Trust in free markets to create wealth

As a visiting professor in Beijing, I recently spent an evening talking about China's economic development with a group of futures traders at a short executive education course. One thing we all agreed on was that a shrinking workforce and an unbalanced economy are serious obstacles to the chances of China overcoming the middle-income trap that has caught so many promising emerging countries.

How can China create enough value to raise the living standards of its huge population, not perhaps to the standards of the United States, but at least to an average annual income of $20,000?

The answer can only be found in the thoughts of a Scotsman who died more than 200 years ago. Adam Smith's greatness was that he showed us how society, if left to itself and properly regulated via the rule of law, will find the most efficient and productive way to create wealth for its members.