Liang Hongfu

As economy globalizes, old practices are left behind

By Liang Hongfu (China Daily)
Updated: 2005-12-06 06:09

At a business forum shortly after I arrived in Beijing last year, I was surprised that many people there were talking about the need to encourage consumer spending. To me, at least, such a move apparently would have contradicted the government macroeconomic adjustment policy that was introduced to cool off the then overheated economy.

My persistent questioning failed to solicit a convincing answer. After many heated arguments, one penal member, a big balding man with a jutting jaw, slammed his fist on the table in front of him and bellowed: "This is China."

End of discussion.

Since then, I have been to numerous other meetings and forums and have met many mainland business people, economists and stock analysts. Most of the time, I happened to agree with what they said. If I didn't, they could usually give me an answer I could understand.

But in the rare (or not so rare as some of those who know me would say) occasions when I felt compelled to challenge their opinions, the conversation would almost invariably end with them saying "this is China," implying, of course, that my understanding of this fast-growing economy was definitely limited, and probably non-existent.

They may be right. But that's not the issue. The real issue is that the mainland business community and the many economists and analysts must understand that China is moving more quickly than they might have thought in globalizing its economy.

As China is becoming more plugged into the global marketplace, many of the unusual and uniquely mainland practices that are either left over from the past or introduced to cope with the monumental and unprecedented move from a planned economy to a market-oriented one seem stale and inapplicable.

More than two decades of economic reform have almost completely transformed the mainland economic landscape. Most sectors of the mainland economy have been opened to foreign companies under the World Trade Organization arrangement. The remaining few, notably the financial services sector, are scheduled to be open in 2006.

Meanwhile, hundreds of mainland enterprises, including the major State-owned conglomerates, have tapped into the world's major capital markets by obtaining listings of their shares in New York, London or Hong Kong. In doing so, these enterprises have not only gained access to the international capital markets to help fund their businesses, but also the discipline to comply with internationally accepted management and accounting practices.

Such preparation is necessary not only for future diversification into overseas markets, but also for the more immediate challenge from foreign competition on mainland enterprises' home turf.

The rapid opening of the domestic market has attracted a host of foreign vendors of a wide range of products from heavy industrial machinery and high-tech equipment to mobile phones and processed foods.

The speed at which foreign vendors have been making inroads into the mainland market has shown up the inherent weakness of domestic enterprises. Much of that weakness lies in the management mindset, which has failed to catch up with changing market conditions.

The more forward-thinking mainland enterprises have recognized that they have to do business according to the rules of the marketplace. To succeed, they have to learn the global way.

Because of historical reasons, the mainland economy will no doubt continue to retain some of its characteristics as it marches resolutely down the path of globalization. But the characteristics that remain will be those that can co-exist with, or even compliment, the free market force.

Email: jamesleung@chinadaily.com.cn

(China Daily 12/06/2005 page4)