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Transition is no new concept for the country

By Ed Zhang (China Daily) Updated: 2015-09-28 09:35

Few economists have explained to the world the difference between what is called development and what the Chinese call transition.

Transition is only one word. But it takes a huge effort for a large economy to realize the full potential of the definition if it means, as it does in China, a second stage of development in which an economy casts away its old skill set to learn and adopt an entirely new one.

By comparison, in its initial stage, development is a much simpler game.

Development, such as using more machinery, building more cities and introducing more credit instruments, is almost like a natural process for the world's late starters in modernization. It will happen almost naturally after a few individuals bring back trade opportunities with more developed countries.

GDP growth will pick up so long as development takes hold in areas around the most important cities, preferably with a certain amount of help from the government, either out of a sense of public responsibility, or individual officials' greed.

Development of this particular kind can be a happy game - farmers can make more money by peddling their produce in cities, factory owners and their workers can earn export dollars by selling to rich countries, the government can reap more revenue simply by standing aside, and officials, by doing nothing, can collect more bribes.

In this process, economists' talk of an institutional change is just empty talk. That's because no one would be able to understand the inevitability. Admittedly, there would be more economic crimes and more complaints about corruption. But people tend to think they can still rely on the existing control systems for handling those individual incidents, no matter how many cases there are.

It is only up to the point when the old way of life, which the Chinese call model of development, simply cannot be sustained that people begin to realize the importance of learning new ways. This is what's happening in China right now.

But the country may have a better chance of achieving its goal of transition than it might appear. Despite all the alarms about a growth slowdown and all the criticism of the government's clumsy, if not dangerous, intervention in the market, China is not totally inexperienced in replacing its skill sets. Its economic reforms, since bidding farewell to the Soviet-type planned economy in 1978, has covered a few different stages. At every stage, the reform phased out many old managers with their old management skill sets.

This is a large country, and at a time of crisis there are always some local governments, usually among the most desperate, to experiment with something new.

In 1978, it was from the most impoverished provinces - and from provinces that were resource rich but, embarrassingly, still unable to feed their people - that agricultural reform started. Following that, a massive number of collective farm managers had to seek mid-career changes.

The flourishing of privately owned companies started from the southern and southeastern provinces, and as a by-product, the country's old northeastern industrial base quickly became a rust belt. In the process, many managers from State-owned enterprises found their command-and-control work style no longer worked.

Faced by an ever-swelling population and strains on a public services, large cities and mega-city clusters will have no way of managing themselves unless their officials humbly cooperate with technology companies specializing in cloud computing.

When Premier Li Keqiang declared in his latest local inspection tour that he would like to remove the incapable, and the capable but inactive, officials from their positions, he was certainly not joking.

The country's anti-graft campaign has created an opportunity for its central leadership to introduce a major reshuffle of officials and official organizations.

China can give a huge boost to its society's productivity and innovative power by getting rid of officials unable to learn and adopt the new way.

Indeed, what is the use of talking about institutional change if it fails to reach the level of the people?

The author is editor-at-large of China Daily.

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