| OPINION
Bottom-up Financial Reforms
Since the onslaught of the financial crisis, the global economy has confronted an array of challenges to secure robust, balanced and sustainable growth. In confronting these challenges, what matters most are reforms and the resolve to carry them out.
The emphasis seems to be on financial reforms by the Central Government, such as reforms on large commercial banks and on interest and exchange rates.
However, by taking a page from the past we see that a bottom-top approach to reforms by which people can draw on the experience of trial projects as well as a top-bottom approach has done much for China's rapid growth and development.
It is widely believed that financial reforms can only be implemented from the top down, because the spillover effect of reforms in some areas or for some commodities is very strong in a free and vibrant market.
The ultimate effect of trial reforms may deviate from their original intentions, producing a positive or negative impact on neighboring areas. Trial reforms also breed inequality. That is, when reforms are confined to certain areas, or different reforms are carried out in different areas, inequality in resource allocation seems inevitable.
Over the course of China's development, despite the coexistence of the above-mentioned reforms, a top-bottom approach has been more common.
However, it is widely recognized that small-scale trial reforms limited to a region or a city can strengthen economic and social development, promote innovation and maintain social stability.
Local and regional governments show great enthusiasm for initiating pilot reforms and expect all-round policy support by stressing that the reforms are comprehensive, as opposed to the lack of reform momentum in some East European countries.
Why are trial reforms so common in China but rare in some smaller countries? For one thing, the complicated conditions and imbalanced development among different regions in China make it impossible for the country to learn from other countries. Furthermore, internal imbalances are severe in the development of rural and urban areas, the east and the west, and the manufacturing, agricultural and service industries.
In addition, some reforms are so large in scale that decision makers find it difficult to decide whether or not to put them into practice. As a result, reforms usually begin on a small scale. It is a growing process, during which people can learn lessons and make improvements.
During China's early development, when four cities—Shenzhen, Zhuhai, Shantou and Xiamen—were designated as special economic zones, a spillover effect and unfair competition existed because it is impossible to limit the reforms' outcomes to the above four cities.
Nonetheless, for a country as large as China, where it is difficult to carry out changes nationwide, decision makers should weigh the advantages and disadvantages of launching trial projects and encouraging innovation.
Moreover, enthusiasm for small-scale reform should be supported. Both local governments and enterprises—as long as they have the intention to innovate—should be allowed to make attempts, learn from their mistakes and implement changes.
Implementing reform is a learning process. No matter how good a reform looks on paper, defects will emerge upon implementation. Only by learning from failures can future improvements be made.
There is disagreement as to whether related laws and regulations should be put in place before trial reforms are carried out. But the question remains over how rules can predate concrete actions. Some people say China can draw from the similar experiences of other countries or even duplicate a set of laws.
Nevertheless, in certain fields, it is difficult to ensure success by blindly borrowing from others because China now is transforming an economy with severe internal imbalances. In dealing with the problem of legislation and implementation, a choice also has to be made as to whether the central or local governments should be the initiator.
This is an edited excerpt of a speech by Zhou Xiaochuan, Governor of the People's Bank of China, at the International Finance Forum held in Beijing on November 17
THE MARKETS
New Milestone
Tmall and Taobao, the B2C and C2C arms of e-commerce giant Alibaba Group, reached 1 trillion yuan ($160 billion) in combined sales by the end of November.
China's explosive e-commerce landscape has changed buying habits in the country. Around 30 percent of transactions were made in the apparel sector, with total sales hitting 300 billion yuan ($48.27 billion). According to the National Bureau of Statistics, nearly 36 percent of purchases of shoes, clothes and bags were completed via Tmall or Taobao.
Tmall accounted for 54.6 percent of China's B2C business in the third quarter of 2012, and Taobao is leading the C2C market with a share of 94.5 percent.
According to media reports, since 2012, Taobao and Tmall have created some 4.67 million jobs, along with 13 million indirect jobs in areas such as logistics, online payment and e-commerce services.
Visa Waiver
Foreign tourists from 45 countries will be able to enjoy a 72-hour visa-free stay in Beijing from January 1, but visitors without a proper visa will not be allowed to travel outside the capital, the city government announced on November 5.
The policy is aimed at making Beijing more accessible to visitors and is expected to attract more overseas travelers.
In recent years, Beijing Capital Airport has strived to become an international transfer hub. But in 2011, transfer passengers merely accounted for 7 percent of 78.67 million travelers received by the airport, among which international transfer passengers were a paltry 354,000, far less than other major international airports in the world.
NUMBERS
55.6 %
China's non-manufacturing PMI in November, a 0.1-percentage month-on-month increase.
50.6 %
China's manufacturing PMI in November, a 0.4-percentage month-on-month increase.
51.4 %
The PMI for Chinese large enterprises, a 0.5-percentage month-on-month increase.
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