We need to understand the "concept of scientific development" and how it applies to financial development in China.
Close observers of how public policy is made on the Mainland are probably familiar with the theories articulated in important policy statements by state leaders. Unlike officials on the Mainland, whose job is to articulate the details of the policies and implement them in accordance with the spirit and the letter of the policy statements, Hong Kong people usually do not pay much attention to such statements. To do so would require spending a lot of time studying them and understanding the "deep layers"（深層次）of meaning of the theories. Some people in Hong Kong even consider understanding national policies a waste of time, and treat the theories articulated by the state leaders as slogans or statements devoid of specifics. I think this is wrong. The intellectual challenge in understanding China is a most valuable one. The reward for success is enormous because what happens on the Mainland is of increasing importance to us, as economic integration continues.
One of the theories that I find challenging is the "concept of scientific development"（科學發展觀）. I am not much of a development economist, but obviously it is essential to approach the economic development of any country, not least one as big as China, from a scientific perspective, with objectives and mechanisms to achieve them clearly laid down, having regard to the complex socio-political environment and special characteristics of the country. In the "socialist market economy"（社會主義市場經濟）of China, the emphasis is clearly on "people first"（以人為本）: indeed the most important objective of economic development in any jurisdiction is to benefit the people. There is also the emphasis on "broad-based development"（全面發展）, linking political, cultural and social development to economic development; "co-ordinated development"（統籌兼顧）across geographical areas; and "sustainable development"（可持續發展）, which is already a familiar subject in development economics.
Also of great interest are the many other phrases used in getting important concepts and messages across, for example, "building a harmonious society"（構建和諧社會）, approaching "reform and liberalisation"（改革開放）with emphasis on "gradualism, controllability and the ability to take the initiative"（漸進性、可控性及主動性）. Given the lack of precedents and therefore the absence of well-defined development models for a socialist market economy, let alone one tailor-made to suit "Chinese characteristics"（中國特色）, there is a need for the "liberalisation of thoughts"（解放思想）to accommodate new phenomena and new scenarios not seen in China before and different from other economies. Readers will also remember the famous saying by Deng Xiaoping about "crossing the river by feeling the stones"（摸著石頭過河）, although I suspect Deng, a good swimmer and fine bridge player, must have also worked out ways to "keep both hands prepared"（兩手準備）, or contingency plans, in case the water gets too deep.
Because of the nature of my work, I do wonder how the "concept of scientific development" can best be applied to financial development in China. This is an important subject for China, given the need to satisfy the many demands for financial services to make economic development sustainable. Deng's dictum that "finance is very important; it is the nucleus of a modern economy"（金融很重要，是現代經濟的核心）has been repeatedly used in various policy statements. There is certainly scope for making the vital function of financial intermediation more effective. The financial markets in the developed economies are experiencing volatility and they are affecting the rest of the world through globalisation. There are many structural issues that need to be addressed. There are important lessons for China if it is to avoid similar mistakes and their debilitating consequences. This may also be a golden opportunity for China to take important strategic steps to steer its own financial development and, given its increasingly important global position, influence the development of global finance in a way that best serves the interests of the country and its people. To avoid gaps between how the "concept of scientific development" is supposed to be implemented according to the policy statements on the Mainland and how financial-development strategies are actually carried out, there is a need to spend more time understanding the "deep layers" of meaning of the "concept of scientific development".
Joseph Yam
12 June 2008
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