Will China be admitted to WTO this round?

Author’s note: This article was written in 4/99. Everyone knows for now China has already accessed to WTO. The Chinese government hoped that access to WTO would speed up reform. The Chinese people worry about foreign competition and job loss. In fact, WTO does bring in foreign investments, alleviate job losses and reform in economy. The reform now much needed is the state sector and the banking sector. The Chinese should pull the foreign forces, such as foreign banks, venture capitalists, and other fund providers to joint force restructuring the battled sectors. It makes the competition keener and the industries will be more vibrant. (12/2002)

China has been knocking WTO’s door for thirteen years. Never before did so many high-ranking Chinese officials lobbying the West for admitting to WTO, will their activities yield results? Can China be admitted as a member of WTO before this millenium close? What are the implications to China and the rest of the world?

Why China was making big concession to US to make way for admitting to WTO? Why is it so hurry to join WTO in spite of inherent problems of unreadiness in several areas such as agriculture, insurance, and banking sectors that will be open for foreign investments? Some propound that in order to keep GDP growth at 7% this year, WTO is the solution. This theory is unfounded, as it will be too late to get result after admission. This theory also underestimated Chinese leaders to be a bunch of shortsighted lot. This returns to my two questions: why China makes big concession and why is it so hurry and they have already waited for thirteen years.
I think the internal severe economic situation cannot be ignored although Premier Zhu denied that China economy was " in the mire" in an interview with AWSJ recently. The official report of GDP growth last year was 8%. However, some thought that this figure was unreliable. Actual economic output fell short of prediction.

To counter deflation and push up domestic demand, China struggles to spend its resources, billions of Yuan on fiscal stimulus. It based on the premise that if GDP growth below 5% would have grave consequences for social stability.

Sagging domestic demand arises due to a change of domestic economy from demand-pull to supply push. Overcapacity resulted excess supplies and inventories surplus. This problem is exacerbated by stagnant and burdensome state enterprises.

Restructuring of ailing state enterprises resulted in growing unemployment rate and social unrest. Loss making state enterprises also reduce government revenue collection. Funds are channeled to meet social objectives; such as meeting unfunded pensions liabilities and providing a safety net for the rising number of laid off workers rather than more productive utilisation.
The fall in export contracted about 7.9 % year on year in Q1 99 due to weak demand from other Asian countries such as South Korea and Japan.

Besides, its banking system is riddled by surging non-performing loans, similar problems as those of the Japan. The non-performing loans are mainly coming from lending to state enterprises. This financial distress is also clogging other financial institutions and credit operatives, freewheeling finance companies and securities house The total banking restructuring bill hitherto can be as large as US $200 billion. If China is to follow Japan footstep, all these costs are to be borne by the government budget, and the public debts to GDP ratio will rise sharply, and whittle down the country’s medium term fiscal stimulus sustainability. Although China like Japan has large reserve as buffer, China has not gone through the scale of banking reform like that of Japan. The losses from NPL can quickly deplete its reserves.

WTO will open up China further. China is currently negotiating with European Union and US to reduce tariff for specific sectors such as agriculture, telecommunication, insurance, banking etc. Certainly, Australia and Japan will follow the queue. All eyes are on this big market, hopefully one can be a step ahead of others during China’s further open up, and compete where they have an edge over the others. Partly, domestic interested parties in these countries wield to have sufficient clout forcing their political leaders to secure these advantages for them. So, I see that the chance for China being admitted to WTO this time round is brimming with hope.
The last unanswered question is what is the implication to China and the rest of the world?
Foreign direct investment will go up, the barrier to trade with other members of WTO removed will attract more foreign investments to China. Comparatively, China has abundant of cheap and good quality human and nature resources, which give them a competitive edge over other third world countries. The only barrier is their lack of transparency in business dealing. WTO will remove this barrier.

Increase in foreign investments will stabilise local currency, reduce unemployment, and alleviate the tension of social unrest. As more foreign goods flood in China market, suitable increase in money supplies, reduction in interest rate will increase domestic spending and curb deflation pressure. The crux of the problem is China does not have a central bank device to control money supply. Probably this can be resolved through open market operation to inject fund to the economy. There are plenty of leeway for the Chinese to improve their life style when money is easy.

Foreign Banks and financial institutions, insurance companies force local bank and local financial institutions to reform faster and catch up with the international practices in order to compete better.

There will be great impact on agricultural sector. China basically is an agricultural country. It should craft long term strategy to compete with the foreign imports. To ensure long term survival of agricultural sector is to the benefit of the Chinese people. Foreign imports should be taken as buffer.

On the other hand, foreign imports will weed out less efficient producers and less competitive products. And more people will join unemployment rank and increase social problems.
Further economy open up also expose the pitfalls in the present political structure which does not adapt to the kaleidoscope of the economic landscape, and will force the Chinese government to reform its governing structure, policies and ensure that they are more align to international practices.

Premier Zhu wooed American professionals to work in China may get little response from Americans unless they are American Chinese. It is disconcerting that why Premier Zhu not look into Singapore for sourcing(I put an ad for myself), Singapore has similar pool of management talents they are western educated ,know Chinese culture better and in character, and it appears more affordable and economical based on China’s current yield and productivity.

Even Jack Welch may have problems managing the largest State Enterprise in China and turn it around, because of the wide cultural diversity. What is work in America may not work in China. The Chinese live under the reigns of communist government for several decades. Although there are profound changes in China, to change people’s mind take decades and generations.
I have colleague from China, living in Singapore for years. The brought up was in China, the mentality is more Chinese than Singaporean even she got the Singapore PR. It was said that the Chinese was only interested in technological skills rather than western management philosophy.
What is the implication to the rest of the world? I have mentioned that the West is eyeing China this big market. Few countries in the world achieve above 6 % GDP growth. The regional ailing countries in this part of the world need to cleverly position themselves to compete with the West and let China piggybacks them for growth. The crucial point is to assess the competency and the strength of the country at large, banking on the vantage point, joint venture with big leagues or becoming their supporting arm.

Learning the experience of doing business in China is of paramount importance. China is changing to meet the western standards. We need to acclimate to local environment to earn economic rent.

Once China is a WTO member, competition will be more on level playing field, and China is forced to walk the chalk and play the rule of the game in any event, and will be more transparent in the deal. And if you dither and lag behind others, you will pay a price not to be an early bird for lack of perspicacity.

The fallen yen saga

Author’s note: This article was written in March 99. Japanese Yen lately has gone up to 120 Yen/dollar. As currency is a relative matter, it is very hard to predict Yen movements. Even though Japanese Minister wish Yen to fall within the range of 150 to 160. However, what is more important is to focus how to lift the sagging economy out of wood should be paramount. For Japan, it is rather complex. The complex economic reality entangles with the web of political culture making the progress of recovery so much tender. The fundamental question the Japanese should ask themselves is what they are going from here? And draw up a blueprint, which is realistic and viable. Engage someone who can plan for the recovery, dragging the footstep only cause the country to pay more debt interest and deflation. (12/2002)

The ferocious waves of Yen devaluation swept through Asia, the domino effect caused the currency crisis stricken countries saw their currency value plummeted precipitately; dollar best value was around 1.46 Yen. Some pessimistic analysts predicted the Yen would easily cross the threshold of 150. However, I read another news said that the true worth of Yen was around a dollar to 95 Yen.

Whether the results were derived from the crude purchasing power parity theory or sophisticated modelling techniques. The volatility of currency value created havoc in the world currency market. Hopefully Behavioural Finance will be able better explain the phenomenon.Yen kept plunging albeit BoJ 's intervention. Panicky countries abjectly urged G7's to coordinate their efforts to prop up Yen's value.

The question is: Is central bank intervention an effective measure to resolve sagging Yen's problem? Yes, it can be a short term measure, but not an effective long term solution.Japan suffered from deflation since early 90s due to asset bubble in the late 80s. The economic problem entangled in political problem exacerbated the economic slowdown.Despite change hand frequently at the helm , none of the political parties have taken bold measures to pep up the economy.

The recent statistics showed Japan economy was already in recession.Japan's economic problems have some similarities compared to that of Asian countries, such as sagging market confidence, increasing unemployment, collapsing asset prices and weak banking systems and mountainous debts at private sector. The differences are Japan has huge foreign currency reserves (current account surplus), large enough to ward off currency speculators and absorb bad debts at banking sector. That gives Japan an option whether to invite capital inflows as compare to cash crunch in Asian countries.

After all, national sovereignty is still prevail in Asian countries, they grudged surrendering their economies to the foreign investors and perceived it as a plot. Japan has probably the lowest interest rate in the world. Its official discount rate is about 0.5%, government bond is about 1.2%. The low interest rate and weak capital market resulted capital outflows making Yen deteriorate than ever. Ageing population and falling prices paint a gloomy picture for corporate growth.

Some Chicago elites urged to increase interest rate. MIT professor Paul Krugman advocated to keep printing money to increase inflation rate and drive real interest rate to negative level, thereby creating new incentivesfor firm to invest. Milton Friedman also for the idea of increase of money supplies. Although they offered incongruous views, they are eminent economists and their advocacy are based on monetary theory. Although I aware that it is generally economist's domain,I wish to view the problem from a different light using common sense.

I reverse-engineered the situation, differentiated cause and effect, and suggest a redistribution of wealth proposition. The main purpose is to counter deflation psychology. This may be applicable to contracting economy. I see the economy encompasses three players; i.e., government, business sector and people, each playing different functions. Government is facilitator and leader,coordinate the growth of the economy and providing the necessary infrastructure for the growth of the economy. The actual growth engine is business sector. People constitute internal consumption of resources. As economy begins to contract, business sector and people scrimp and cut back demand and consumption forecast, it further shrinks economy and this downward spiral start to snowball. The crux is to arrest the situation before it become worse.

Unemployment and reduction in disposable income are the sources of expectation cut back. Dampening demand and growing losses further reduce corporate demand, retrenchment, freeze or cut wages. The economy is shrinking, the business sector and people are getting smaller and smaller in the pie distribution. It does not help to revive the economy. To counter the situation, government should take a lead to redistribute wealth,cut tax, not only corporate tax, because there will be no cash flow impact if company incurred losses, also other related business taxes and levies that effectively transfer wealth from government to private sector.

When economic performance improve, government is clever to impose and revert tax to original position. By doing so, private sector is able to pay better wages to people and use the "extra" resources for growth increasing the multiplying effects. Although government can increase expenditure in infrastructure, that only benefits certain sectors. And these infrastructure expenditure must result in increase productivity (i.e., increase economy output). Redistribution of wealth to private sector increase the velocity of money flows through multiplying effect faster than the public sector. Original demand cut back and retrenchment are inevitable.

As the bottom line turns blue and company has more cash reserves, confidence in private and people restore and will further fuel demand growth. Therefore, government and private sector must be willing to share the pie--redistribution of wealth. Government as leader must be pro-business, take the lead to open new market to create demand, reduce unemployment; for example, revive tourism sector, this will help in airline, travel, Hotel, consumer sectors. Weaken regional currencies certainly an attraction to the west to visit Japan and the region. A deliberate and coordinated plan of regional package tour will certainly help Japan and regional countries. Revived tourist sector will create more jobs and bring in foreign reserves.

Government role is to facilitate growth and explore new opportunities (domestic and export).Of course, Japan has the uphill task to shake up its banking sector. This requires courageous and determination to break up with the old system. I used to admire some of the Japanese systems such as Quality management, Kaizen, Just in time (Probably now scrapped due to traffic congestion),Toyota production system, TPM, Target costing, empowerment and knowledge management. Many of the leading edge companies in the west adopted Japanese companies' best practices. Japanese is also innovative to convert invention to creative products. I hope team spirit will help Japan sail through economic crisis. A strong and stable Yen not only help Asian economy. It is also an emblem of strong Japan economy.

The ferocious waves of Yen devaluation swept through Asia, the domino effect caused the currency crisis stricken countries saw their currency value plummeted precipitately, dollar best value was around 1.46 Yen. Some pessimistic analysts predicted the Yen would easily cross the threshold of 150. However, I read another news said that the true worth of Yen was around a dollar to 95 Yen. Whether the results were derived from the crude purchasing power parity theory or sophisticated modelling techniques.

The volatility of currency value created havoc in the world currency market. Hopefully Behavioural Finance will be able better explain the phenomenon.Yen kept plunging albeit BoJ 's intervention. Panicky countries abjectly urged G7's to coordinate their efforts to prop up Yen's value. The question is: Is central bank intervention an effective measure to resolve sagging Yen's problem? Yes, it can be a short term measure, but not an effective long term solution.Japan suffered from deflation since early 90s due to asset bubble in the late 80s. The economic problem entangled in political problem exacerbated the economic slowdown.Despite change hand frequently at the helm , none of the political parties have taken bold measures to pep up the economy.

The recent statistics showed Japan economy was already in recession.Japan's economic problems have some similarities compared to that of Asian countries, such as sagging market confidence, increasing unemployment, collapsing asset prices and weak banking systems and mountainous debts at private sector. The differences are Japan has huge foreign currency reserves (current account surplus), large enough to ward off currency speculators and absorb bad debts at banking sector. That gives Japan an option whether to invite capital inflows as compare to cash crunch in Asian countries. After all, national sovereignty is still prevail in Asian countries, they grudged surrendering their economies to the foreign investors and perceived it as a plot.

Japan has probably the lowest interest rate in the world. Its official discount rate is about 0.5%, government bond is about 1.2%. The low interest rate and weak capital market resulted capital outflows making Yen deteriorate than ever. Ageing population and falling prices paint a gloomy picture for corporate growth.Some Chicago elites urged to increase interest rate. MIT professor Paul Krugman advocated to keep printing money to increase inflation rate and drive real interest rate to negative level, thereby creating new incentivesfor firm to invest. Milton Friedman also for the idea of increase of money supplies. Although they offered incongruous views, they are eminent economists and their advocacy are based on monetary theory.

Although I aware that it is generally economist's domain,I wish to view the problem from a different light using common sense.I reverse-engineered the situation, differentiated cause and effect, and suggest a redistribution of wealth proposition. The main purpose is to counter deflation psychology. This may be applicable to contracting economy. I see the economy encompasses three players; i.e., government, business sector and people, each playing different functions. Government is facilitator and leader,coordinate the growth of the economy and providing the necessary infrastructure for the growth of the economy. The actual growth engine is business sector. People constitute internal consumption of resources.

As economy begins to contract, business sector and people scrimp and cut back demand and consumption forecast, it further shrinks economy and this downward spiral start to snowball. The crux is to arrest the situation before it become worse.

Unemployment and reduction in disposable income are the sources of expectation cut back. Dampening demand and growing losses further reduce corporate demand, retrenchment, freeze or cut wages. The economy is shrinking, the business sector and people are getting smaller and smaller in the pie distribution. It does not help to revive the economy. To counter the situation, government should take a lead to redistribute wealth,cut tax, not only corporate tax, because there will be no cash flow impact if company incurred losses, also other related business taxes and levies that effectively transfer wealth from government to private sector. When economic performance improve, government is clever to impose and revert tax to original position.

By doing so, private sector is able to pay better wages to people and use the "extra" resources for growth increasing the multiplying effects. Although government can increase expenditure in infrastructure, that only benefits certain sectors. And these infrastructure expenditure must result in increase productivity (i.e., increase economy output). Redistribution of wealth to private sector increase the velocity of money flows through multiplying effect faster than the public sector. Original demand cut back and retrenchment are inevitable. As the bottom line turns blue and company has more cash reserves, confidence in private and people restore and will further fuel demand growth. Therefore, government and private sector must be willing to share the pie--redistribution of wealth. Government as leader must be pro-business, take the lead to open new market to create demand, reduce unemployment; for example, revive tourism sector, this will help in airline, travel, Hotel, consumer sectors.

Weaken regional currencies certainly an attraction to the west to visit Japan and the region. A deliberate and coordinated plan of regional package tour will certainly help Japan and regional countries. Revived tourist sector will create more jobs and bring in foreign reserves. Government role is to facilitate growth and explore new opportunities (domestic and export).Of course, Japan has the uphill task to shake up its banking sector. This requires courageous and determination to break up with the old system.

I used to admire some of the Japanese systems such as Quality management, Kaizen, Just in time (Probably now scrapped due to traffic congestion),Toyota production system, TPM, Target costing, empowerment and knowledge management. Many of the leading edge companies in the west adopted Japanese companies' best practices. Japanese is also innovative to convert invention to creative products. I hope team spirit will help Japan sail through economic crisis. A strong and stable Yen not only help Asian economy. It is also an emblem of strong Japan economy.

The ferocious waves of Yen devaluation swept through Asia, the domino effect caused the currency crisis stricken countries saw their currency value plummeted precipitately, dollar best value was around 1.46 Yen. Some pessimistic analysts predicted the Yen would easily cross the threshold of 150. However, I read another news said that the true worth of Yen was around a dollar to 95 Yen. Whether the results were derived from the crude purchasing power parity theory or sophisticated modelling techniques.

The volatility of currency value created havoc in the world currency market. Hopefully Behavioural Finance will be able better explain the phenomenon.Yen kept plunging albeit BoJ 's intervention. Panicky countries abjectly urged G7's to coordinate their efforts to prop up Yen's value. The question is: Is central bank intervention an effective measure to resolve sagging Yen's problem? Yes, it can be a short term measure, but not an effective long term solution.Japan suffered from deflation since early 90s due to asset bubble in the late 80s.

The economic problem entangled in political problem exacerbated the economic slowdown.Despite change hand frequently at the helm , none of the political parties have taken bold measures to pep up the economy.The recent statistics showed Japan economy was already in recession.Japan's economic problems have some similarities compared to that of Asian countries, such as sagging market confidence, increasing unemployment, collapsing asset prices and weak banking systems and mountainous debts at private sector.

The differences are Japan has huge foreign currency reserves (current account surplus), large enough to ward off currency speculators and absorb bad debts at banking sector. That gives Japan an option whether to invite capital inflows as compare to cash crunch in Asian countries. After all, national sovereignty is still prevail in Asian countries, they grudged surrendering their economies to the foreign investors and perceived it as a plot.

Japan has probably the lowest interest rate in the world. Its official discount rate is about 0.5%, government bond is about 1.2%. The low interest rate and weak capital market resulted capital outflows making Yen deteriorate than ever. Ageing population and falling prices paint a gloomy picture for corporate growth.Some Chicago elites urged to increase interest rate.

MIT professor Paul Krugman advocated to keep printing money to increase inflation rate and drive real interest rate to negative level, thereby creating new incentivesfor firm to invest. Milton Friedman also for the idea of increase of money supplies. Although they offered incongruous views, they are eminent economists and their advocacy are based on monetary theory. Although I aware that it is generally economist's domain,I wish to view the problem from a different light using common sense.I reverse-engineered the situation, differentiated cause and effect, and suggest a redistribution of wealth proposition.

The main purpose is to counter deflation psychology. This may be applicable to contracting economy. I see the economy encompasses three players; i.e., government, business sector and people, each playing different functions. Government is facilitator and leader,coordinate the growth of the economy and providing the necessary infrastructure for the growth of the economy. The actual growth engine is business sector. People constitute internal consumption of resources. As economy begins to contract, business sector and people scrimp and cut back demand and consumption forecast, it further shrinks economy and this downward spiral start to snowball. The crux is to arrest the situation before it become worse.

Unemployment and reduction in disposable income are the sources of expectation cut back. Dampening demand and growing losses further reduce corporate demand, retrenchment, freeze or cut wages. The economy is shrinking, the business sector and people are getting smaller and smaller in the pie distribution. It does not help to revive the economy. To counter the situation, government should take a lead to redistribute wealth,cut tax, not only corporate tax, because there will be no cash flow impact if company incurred losses, also other related business taxes and levies that effectively transfer wealth from government to private sector. When economic performance improve, government is clever to impose and revert tax to original position.

By doing so, private sector is able to pay better wages to people and use the "extra" resources for growth increasing the multiplying effects. Although government can increase expenditure in infrastructure, that only benefits certain sectors. And these infrastructure expenditure must result in increase productivity (i.e., increase economy output). Redistribution of wealth to private sector increase the velocity of money flows through multiplying effect faster than the public sector. Original demand cut back and retrenchment are inevitable. As the bottom line turns blue and company has more cash reserves, confidence in private and people restore and will further fuel demand growth. Therefore, government and private sector must be willing to share the pie--redistribution of wealth. Government as leader must be pro-business, take the lead to open new market to create demand, reduce unemployment; for example, revive tourism sector, this will help in airline, travel, Hotel, consumer sectors.

Weaken regional currencies certainly an attraction to the west to visit Japan and the region. A deliberate and coordinated plan of regional package tour will certainly help Japan and regional countries. Revived tourist sector will create more jobs and bring in foreign reserves. Government role is to facilitate growth and explore new opportunities (domestic and export).Of course, Japan has the uphill task to shake up its banking sector. This requires courageous and determination to break up with the old system. I used to admire some of the Japanese systems such as Quality management, Kaizen, Just in time (Probably now scrapped due to traffic congestion),Toyota production system, TPM, Target costing, empowerment and knowledge management. Many of the leading edge companies in the west adopted Japanese companies' best practices. Japanese is also innovative to convert invention to creative products. I hope team spirit will help Japan sail through economic crisis. A strong and stable Yen not only help Asian economy. It is also an emblem of strong Japan economy.

Premier Zhu’s visit and China Economy

Author’s note: This article was written in 1/99. Premier Zhu will soon retire and leave the political scene. The China economy for the past few years was in the right track. Amidst the global economic slow down, China growth is still spectacularly leading the rest of the world. Of course, many countries when come to public expenditure make unwise value destroying spending. They don’t creatively planning what to spend and how to spend? That is why criticism comes in. China still relies public expenditure to stimulate its economy. This is not a long-term solution. Long term should move towards balanced budget. (12/2002)

I was touched by China Premier Mr Zhu Rongji’s speech in the Q and A session of the "17th Singapore Lecture".

I wish to share some of my view on China’s economic development based on the observation of my visit to China about a month ago.

The greatest controversy is surrounding whether China should resort to fiscal stimulating and devoid of monetarism. Eventhough China has been implementing fiscal policy for several years. There are economists still advocate monetary policy is the only panacea. To reflate the economy, printing money is the only way to get out of the deflationary spiral.

For China case, increase in money supply or lower interest rate certainly will have impact on consumption due to easy money. I did propose reduction of interest rate as a measure in my April’s mail to this forum. However, China has cut its interest rate seven times and has little impact insofar. It seems monetarism does not work in China at least till now.

I come up with the following possible scenarios to explain this phenomenon.

One, Monetary policy take longer time to effect.
Two, China is in the process of transforming its economy from socialism to capitalism. There are many systems still not in place. Therefore, the flow of money is clogging in the channel.
Three, the extension of two, is through my observation in China. The credit utilisation in China is low. Therefore, the benefit of low cost of money is not exploited by ordinary consumer but SOE. Coupled with underutilisation of the marketing 4 Ps, put limitation to the success of the policy.
Fourth, monetary policy is not effective for the cure. Interestingly, Japan has the similar problem, and its cost of capital close to zero. Its monetary policy implemented for years and yielded no prominent results.

Is fiscal stimulus the answer for China economy? My view is China has more legitimate reason than Japan in adopting fiscal spending policy. Relatively, China is a developing country whereas Japan is a developed one. They face different perspectives to pump prime. They should adopt a common choice, which strategically add value to the future economy. Therefore they should evaluate and sift from many projects available and choose ones that fulfil this goal.

Neither do I favor fiscal nor monetary policy. Fiscal policy is a temporary measure strategically to buy time for economic reform to ensure that economic momentum is maintained. That is how Japan jumpstarted its economy and China can maintain its GDP growth rate. Fiscal and monetary do have their strength respectively to cushion economic activities. How far the mass public spending can go on depend on the particular country’s debt capacity. China may also consider tap international funds if it can reduce the counter party sovereignty risk and adopt a shorter project life period and gestation period from fund requirements to fund generation same as the West. It will attract more foreign investors to joint venture in China’s public projects and thereby save more money for other uses.

Unemployment, we used to view it as a threat to social stability, and it is unproductive and impropitious to a nation. Putting money to the unemployed pocket itself is unproductive and should be a temporary measure. China should also see this as an opportunity to formulate its human resources plan and redeploy its human resources. In view of the high development of its future economic developments if it get out of its current economic woe, it certainly requires different grades of workers, executives in different industries at different levels. It should take this opportunity to reform its current structure to train its human resources to fulfil its current and future demand.

As the economic reform goes deeper, or China opens its door further to foreigners and resulting more enterprises go bust due to severe competition and more people are out of the street. Unemployed becomes a common phenomenon. To institute a structure to fine-tune and unleash its current Human Resource supplies becomes all the more important. With this structure, prima facie, China can withstand any setback from the economic reform in the future. It is a price inevitable for economic reform. It gives the social security the country people want and they are more at ease with the change because their rice bowls are temporary broken and they are looking forward for new job opportunities. They know there is a social network that is ready to protect them. They are more confident and willing to spend the current savings for consumption. As everything is in its place, the economy will be back on track.

It can also open up more avenues, such as providing fiscal incentives and aids for the unemployed to migrate to the less developed provinces to fuel growth in those areas and ease the tension in the developed region. It also opens marketing channel to absorb the oversupplies. This is the theory of dissemination that particularly suitable for China. This was what I meant by plenty of leeway for improving lifestyle in China in the April’s mail this year.

I sincerely hope that with the lead of premier Zhu, China will soon out of the scourge of economic woe as those of the Asian economic crisis stricken countries.