On Development of China in 30 Years

This topic comes from a lunch talk days ago with a visiting scholar from China and a colleague in our department, who is quite ignored on the Chinese issues. Though under most conditions, the discussions about China that covers the riskiness of the banking system, unfairness of educational resources, the bribery among the official servants and governmental departments, can easily reach a consistent conclusion, this time we are facing dispersion. Such dispersion, however, can mean the ignorance of knowledge on fundamental theories of accounting and finance, the reality of Chinese society, and, of course, so-called ‘face’ that is widely seen in Chinese cultures (面子:笔者注). To avoid some unnecessary troubles, this article only summarizes the viewpoint of mine.

This article investigates the development of China in past thirty years and its related issues on the social well-beings. However, it is far from adequate for an unbiased and justified discussion as the limitation of contextualization applies. The limitation also partly explains why I write this blog in English rather than in Chinese. Because I do not want to trigger the censorship from that ancient country, though the censoring system can have little impact on my blog given its highly limited readers coverage.

  1. The Role of Government and The Development of Economy in General

    The very first question refers to the development of China in past 30 years in fundamental. This is the most prestigious part of the recent Chinese history that should be discussed than any other ones. As, in the past thirty years, China has transferred itself from a less developed country into a comparatively developed star. People becomes richer than they used to be, and the living styles has been changed a lot. The government and academicians accompanied starts to bury themselves in such results, and they assert, they have created a puzzled that to be solved by the whole economic world, namely, how and why the Chinese economy boomed in past thirty years and what can be implied? However, to my understanding, the development of Chinese economy is quite simple. That is the concentration of resources and great sacrifice on social well-beings and fairness.

    The prolonged understatement of currency rate and good controls on the foreign currencies transfer for past thirty days ensures the benefit of cheap labor and limited import transactions. Given a balance sheet that the asset sides always exceeds its liability side, the firm can boom up rapidly with a fast increase on net assets. Such booming up can even accelerate when the distribution of earning is controlled. Indeed, if India follows a similar way of governing, there would be a second China in Asia. However, after hundreds of years governed by the United kingdom, their philosophy has been changed. That is, the government can be extremely hard to imitate such a method like his Chinese neighbor adopts, as is suggested by an article on Economist. The only difficulty that traps numerous economist in US and Europe is that, how can the public accept such concentration and where the public monitoring is. In general, they just cannot believe in their eyes.

    Evidence can be easily shown regarding this issue if you readers want some. A good example that confirms my argument comes from the difference on size and profitability between the state-owned firms and entities of other ownership. The most profitable industries, including the telecommunication service providers, electricity and water supplies, petrol and gas, mass media, publication houses, etc are all state-owned that form a chain of monopolies in reality. In fact, such controlling avoids the market competition and the public requirements on optimization, which in turn, ensures good income for the country for the investments on infrastructure. However, by doing so, it enlarges the differences between state-owned firms and others, and strengthens the voting power of government in the market, and eventually, induces some other issues.

  2. The Consequence of Governmental Controlling: Social Disorders

    The strengthening of voting power of governments in markets can lead to good rent-seeking motivations and can result in a widespread of corruptions. The corruption can partly be explained by a social basis on personal connections rather than that of rule-in-law principles as in US and Europe. However, I prefer an alternative explanation on the lack of public monitoring. Given a central role of government in resource allocation and distribution, the public monitoring can alleviate the rent-seeking motivation in this process and secure the fundamental fairness, which is the main responsibility of Congress in most countries of the world. However, the Congress of China failed to control this.

    Such failure on monitoring results in a social fashion in China: Guanxi (Relationship) Economy. The worship on money and power eventually exceeds the merit of being honesty and diligent. Namely, if you want to be successful in China, an easy approach is to find the right person.The rent-seeking on governmental officers and the fashion of bribery in daily lives in fact promotes the popularity of entrance exams for civil servants. In a developed country, this is rare to see. An intriguing point underlying its popularity is its motivation. Because it is actually not reasonable for a great amount of graduates, holding a master’s and PhD diploma, to pursue a position that can indeed be fulfilled by a trained secretary, except for a fabulous temptation from Satan.

    The offer from Satan, however, is a package comprised of various benefits: priorities on cheap housing that should be for low-incomers, special treatment on medical care system that is designed for all the public, VIP treatment for kid’s education from the schools that are established by the tax income from the public, perks and bribery that is created from the dominant role of government in market, etc. In addition, they are rewarded an outstanding pension plan that is unavailable to other public except for employees in state-owned firms and government-sponsored departments. Regarding this, there forms a mainstream of conflicts in Chinese society: the officials and privileged groups versus the rest.

    The conflicts between the privileged groups and the rest are manifested in not only the population of such exams takers, but also popularity of immigration. Students without good family background and very little hope of being employed in state-owned firms and governmental-sponsored departments tend to seek opportunities of studying overseas. The scholarship and sponsorship overseas in fact provides students from a poor family but hold very good academic recordings an outstanding chance of developing their own careers, and provides a substituting mechanism for this group that has long been overlooked. A survey conducted by the Chinese government shows the returning rate of students studying overseas with high ranking on academia is only approximately 10% in past thirty years. I suppose, the unfairness existed and fear from the privileged groups should contribute much to this result. The escaping of such excellent students, especially those with PhD degrees and good contribution to their own fields, however, withdraws the potentials of the developing of Chinese society, and thus, ruins its perspective.

  3. The Governmental Role and Risk Control of Banks

    The dominant role of government in the market, though ensures the short term profit by securing the monopoly role of state-owned firms in key industries, also leads to some potential risks in banking sectors. The banking system in China takes two layers that consist of national and regional banks. They are both charted and supervised by China’s Bank Regulatory Commission, a group that is formally independent of but implicitly holds a good relation with the central bank and government.

    The banks are all highly staked by the government no matter which type the ownership is. Due to the restriction on banking business, banks in China in fact earns highest both fee and interest income comparing to their counter-parties in other countries. However, it is also their links to the government that their risk management strategy is under challenge.There is a strong regulatory requirement that prevents the banks in China to operate risky transaction including high volume of derivatives and structured products, but their high dependence on fee income and interest spreads generally compensates this drawback.

    Given the stringent auditing policy for firms in China that seeks IPO opportunity, which involves both strict benchmark on their performance and bribery implicitly acknowledged, firms in China, no matter its size, are totally bank loan dependent. That is, loan from banks performs central role in Chinese markets. Given the conclusion stated above on the central role of Chinese government, the governmental decision can have a strong impact on banks’ loan contribution. Reasonably, firms with governmental background can have an easier access to the bank funding than others. That explains why the Ministry of Railway in China can have a 5,000 billion RMB loans with particularly low quality, but private firms with good performance can only receive funding through underground banking systems.

    The conflicts between the risk controls and the governmental impacts eventually raises the riskiness of banks’ asset portfolio in part, and the concentration on land business forms the other. Given the land are allocated by the government, who takes the ultimate ownership, the transfer of utility rights of lands form a central item of governmental income, not only for central government, but also for local ones. The demand and supply of the utility rights, eventually boosts the price of landing, enlarging the governmental income and the cost for housing companies, finally creates a high level of housing price, comparing with the GDP per person and the average income.

    The governmental controlling and their pursing the profit from land leasing result in the housing bubble that is similar to the United States before the crisis in 2007. Though the existence of high demand in houses, the bubble can hardly stay long with its great dispersion from average income. Thus, assuming the depreciation of house pricing in the future, the default risk and prepayment issues can be apparent, and the value of collateral is dropping down, the capital adequacy ratio set by Basel Accords can vapor in a dramatically fast manner and soon the banks, no matter whom they are, can face a short of funding. The SHIBOR rates can boost due to such demand, and finally, the financial stability of the whole country is threatened.

    I am not sure about the percentage that the loans take in banks’ asset side of the balance sheet in China but it can apparently exceeds 60%, the average of US banks. This implies a very high leverage and a good potential catalyst for death when the market depreciates. The strong power of United States eventually saved up his banking system after bailing out several of its largest banks but I do suspect if the Chinese government can be powerful enough to pay the bill when such disaster eventually comes. If the answer is no, the proposed financial crisis raised from a crash of the banking system can then turn itself into the sovereign debt crisis as what the Europeans are now suffering. Though the probability of such happening can be low according to the current situation, but the consequence can be disastrous.

  4. Remarks and Contribution

    Above all, though China has experienced its dramatic development since the 1980s as the starting of its open-door policy, some drawbacks remains. I assert that such drawbacks are induced by a unique social structure and can induce some unsolved issues on interest of conflicts among different social classes. The conflicts, however, further leads to numerous social issues that threaten the stability and future development opportunities.

    This article also provides an answer to a question on why the economic growth in China maintains a high percentage by suggesting the central role that the government play in this market. The economic growth of China in past thirty years in fact is a substitution of loss on social well-beings for the public by the artificial intervene on the process of allocating and distributing the resources.

    This article also anticipates that such intervene can result in a reduction on risk controlling efficiency for banks and thus harm the economic system in return.This article is also consistent to the recent discussion from the media that refer to the worries from the West on China’s being the third polar of the world. I would like to say that it is still too early to worry about this issue as China is still at its very early stage on development. It can only be a powerful country in reality when the internal conflicts can be reasonably solved and the fairness secured. Considering its political structure and uniqueness of contextualization, reaching this target means a long way to go.

This article is based on an academic analysis on the Chinese economy and does not represent any official point of view from or related to Chinese government. I personally maintain all the copyrights on this article. Please let me know if you want to re-post that somewhere else.

Government Intervene: A Case from Wenzhou

这几天的新闻似乎层出不穷。晚上睡觉前翻看Kindle上订阅的卫报总是看到Liam童鞋因为外交中说不清道不明的关系而被穷追猛打,而希腊的经济危机和国家破产似乎也已经成了定局,昔日的淘宝因为政策的修改而被搅的天翻地覆。更有甚者,温州的老板们因为民间借贷而卷铺盖蒸发。一下子所有的民间借贷和银行款项都成了变相注资。总而言之,最近的世界似乎真的很不太平。

政府干预在中国一直是一个屡试不爽的手段。从市场经济中的物价强制干预到相关政策的执行(如高校食堂被严令不得涨价、建党八十周年大家唱红歌、对大量民运分子进行严格的管控等),我们总是可以看到它的身影。然而,这次温州的政策却是:严格控制欠钱的老板。而新闻背后网友的评论则是:银行和政府的管控已经到了限制人身自由的地步。比如不得随便离开温州、银行时不时的电话骚扰等。

我不知道这个评论是否属实。但是即使不属实,官方随便监控有可能潜逃的企业老总也涉嫌违法。严格来说,在潜逃行为尚未发生,或者没有明确证据证明其潜逃前,这种猜测是不能作为法律证据的。尽管我不是法学院的学生,但这个应该是普遍适用的。有的读者或许会说:那公安机关也会监管一些可能潜逃的贪官和罪犯,这个如何解释?请注意:这些人事实上已经存在了犯罪动机甚至于证据。当然,作为一个匪夷所思的国家,我保留有可能出现各种匪夷所思情况的可能性。

如果该评论属实,那么这个问题就非常严重了。如果说之前政府对上访人员和民运人员的控制并没有引起大多数民众关注的话,这次的行为就显得非常赤裸裸了。如果说对民运人员可以适用”颠覆国家政权罪“,对于上访人员可以使用”扰乱公共秩序罪“,那么我真不知道对于这些事实上还没有开始潜逃的老板们使用什么样的原则了。俗话说得好,心理出轨并不代表现实意义上出轨。同理,即使有潜逃的潜质也不代表一定潜逃。而对于所谓的”蛛丝马迹“进行所谓的”控制“,则更是笑话。

之所以说司空见惯,是因为这种行为对广大国人而言实在是太稀松平常,甚至于可以说是爱理不理了。有个玩笑开得很好,据说如果在欧洲随便拆掉一幢房子,整个小镇的居民都会上街;而如果在中国有一处房子拆不掉,那么一个连的城管就会围到那个房子前。千万不可低估城管的力量,要知道他们是战斗力仅次于解放军的非武装力量。

而在高校,这种情况就更正常了。本一个很正常的”教授治校“理论被喊了几十年却没任何进展。老师教授和学生,本应该成为学校的主体,却被人踩在了脚下。本来应该处于从属位置的行政人员却把自己当成了主人。在英国我们关注的高校问题永远是围绕教学和科研展开,而中国高校呢?最令人关注的问题却是宿舍和食堂。而且就笔者七年高校学习的经验而言,无论是在专科学校还是重点大学,这种矛盾的调和似乎都比共产主义实现更遥远。

当然,如前文所言,我也知道。在穷山恶水间,有时候的确不能去跟刁民讲大道理。毕竟跟一群没有道德可言的人去讲道德就如跟撒旦讲圣经一样可笑。但是正如行有行规,家有家规,政府为何不能允许行业自律和使用契约关系的直接约束?手伸太长的后果只能是把好事变坏事,实事工程变成政绩工程,斗志昂扬变成口号嘹亮!

Government Versus Public: Friends or Enemies?

如果说赖昌星的回国和郭美美的漂亮车车还不足以吸引大家的眼球的话,温州高铁的事故可以说是让大家接触了一次真正的爱的教育。或许大多数人不会认可1959年的“自然灾害”是人祸;或许没有受过教育的大众并不能理解“希望工程”为什么并没有改变他们子女没有接受教育的命运;或许我们也还在怀念赖老哥为了平抑中国的油价所作出的卓越贡献,这次的事故和铁道部的操蛋应对却让我们深深地震撼了。

尽管本人一向对专家的100%保证嗤之以鼻,尽管我也对国内的很多政府官员和高校行政人员没有什么好感,尽管我也对食堂那些欺上瞒下的混帐东西深恶痛绝,甚至于我对那些除了钱脑子里啥都没有的暴发户不屑一顾,而这次铁道部的快速反应和”积极应对“却让我这个在天朝混了二十多年,接受了除博士阶段所有教育的人傻了眼。要知道,如果政府部门对于所有的突发事件都能有如此的反应速度,中国早已不国了。

其实我估计在中国,是个人都应该多少坐过火车。火车工作人员的冷漠,火车站的管理混乱,火车的一票难求,以及铁道部的一些脑残规定(比如至今不能网上购票,不能支持信用卡)都让我们对这个部门没啥好感。但是就我而言,我始终坚信,尽管这是一个熟透了烂掉的苹果,但是它始终是一只苹果,在关键的时候,它总会有一些苹果的特质。然而,我发现,我这次真的错了。

且不说闪电是否真的可以把火车干趴下,也不说通讯系统和电脑故障,更不用说是不是因为司机和调度员同时脑子抽筋,或者干脆说这帮混帐们都他妈是临时工,在一切调查都没开始前就要求就地掩埋并毁灭证据,恐怕这事儿也就他们铁道部干的出来。这时候,即使是一个大字不识的庄稼汉也应该能预见到其中可能的问题了。当过孩子和父母的都会知道,当孩子的试卷总是不愿意拿出来的时候,大家其实都预见到了考试的悲剧。而当孩子当众撕掉试卷,那后果只能是脱裤子屁股开花。为什么?在孩子没有神经搭错的情况下,考得一塌糊涂只能是唯一的解释。而一顿狠揍绝对是这个结果最好的”奖励“。

可惜我们的铁道部童鞋就做了一件如此这帮的”建党伟业“。在一切事件都还都还没有定论,当一切原因都还没有调查清楚,当失踪者的尸体还没有找到的时候,铁道部却要求掩埋车体,尽快恢复通车。这些行为已然引起了广大的群众不满,于是网上”骂声一片“。然而当拆解过程中发现小伊伊的时候,人们的怒火再也无法压制了。被拜金欲压抑了十多年的爱心终于在天安门那晚的枪声之后再次被燃起,高潮来临了!

其实我们常说,干一番事业就如同做人,需要行得正,方能站得直。而于政府,这也是一样的。为什么各国政府(天朝除外)都会如此重视反腐倡廉?因为政府是代表着广大的纳税人的,他需要体现纳税人的利益。这就像一家公司,当总经理不顾股东们的反对大肆敛财的时候,这家公司也就接近了崩溃的边缘。

或许很多人还在骂为什么那么多华人要远走高飞?为什么他们就不念旧情却愿意在大洋彼岸当一辈子二等公民?而更让人无法理解的是为什么高官子女都在海外?其实这都不难理解。我父母老跟我开玩笑说老毛有一句名言,那就是“知识越多就越反动”。其实我以前一直没懂这句话。而现在我懂了。因为知识往往会给人以宽广的眼界和独特的视角,这回让我们看到更多的问题和阴暗面。显然,这不是一个独裁者和专政政府所喜欢的。

共和国六十年,风风雨雨,荣辱与共。走过了多少的坎坷和险阻,也迈过了多少的河流和山坡。但是,我们需要知道,为人者,不可以金钱为唯一的目标。我们需要关注的还有爱和人性。“破四旧”毁灭了一代中国人心中所应该有的道德和底线,同时也葬送了下一代人所应该具有的传统教育和人文关怀。其实世界上有很多的官二代和富二代,但是唯有中国大陆的官二代和富二代们是最不学无术和不招人待见的。或许有人说,这是仇富心理在作怪,但是我认为更好的解释是“父母,永远是孩子最重要的老师!”

愿车祸中地下的人们场面,希望你们的鲜血可以给那些官员们撕开一丝良心的光芒!

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