Xinhua Article – Real economy, SOEs crucial for development of NE province: Xi

Dear Friend

One world two systems learning and cooperating. Story from Liang Hui – the two sessions

As you read this article you will note the meaning of socialism with Chinese characteristics. It is a reference to the role of the state in working directly to provide support for the people where there are real problems.

In the North East of China there is substantial over-production of steel, coal and allied products. The rust belt. Similar to rust belts in other countries who needed these products in large quantities in the early and middle stages of their Industrial Revolutions but demand substantially reduced as their economies moved away from basic products, exports and simple infrastructure.

In these areas where the pain is being, and will be, felt, it is the State owned enterprises who will lead the efforts to relocate jobs and build new enterprises to rebuild these areas.

This contrasts with western approaches which use the Welfare State and subsidies to keep ageing companies afloat. China will relocate production into global markets that are at earlier stages of development and rebuild modern companies in the rust belt area.

The Chinese are not smarter than us. They simply have spent many years watching and learning from our experiences – good and bad – to help them find their way through these cycles.

But the spreading of prosperity, the creation of welfare is being done whilst trying to avoid dependency.

So in the West the privatisation of SOEs led to substantial offloading of people, which created huge demands on the Welfare States, and on taxation. Whilst we benefitted from competition we have never fully calculated the consequential welfare costs of privatisation – and they are very large.

China is keeping those costs off the State’s balance sheet and developing hands on practical solutions for their rust belt and similarly affected areas.

It is an indication that socialism with Chinese characteristics is similar yet different to our approach in the west. The Chinese approach is more similar to the Western calls for investment in infrastructure and investing in business regeneration but in a much bigger way.

It is not left to retraining and the private sector. It is direct SOE initiatives to solve the problems. The minds of major leading companies are applied to solving the problems of the past and not just innovation and global development.

An interesting approach indeed


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