Economic revolution sprung from China’s grassroots rather than top-down approach

Economic revolution sprung from China’s grassroots: scholars

Staff Reporter

2013-05-01

China’s economic reforms, which begun under the late Deng Xiaoping more than 30 years ago, are often thought of as a top-down revolution presided over by the ruling Communist Party. The country’s rapid economic growth in the last three decades proves that the party’s plan was well-conceived and executed and the credit for China’s economic miracle thus accrues to them, says the Beijing-based Economic Observer.

This view has been challenged however by Nobel laureate Ronald Coase, an economist at the University of Chicago, and his coauthor Wang Ning. Coase and Wang have pointed to the vital role played in China’s economic reforms by people at the grassroots level.In their new book China’s Transformation, the scholars say that when the country started its economic reforms in the 1980s, the reforms were driven by two forces. One was the government, while the other was people from the lowest echelons of society.

Grassroots reforms affected four classes of society: contracted farmers working state-owned fields, enterprises run by rural townships, self-employed businesspeople in cities, and special economic zones in the coastal regions.

In the initial stages, the reforms carried out at the grassroots level were not backed by the government; rather, these changes were heavily restricted by government policy and ideology.

The system of contract farming brought an end to the collectivized commune system. Enterprises managed by rural townships could only operate in sectors which did not conflict with the interests of state-owned companies, and the first special economic zones could also be closed by the central government at a moment’s notice.

The farm-contracting system and the introduction of the profit motive gradually began stoking farmers’ renewed enthusiasm for production, and enterprises managed by rural townships began harnessing the redundant workforce around them to be used for industrial production. Self-employed entrepreneurs in cities began contributing to the development of the private sector, setting an example for moribund state enterprises, said the authors.

These reforms, which began at the lower levels of society, changed both China’s market and its society dramatically.

This phenomenon was also noted by the reformists within the party, who approved the socialist market economy at the party’s 14th National Congress in 1992, and made efforts to integrate the grassroots revolution with government-initiated reforms.

This revolution also led to a desire among China’s citizens for better protection of their civil rights and property, prompting the government to raise compensation for appropriated land, to soften its one-child policy, and consider abolishing the system of re-education through labor camps.

The growing strength of China’s state enterprises from the 1990s again put private enterprises under pressure, stymieing the greater economic revolution. The country’s sharp contrast between open markets and closed ideologies continued to pose a threat to the nation’s development, because basic reforms could not be sustained without a freer ideological approach, the authors said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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