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BIZCHINA / Weekly Roundup

How Chinese bumblebee ignores economic laws

By Khalid Malik (China Daily)
Updated: 2007-07-04 15:45

To elaborate on the standard explanation of development: Think of the
shift of surplus labor out of agriculture to high productivity industrial
sectors. That large pool of labor keeps wages low and returns high on
capital and investments. And that all works out somehow to propel growth.

But many other countries have similar conditions, so why don't they grow
equally fast?

My view is that development is fundamentally about transformation. There
are at least four key elements which go very far in explaining why China
has done well.

First, long-term commitment to reform and development. Quite remarkable.
When Deng Xiaoping launched his reforms in the late 70s and early 80s, he
foresaw a 25 to 50 year period of reform. That's a remarkably long
commitment.

Most countries' governments are for four to five years. Along with the
political cycles come cycles in economic markets.

This holds true for China. Rather than having a big detailed movement,
China's approach was almost like a philosophy, a strategy. The government
was aiming at a broad direction. Means were flexible and could keep being
adjusted along the way.

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Second, pragmatism. If something was not working, China's approach was to
fix it and change it. No policy since the late 70s has been carried out
in China in one go. There has always been piloting and testing, following
Deng Xiaoping's famous phrase to feel the stones as you cross the stream.
That approach is quite unique.

Third, strong institutions changing to meet reform needs. Whenever there
was a reform agenda, there were clear adjustments of institutions to
deliver the agenda.

Fourth, the public good. There was strong growth in creating human
capital -- education, cohesion bringing society together and a very
deliberate investment in public infrastructure to open markets. In the
late 70s and early 80s the public good became very important and remains
very important.

Now for the role of ownership. What China has done well is to
fundamentally say to every-one that Chinese development is to be led by
Chinese leaders and Chinese institutions; and to believe that they may
not be perfect, but they're ours. They're our objectives, our policies.
And maybe they did well because they didn't listen to many outside the
country. I'm talking about strategy issues as opposed to technical
content.

A State elite worked to define strategies and priorities. This elite was
deeply committed to improving people's lives. It had a development
vision. It was not a grabbing hand. And they used the pilot project
approach of scaling up.

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