, and cur­rently a se­nior fel­low with the Chongyang In­sti­tute for Fi­nan­cial Stud­ies at Ren­min Univer­sity of China. ding­[email protected]­al­ cn. Fol­low him on Twitter @ ding­gangchina

Il­lus­tra­tion: Liu RUI/GT

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