There is an interesting – if unofficial – translation here of Professor Xiang Songzuo of Renmin University’s School of Finance, and former chief economist of China’s Agriculture Bank, December lecture.
He starts by saying that China wants private enterprise to flourish but the Politburo seeems to debate rather too often whether private property should be ‘eliminated’. He points out that this is, naturally, hardly conducive to private sector confidence:
At the symposium on the private sector, General Secretary Xi Jinping talked about six issues. Among them I am most concerned about the sixth: the protection of personal safety and property. Think about it. In a country with robust rule of law, where everyone is equal before the law, shouldn’t these basic rights be properly guaranteed for everyone, entrepreneurs and commoners alike?
When he goes on to suggest that what everyone (including the government) is seeking stability, most people in the West would heartily agree with both suggestions. He states that 75% of the Chinese economy is the service sector (which I found surprising) but that is probably connected to the large number of loans which are borrowed for, but not used for company purposes, and instead used for financial speculation. And even state companies are, it appears, allowed to collapse, having used their own loans for speculative finance, leaving large debts behind. He continues:
The problems that private business actually faces are not difficulties in financing…..They are afraid of unstable policy and the government not keeping its word.
The leader of the State Council said it clearly in a meeting of the Standing Committee: in China, the government is what can be least trusted. Therefore, in order to solve the debt problem, first, the government has to pay back debts it owes businesses, the state-owned enterprises have to pay back debts they owe private enterprises, and large private enterprises have to pay back debts they owe smaller ones.
For the Chinese economy to continue growing in a truly stable fashion, and extricate itself from its present quagmire, it must implement the following three essential reforms: tax system, reform in the political structure, and reform in state governance.
I’m surprised that the problems for the Chinese are, at heart, so inordinately Western. As if to prove it, even Coca-Cola has managed to deceive the Chinese into drinking their empty calories and thus to create obesity – whilst encouraging the normal and useless fix of physical activity to counteract their own marketing.
Mind you, when a country based itself on its ability to export it is not surprising that when that main export market has suffered a financial crisis, the exports take a big hit. Globalisation does indeed mean, that we are, for better or worse, all in it together.
China’s problems are probably more easily fixed than our own in one respect – the Chinese government seems to be more aware (or is that less protective of the view?) that money is for government purpose.
Where they have problems is that they think that the rule of law is also for government purpose.
Indeed the current UK government exhibits all of the same problems – except that the rule of law has not yet been entirely undermined.
Unless we want a Government controlling us, Chinese style, the rule of law is the only thing saving us from chaos.
China’s lessons are, it seems, not for China alone.