[Viewpoint] What China can learn from Korea

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[Viewpoint] What China can learn from Korea

Wu Jinglian, 82, is still cited as China’s most famous economist. Despite his advanced age, the architect of Deng Xiaoping’s market opening and reforms retains a research post at the Development Research Center of the State Council. Dubbed Wu Shichang, or Market Wu, he designed the unique Chinese style of a market economy within a socialist framework which paved the way for the country’s march toward prosperity. He is also one of the few mainstream economists who speaks with candor about conservative hardliners in the party and the government.

Wu was in Seoul in April to attend a seminar. Surprisingly, his first words were an expression of gratitude to Korea. He cited Kim Man-je, deputy prime minster in charge of economic affairs, as an influence who taught him a lot about Korea. In the early stages of reforms in the 1980s, Wu wanted to learn more about Korea’s industrialization and modernization. But there was little access because the two countries didn’t have diplomatic ties. So he found a way around that barrier. He used his influence with international organizations to host seminars in Southeast Asia and invited Korean economic figures to hear them out directly.

After the two nations established ties in 1992, China openly sought lessons from Korea. The highest-ranking officials, including President Jiang Zemin, frequented Korea. In early 2000, they studied finance from Korean financiers. The central bank governor at the time sought a solution to the bad loans problem in the Korea Asset Management Corporation. In 2006, the Saemaeul Movement was studied by the Chinese because of its effect on rural modernization, which drove the Korean economy out of poverty in the 1970s.

Now that China is the world’s second-largest economy, it would seem to have little more to learn from Korea. But there are still lessons to be gleaned from the smaller neighbor.

Korea’s North East Asia Research Institute recently launched joint lectures with the Institute of World Economics and Politics, which is affiliated with the Chinese Academy of Social Sciences. The lectures, which run from August to the year-end, are focused on teaching Chinese bureaucrats and businessmen the Korean model of privatizing state entities and evolving from a state-driven economy to a private sector-led one.

The lessons are too important to be considered a mere private-academic exchange. The participants are mostly public officials from China and former senior Korean bureaucrats who participated in the making of policies and laws on privatization and management control.

The lecture themes specially requested by China are noteworthy as they suggest the flaws and limits of China’s hybrid economic model as well as what aspects of Korea interest Beijing the most.

The Chinese want to know how to avoid the so-called middle-income trap, how fast or slowly to pursue financial system liberalization, the risks of financial liberalization for the local banking sector, actions to deal with an aging population, things to learn from Korean chaebol, how to privatize state enterprises, the academic role in government policy-making, applications of the Saemaeul Movement, the driving force behind Korea’s popular music, the role of religion in Korean modernization, the repercussions of the upcoming presidential election on foreign affairs (particularly on China), and the government’s and the public’s thoughts on the future of the Korean Peninsula and East Asia.

The themes vary widely from the economy to religion and pop culture. What worries Beijing most is the possibility of the country heading toward a middle-income trap, the kind of stagnation and turbulence that gripped Latin American economies in the 1980s and 1990s. Various underlying social and economic problems such as income disparities that are covered up by buoyant growth can explode if growth flatlines. The country already has some ominous augers of social unrest, with more than 180,000 protests erupting every year.

Korea is one of the few countries that successfully avoided the middle-income trap and is now a developed country. If China follows in our footsteps, there is one more thing it can learn from Korea: accomplishing democratization together with economic modernization. In this field, Korea is an expert.

When our country hit the $3,000 per capita income milestone in 1987, Koreans poured into the streets to rally for democracy. China’s per capita income reached $3,000 in 2008, coinciding with the Beijing Olympic Games, and $5,000 last year. People at the grassroots level have become more vocal and outspoken in challenging the state. It remains to be seen what kind of unique democracy model China can whip up.

But in one way or another, authorities won’t be able to put off the public demand for more freedom for long. While visiting Seoul in 1995, former Chinese President Jiang Zemin quoted Confucius’ famous saying, “Virtue is not left to stand alone. He who practices it will have neighbors,” to emphasize the partnership between the two nations.

Sharing the best of our history can only help China.

*The author is the director of the JoongAng Ilbo China Institute.

by You Sang-chul

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