Reform debate

More than 100 economists, well-known enterprise figures and senior government officials gathered in Beijing in October 1990 at a forum to discuss socialist economic reform, calling for the finding of precise theoretical and practical answers as soon as possible, Chen notes.

The disputes ended two years later after Deng Xiaoping, mastermind of China's economic reform and opening-up drive, made a southern China inspection tour, making his famous conclusion that "planning and market are both economic means."

Chen minced no words in his admission about the government's inexperience and inadequate preparation in carrying on with the reform of price and wage systems in the late 1990s.

Two phenomena having direct bearing on the tossing and turning of the local economy or what local economists termed zheteng, were investment thirst and political performance effect at the changeover of governments, Chen notes.

"Economic overheating, investment expansion and changes of government have a positive correlation," he says. "Once excessive thirst is translated into government action or becomes the objective of government driven by personal gain without correct guidance by the market and rational thinking for development, its negative effect will rapidly swell, thus touching off run-away overheated development."

Thirty years into the economic reform, there is still some truth in this perspective as fixed-asset investment remains the strongest economic engine in comparison to foreign trade and domestic consumption.

By Chen's own admission, in doing business in China, the key rests firstly with the leadership, above provincial and ministerial levels. "Without unanimity of thinking among officials at these levels, work would not be done well."

Being the director of the State Planning Commission, Chen's daily routine was to deal with local governments. When it came to controlling the overheated macro-economy, however, Chen says it was often "the question of economic overheating in the other guy's backyard."

Considering the widening regional disparity in China and the country's closer integration with the global market, the mission of striking a balance between inflation and growth now would be tougher.

(Shanghai Daily October 20, 2008)