Q4. Do you think China can grab the opportunity to restrict its economy and minimize pains?
The current government has done a great job in terms of identifying that the era of "low cost, high infrastructure investment and export" model of growth is over, and is not sustainable for the environment or society.
The government has clearly spotted that, and therefore is embarking on a series of reforms, one of them, as Li Keqiang has said, is to let the market play a bigger role, and if possible, the government should intervene less. I think that is a good reform.
But for China, as China being so big, so disperse, if one should expect any batch of government to achieve 100 percent of success, I think that is not realistic.
They can achieve better reform, but no single government in China can achieve 100 percent of their agenda, because China is just too big, too complex to do that.
In terms of their success, I think whether or not the government will be successful depends on a few things.
One, it depends on the commitment for reform by the current government, because it is going to be a lot of pressure coming towards them not to do it. There would be a lot of interested parties lobbying against the reform. Can they stay their ground and push forward the reform? Plus, can they navigate the process, in terms of which reform comes first, how far do you go, and when to slow down.
I don't think the government should be one-minded as like only reform. At some point the government may need to adopt a more relaxing macro policy to allow a bit of growth, and then tighten it again to continue the reform, rather than only reform. Because when it is only reform, it will create a lot of pains to the system. I think it would be like, 70 percent reform and 30 percent relax, 70 percent reform and 30 percent relax, that kind of interchange.
And then obviously, you will also depend on the external environment, which doesn't seem to be good with the US recovering and the Europe over the obverse period. The external environment would pose less challenge or stress to the government's agenda for reform.
So, I think they would have some success. One should not expect total reform, because China is too big to achieve that in any given year.
The other thing is also whether or not the people are ready for that. I have said in other interviews that China cannot have a correction without going through a correction. If you want a correction, you need to go through a correction, meaning that you cannot have a reform without pain.
So it's a question of how can you manage the pain? The fear I have is that the Chinese people want a correction without going through a correction, like we want a reform without suffering any pain.
That would be impossible. Therefore, the Chinese people should prepare for reform, and brace themselves, including retraining.
So if I am low-skill labor, I need to retrain myself to make myself employable again. If I am a graduate, I need to reset my expectations in terms of my starting salary.
Therefore, the people have to play a part, the sudden growth of pain is necessary for the right future. They need to invest in themselves in order to be competitive going forward, and rely less on the government. And that would be something the Chinese people need to do, otherwise reform would be tough, because like I have said you cannot have a correction without a correction.
