Onus is on leaders to find new paths

Updated: 2016-04-08 08:20

By Ed Zhang(China Daily Europe)

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What matters is not just political resolve, but also where opportunities for the most rapid change exist

Experienced China watchers have been right in saying that, since the turn of the year, the country won't see a business bust any time soon. The greatest challenge to Beijing has always been to choose, from a limited number of options, the right time to wage the right reform, so as to achieve the right result and pave the way for the right progress for the overall economy.

Data about the nation's performance in March are bearing out their forecast. In general, the impact of the business slowdown, and the social pain it is creating, has become less threatening.

Yes, there are places - most noticeably some northeastern cities - where life is worse for workers at state-owned enterprises where production lines are lying idle and rusty. But their number is relatively small in comparison with the massive number of workers (30 million by one count) laid off during the first round of SOE reform in the 1990s, when Zhu Rongji was China's economic czar.

Onus is on leaders to find new paths

The government coffers, especially at the central level, are much more full now than at that time. So long as the anti-corruption campaign can deter officials in the local and enterprise levels from putting it into their own pockets, the state has the money to arrange for a relatively less-painful relocation of the workers who lose their jobs.

In the meantime, in coastal and southern cities, business is growing, led by the services sector. The latest services purchasing manager's index is 52.2, up from 51.2 in March, which is an indicator of accelerating business activity in the weeks ahead.

The situation seems to be stabilizing to allow for more reforms. So, as some foreign observers argue, it's the political resolve that matters.

The message suggests that if more efforts and resources are used just to make SOEs and the large state-owned banks comfortable, then China is in danger of wasting precious time. But if more policies and measures are actually taken to level the ground for fair competition, and for the government to form partnerships with private investors, there will be better future growth.

This reflects a very good understanding of this country. But what matters is not just political resolve. It also depends on where opportunities for the most rapid change may exist. And again, economic geography is important.

In many northern provinces, where the local economy used to rely heavily on mining and heavy industry, only the starting-level opportunities are thinkable, namely the things the southern provinces did in the 1980s and '90s, such as allowing and duly protecting more small, private enterprises, starting from mom and pop shops and self-employment.

Even if they can do it, they can't add much to the national GDP.

And in all likelihood, doing that is difficult enough, considering the fact that those provinces have lost their most enterprising young people, turning them away to become migrant workers in the more accommodative cities.

At the same time, elsewhere, most cities can just keep building the same industry and follow the trend started by others. They don't have the ability to blaze the trail and serve as new examples. On the leadership level, it is a competence issue. And on the market level, it is a matter of how to differentiate from a region's own past and other regions' beaten path.

In how many cities can investors find a leadership pursuing different strategies to the ones that have bored overseas investors for the past decade, like those aimed at turning practically every Chinese city into an international business hub?

Where is the kind of leadership capable of building a local niche and that can keep upgrading goods and services for the rest of the country?

China can't afford to wait for its universities and Party schools to turn out a new generation of leaders better informed about modern economics and technologies.

City leaders today have to learn more and do more, including learning from and correcting past mistakes.

For investors, there are only a few cities to choose from for the most innovative and potentially most lucrative opportunities.

Beijing, Shanghai, Shenzhen, Chongqing, Hangzhou and Tianjin seem to belong in this group, but which one will become the champion, and which one will lead in what industry, is still for the observers to find out.

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn

(China Daily European Weekly 04/08/2016 page13)

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