Date: 22 March. 2009

Xiao Wunan: Global Financial Crisis, Crossroad for China

There is a belief in Buddhism that nothing is good or bad. The crux is in how to understand something. One moment of thought can make a world of difference. The mountain remains the same mountain and the water is the same water, only the frame of mind has changed. The same principle can also help us understand and cope with the current global financial crisis. A slight difference in thinking may either lead to China’s rise in the true sense, or it may plunge China into a quagmire with no way out.

China is confronted with many difficulties, but it has two main problems: one is how to deal with the 4 trillion worth of investments, and the second is how to correctly understand the financial crisis. Other difficulties will basically be solved when these two problems are settled. This article attempts to employ this mode of thinking to “feel the pulse” and “give prescription” for China.

It is very difficult to ascribe the current economic predicaments to the financial crisis. A review of the course of economic growth in China will find that we have been taking the path of “high investment”, “high growth”, “high energy consumption” and “low efficiency”, which can be justly called a “bubble economy”. If this model is continued, including “maintaining the 8% growth rate” because of employment and stability considerations in the current period, there will be more trouble. There are apparent defects at the industrial level and structure of China: enterprises’ lack core competitiveness, scientific and technological progress is inadequate, management and labor quality is poor, the environment is being polluted, and resources are wasted. That is to say, even if no problems occur this time, a disaster will be inevitable in the future. I strongly agree with the practice of Guangdong’s Wang Yang to eliminate backward industries by using the financial crisis to squeeze out the economic bubble. We should be aware that there are too many “hidden rules” and “blindness” in project investment and decision-making in China. Tuft-hunting and black box operations are the rules for “success” of an enterprise, and various supervision and management systems are either absent or exist in name only.

There are some prevailing views among the people, for example, that “one half of project investment has entered some individuals’ pockets”, and “money comes when you bribe the government”. Though such views cannot be simply judged correct or incorrect, from the large amount of corruption cases in recent years, we can see that these problems are indeed very serious. No doubt, the NDRC, the ministries of environmental protection, science and technology, national land and cultural heritage all participate in project planning or approval. However, in actual operation, local governments “crave for greatness and success” and successively launch “face projects”. Some interest groups use administrative procedures to “encircle money” or protect their legitimacy. This leads to strange and even absurd results of many projects, despite “demonstration at each level and control at each step” from conception, planning, design, project initialization to implementation. For example: China holds a large amount of US national debt, joining the US Blackstone Fund and Morgan Stanley, global resource investment and recent M & A of Billiton. How did such ideas emerge? Who on earth made the decisions? “Every year we reflect on our mistakes” yet “every year we make mistakes despite reflection.” For a government that talks about responsibility, isn’t it time to re-examine itself?

The author holds that if both national defense and economic safety are guaranteed, the wisest choice is to invest the 4 trillion, tens of trillions, and even bigger amounts, as well as current foreign exchange reserves and even the whole national reserve to construct a social security system. Of course, it is important to create wealth. However, from another perspective, today’s economic accomplishments in China are made at the expense of many people’s interests, value, and dignity, including various social security rights that they should be entitled to. It is a debt that must be paid. Furthermore, the national wealth in China should not be swept away by Western (mainly the United States) financiers and politicians, or be consumed by certain people by means of “collaborating from within with forces from outside”. The people should be entitled to supervise how taxpayers’ money is used and should be entitled to share the achievements of reform. The national character of Chinese people determines that they are content to be good citizens as long as they have “food”, “shelter”, “clothes”, “wife” and “offspring”. Why doesn’t the government seek this heaven-sent chance to thoroughly solve the problem? If so, the high savings problem, domestic demand problem, and social stability problem would be fundamentally solved.

To correctly understand the financial crisis is the basis of correctly coping with the financial crisis. What position should modern Chinese people take to deal with the financial crisis? That is: to use the malpractice of “drumming while others pass around a flower” or to start “scraping the bone to erase poison” for generations of Chinese to come? This financial crisis is by nature a value crisis, reflecting the bankruptcy of the value system of Western society, especially the United States. They claim that mankind should keep upgrading and expanding their demand for material goods and endlessly depredate the natural world, assisted by their social system, economic system, legal system and technological measures. The conflict is the clash of mankind and nature. Therefore, this kind of crisis is inevitable and irresistible. Chinese culture, especially since Lao Tzu, strives for harmony between man and nature. Therefore, to rethink, to understand the world and lead mankind’s future from the perspective of Chinese culture is the only feasible approach. Regretfully, China’s understanding of the financial crisis is only limited to the level of the financial system, regulatory and legal defects, and wrongly ascribes the crisis to the demand problem resulting from sluggish exports and inadequate domestic demand. The fruitless practice of stimulating demand and driving investments will turn out to be like quenching your thirst with poison, only to aggravate the economic bubble and make the problem bigger.

The “Dream to Reinvigorate the Nation” with Western values over the past 100 years and the negation of our own culture after the “May Fourth” Movement is almost an abnormal path. It is impossible for any great nation or country to become prosperous and strong without cultural revival, moral upgrading, and personality development. Three decades of reform and opening-up depended on Deng Xiaoping’s three major theories: it doesn’t matter if the cat is black or white so long as it catches mice, let some people become rich first, and development gets the last word. The nature of these principles is to unleash people’s primitive greed as a motive force to realize individual goals and social objectives, like opening a “Pandora’s box”. The results go against the original intention of the reform and opening-up. The principles also lack national strategic foresight and the demeanor of a big nation. Chinese civilization created many miracles. For example: China reached the peak of human civilization in the Song Dynasty, and Chinese people have never been exterminated by natural disaster. China always maintained advantage in population, which is inseparable from our brilliant philosophy and medicine.

Watt’s invention of the steam engine marked the inception of modern Western civilization, boasting something that Chinese lack. Modern science and technology, the social system, economic system, and legal system, are “things” that “people with lofty ideals” strive to fetch. However, in midst of the global economic crisis, people suddenly realize that these “things” are the sources of today’s environmental crisis, social crisis, moral crisis, and financial crisis. At this time, we should thank our ancestors for their insight, which helped China survive this disaster. The only thing to fear is not being clear about what we should do and what we shouldn’t do. There’s only a thin line between heaven and hell. A red sun on the horizon may be either setting or rising.

The above words are to clarify the two development goals of China; the short-term goal of how to solve our mentality problem and the long-term goal of how to solve the pursuit of value. In the end, the pursuit of happiness should be the ultimate goal of a society. This may solve the biggest social malpractice in China, i.e., people running blindly about for money. Let the country be full of harmony and enhance its cohesion, just like the transformation from “stillness” to “settlement” mentioned in Buddhism. This will naturally give rise to “wisdom”, with which new ideas, philosophy, religion, and art, including physical technologies and skills, can be created. Consequently, the country will become more creative. With power of sustainable development, the nation will become lovely, respectable, and admirable. Every Chinese person will “become Buddha”!

In recent years, it is widely deemed that Bhutan is the happiest country and most wonderful destination. Chinese civilization has been explaining this for thousands of years. There are two ancient peoples in the world: Chinese and Jews, which both deem filial piety as the foundation of personal development. Why don’t Chinese people pass on their ancient wisdom and assume their responsibility for mankind and history? In some sense, this financial crisis is a crossroad for China.