[VIEWPOINT]What China can teach Korea

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[VIEWPOINT]What China can teach Korea

The 10th National People’s Congress of China was convened on March 5. The overall evaluation of the congress will be made after the plenary session is over, but the speech of Chinese Premier Wen Jiabao was full of confidence and enough to leave a strong impression on many people throughout the world. The premier’s speech included some issues difficult to settle, as well as a hopeful outlook for the future.
However, most China experts, both at home and abroad, agree that the Chinese economy will maintain a high growth rate for the time being.
Where does this confidence come from that is acknowledged by both the Chinese and others?
It is not just because the Chinese economy benefits from cheap labor and plentiful resources. The following factors also seem to be contributing more to the country’s confidence.
First, China is a very young country. The average age of the Chinese people is just 32, and they have a high standard of education compared to their level of income. It is especially hard to find people over 50 among the bureaucrats who will be the next generation of leaders.
This is probably because those Chinese over 50 could not get a normal education due to the Cultural Revolution of the 1960s, and also because a trend of studying overseas started only after the mid-1980s, when China belatedly adopted an open-door policy. These overseas-educated Chinese, who are armed with expert knowledge, open awareness and strong patriotism, play the role of the locomotive that drives the dynamic development of the Chinese economy.
Second, the leaders of China are preparing themselves against future problems. China is especially learning from the examples of its surrounding countries, and, in this respect, Korea has been a good example for China to learn from.
For example, right after Korea’s financial crisis in 1997, China established an asset management corporation similar to the Korea Asset Corporation and concentrated on solving insolvent bond problems. It also made large-scale investments in social infrastructure to prevent failure of physical distribution, which can be an offshoot of side effects rapid growth of the economy. In addition, although still only at a very early stage, the Chinese Communist Party is carefully carrying out democratic experiments such as direct and secret ballots.
Third, the development of the Chinese economy owes a lot to cheap labor and sufficient capital but, at the same time, its growth derives from technological development and increased productivity. According to the majority of recent practical analyses, the growth engine of the Chinese economy over the past 20 years derives from an increase in productivity and technical knowledge as much as from its cheap labor and sufficient funds. This is a characteristic of the Chinese economy that is different from that of Korea when it achieved fast development. Internal factors such as a comparatively high standard of education and investment in research and development contributed to China’s productivity, but the effect of technology transfers from foreign business concerns that have invested in the country play a big part too.
In addition, the fact that the home consumption market of China has a highly competitive structure also helps explain the fast increase in the productivity of Chinese corporations.
Fourth, the Chinese economy has a very high standard of open markets compared to its standard of income. Not only the manufacturing but also the service sector, including finance, is comparatively open to the outside world, and the opening of markets, including the capital market, will be accelerated. This is a sign of the confidence China has in its economy, and evidence that Chinese leaders sufficiently understand the positive effects of openness.
It is these factors, along with a plentiful labor force and adequate capital, that are driving the development of the Chinese economy, and it ultimately reflects the capability of the Chinese leaders. They have the capacity and tolerance to select young, talented specialists and promote them to responsible posts.
They also have the prudence to learn from others and cautiously prepare for the future, and the courage to enhance productivity and competitiveness by actively opening their markets to the outside world. Of course this could be too optimistic an evaluation, and the current leaders of China could be denounced as leading players in developmental dictatorship in another 20 years, as was the case in Korea.
Nevertheless, it may not be only this writer that is envious of the Chinese leaders, who appear to be full of conviction and confidence. Now is the time for Korea not to just play the role of an example for China to learn from, but for us to learn from China, putting aside any embarrassment we may have about learning from a less-developed country.

* The writer is a professor of economics at Yonsei University. Translation by the JoongAng Daily staff.

by Lee Doo-won
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