Generation 40s – 四十世代

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Only the rule of law can ensure sustained prosperity in China

South China Morning Post
Comment›Insight & Opinion

Andy Xie

Andy Xie says China’s cycle of economic instability will continue unless the rule of law and the necessary checks are implemented to rein in abuse of government power

Over the past quarter of a century, China has escaped poverty and joined the ranks of the middle-income countries. The statistics are staggering: nominal gross domestic product in US dollar terms has increased by more than 20 times, exports more than 40 times, and electricity production over eight times. China today consumes more energy than the US. The World Bank calculates that China’s GDP will exceed America’s this year in purchasing power parity.

The remarkable success is a combination of good policy and luck. The most important decision was shifting to a stable currency policy in 1994. Repeated devaluations before then kept the economy small at market exchange rates.

With a stable currency policy, the focus for other decisions is on efficiency to maintain competitiveness. The subsequent structural reforms, such as joining the World Trade Organisation, corporatising state-owned enterprises, privatising the housing market and building modern infrastructure, wouldn’t have happened without the currency constraints.

When a country achieves a period of spectacular growth, it’s not just due to good policies or a benign global economy. Society must have strong fundamental human resources to begin with. China’s modernisation began a century before the reform and open-door policy of 1978. While economic development was periodically interrupted by wars and revolutions, the development of human resources continued. In the 1930s, parts of China’s eastern seaboard had already caught up with developed economies.

Between 1949 and 1978, the government wiped out mass illiteracy through a national education system. It also implemented basic health care. These two achievements were critical to the subsequent economic development.

The government has been firmly in control of economic development. The lack of institutions to check excesses has fostered a mentality of taking short-cuts. A race to the bottom in behaviour has accompanied the rapid growth. Some have mistakenly seen a causality between the two. In fact, most challenges that haunt China today could have been avoided without significantly hurting growth.

Take the environment. Many are pushing the view that China’s environmental degradation is a result of rapid economic growth. The purpose of such talk is to persuade people to tolerate pollution.

True, there is a trade-off between the environment and growth. But the extent of the trade-off is not even close to what China is experiencing. Unchecked greed is the main driver for China’s environmental degradation. Without the rule of law, why would any business want to pay for pollution control? It is much cheaper to buy off local government officials.

Rising income inequality is also often explained away as a price of growth. It is good propaganda aimed at the masses so they will accept their unsatisfactory position in society. They are told they would be even worse off without growth. The reality is that the concentration of power at the top is the main reason for rising income inequality. China’s growth is based on its labour competitiveness. Yet, the gain in wealth has hardly benefited the people who work in the factories or on construction sites. The people who play with money have come out ahead. The rapid monetary growth in a system that centres around government power has enriched the ones closest to that power.

Rapid monetary growth has been the bane of China’s economic development since reforms began in 1978. Bouts of high inflation, accompanied by devaluation, triggered the political instability in the 1980s. As another bout of inflation in 1992-93 threatened more instability, macro tightening was introduced.

From printing money, the growth strategy shifted to improving efficiency. The subsequent reforms culminated with China joining the WTO, which unleashed the productivity of Chinese labour into the global economy and supported a decade of export and investment-led growth.

When China’s growth took hold, the bad habit of printing money returned. The difference was that it happened as the currency came under appreciation pressure, largely due to the benefits from joining the WTO. China should have either allowed the currency to appreciate fully, or kept the peg while allowing inflation to adjust the currency value.

The actual policy was to create a slow and predictable upward trend. The “sure bet” inflamed a frenzy of hot money inflows, which led to a massive property bubble. The bubble became the main revenue source for local governments and served to enrich some people; the ones close to power, of course. It all happened at the expense of inflating away labour income and savings. That policy is responsible for today’s high income-and-wealth inequality.

The current government is facing a crisis situation just like in 1993. It has to undertake structural reforms to shift the growth model towards efficiency and away from printing money. The key is to decrease government power and let the market make most decisions. This is why the anti-corruption campaign is the heart of the structural reform. It is the only way to cut government power. As long as the government maintains its anti-corruption campaign, in five years, China’s economy will experience another decade of good growth, which would make it the largest in the world.

China’s modernisation has been on and off for a century and a half. Whenever the environment is peaceful and government power is contained, China prospers. It reflects the fundamental competitiveness of Chinese people.

Unfortunately, the main model for getting rich in China is to take a slice from every person. This is why most rich people achieve success by cultivating guanxi (relations and connections) with government officials. It is the main reason that, whenever the economy prospers, the government expands its role in the economy.

The anti-corruption campaign is the only way to rein in government power in the absence of the rule of law. If the right institutions are not put in place, government power will expand again when the economy is healed. Such a cycle of instability is inevitable until China adopts the rule of law and checks and balances in limiting political power. When such institutions are all in place, China’s per capita income will catch up with those of the advanced economies, and China’s economy will be as large as those of Europe, Japan and the US combined.

Andy Xie is an independent economist

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App 世代新媒體教育

Hong Kong Economic Journal
C04 | 優質教育 | 教育講論 | By 蔣治淙 |





美國知名心理學家Howard Gardner 聯同KatieDavis去年出版了名為The App Generation的書籍,內容簡單,卻極具啟發性。作者認為,科技會影響我們的生活習慣及想法,最後更會改變文化。而從小就使用App的年輕一代,多會習慣按照別人提供的方法和途徑去生活,而少有走出去冒險探索。作者覺得,這一代以為世界是個app 的大滙集,人生甚至是個「從襁褓到墳墓」的app 而已。(It’s our argument thatyoung people growing up in our time are not onlyimmersed in apps; they’ve come to think of theworld as an ensemble of apps, to see their lives as astring of ordered apps, or perhaps, in many cases, asingle, extended, cradle-to-grave app.)近年,許多大專院校因應時代需要,加強新媒體相關的課程,例如加入多媒體製作實務課程,甚或把新媒體另闢成獨立學科。上學年首次教授多媒體創作課程,我對生於互聯網時代的學生,有兩點觀察:




從前,在沒有先進科技的配合下,許多創意只能停留在構想的階段,最出名的例子有著名導演寇比力克(Stanley Kubrick)的電影《A.I.人工智能》,這電影早於1970年代已開始創作,但經過二十多年後,寇比力克還是決定放棄,因為他認為以當時(即1990年代中期)的電腦技術,未能創造出機械人主角David;直到他過世以後,史匹堡(Steven Spielberg)才着手製作電影。

今天,科技的限制已然減少了許多,「Your onlylimit is your imagination」這句老話也不再是空喊的口號。新媒體教育最重要的是訓練思考,教導學生操作硬件和軟件,目的是要利用科技來實現腦裏的構想。





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Beijing could do worse than follow Hong Kong’s market rules

South China Morning Post
Comment›Insight & Opinion
SCMP Editorial

If Beijing looks to the private sector to perform more of the heavy lifting in growing China’s economy, it can do without uncertainty or lack of confidence in the minds of investors. Beijing’s newly revealed proposal to impose severe restrictions on the role of international accountants in auditing mainland companies listing in Hong Kong or overseas is not helpful in that regard. Mainland finance officials should take time to think again about the new auditing rules before ending a brief consultation by the end of this month and introducing the changes before the end of the year. A landmark ruling on Friday by a Hong Kong court should prompt them to do so.

The case involved an existing requirement – reinforced by the new rules – that accountants must follow the country’s secrecy laws and not pass on any information to overseas regulators or exchanges. Accounting firm Ernst & Young sought to rely on this requirement in refusing to hand over information to the city’s Securities and Futures Commission relating to listing candidate Standard Water. But the Court of First Instance rejected the argument, saying mainland law did not impose a blanket prohibition and the firm could not prove that information withheld contained state secrets.

When companies sell shares in new listings on Hong Kong and overseas stock exchanges, investors rely on audits by international firms for assurances that the books are clean.

Under the proposed new auditing rules, international accounting firms are to be barred from sending their staff to audit a mainland company. Instead, they are required to team up with local accounting firms so that the domestic partners’ accountants do the auditing. This turns back the clock 20 years, just when people already have reason to doubt the credibility of audits done on the mainland, even with involvement of mainland units of the Big Four international accounting firms. And it will no longer be possible to send an accountant from Hong Kong to vet a mainland audit.

This is not the first time Hong Kong’s market regulator has felt compelled to intervene after the state secrets law was invoked to prevent the disclosure of information by mainland companies material to investment decisions. The SFC deserves support. If dodgy companies can hide behind the state secrets law, that can only harm the interests of shareholders and the image of Hong Kong as a capital market. Moreover, if Beijing is serious about increasing transparency and fighting corruption it could do worse than follow Hong Kong’s market rules.

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Hong Kong Economic Journal
C02 | 醫情醫說 | 德育相傳 | By 許芷茵 |

上星期為基督教香港信義會王賽明快樂家庭培育中心及FAM《樂活.家》家庭生活雜誌主持了一個名為「愛語.密碼」的講座。中心早前做了一項統計,發現香港家庭較少使用「愛語」—— 在八百多份由家長及子女填寫的問卷中,有六成父母認為自己「以運用愛的語言與子女相處」,但子女回應顯示「只有四成父母能做到」。


不要吝嗇對孩子的讚賞( 事實上,不要吝嗇對身邊任何人的讚賞),孩子做得好,清楚明白具體地讓他知道「我注意到你今天的書包收拾得很整齊,做得好」或是「我知你在歌唱比賽失落名次,可是你表現得很大方,還大力地為優勝者鼓掌,我非常欣賞你」,成年人努力工作,飽受壓力,到了發薪金那天,可找到一點安慰;至於小朋友,他們用功讀書、守規有禮,還要參加十八種不同的課外活動,壓力未必比成年人小,他們的能量來自父母的讚賞。