Wednesday, March 09, 2005

COMMENTS_China will not go to collapse?

My never-met friend Fons told his readers the view on the possibility of China's collapse in the future. As a Chinese, I don't believe the economic system will be destoryed in one night. But I am not sure if a long-term collapse will happen in the future. There is once a ancient Chinese saying: "The rein of a thousand-mile-long wall is caused only by the home of the ants inside".

The company managing problem is one of the "ants homes" if that is the case. Asian Wall Street Journal reported yesterday that China is considering a cap on executive pay at its state-owned enterprises. It quoted the words from Xu Kuangdi, the vice chairman of the Chinese People's Political Consultative conference, saying that regulators are formulating a policy that would limit a boss's pay to 14 tims that of the average salary of a company's employee.

The policy is aimed at reducing the widening gap between wealth and poor in the context of companies. Many employees are now complaining that their salary is going down, while the bosses are only looking at how to earn more money for themselves. According to AWSJ, executives at China's state-owned enterprises used to determine their own pay packages, leading to corruption and lack of accountability. Thought the state-owned Assets Supervision and Administration Commission are trying to regulate tightly on the payment of the executives, the systems of monitoring and punishing are still underdeveloped. The recent frequent corporate scandals have pushed the regulators to do more on the section. The latest annual report of the Supreme People's Procuratorate(in Chinese) said that the most important job this year is to punish the people, especially the senior management, who "ate" the state-owned asset illegally.

The target of the current Chinese leaders is to set up "harmonious society", which will solve the most urgent problem in China if done. In some extent, harmony means equality in the society, while Pareto Efficient(a economy theory created by Vilfredo Pareto) tells that there is an inverse relationship between equality and efficiency. If equality is achieved, how about efficiency?


Fons Tuinstra said...

So, the next book should not be called "China's will collapse" but "China will be eroded". Like that approach.

Amy or koala said...

hehe, exactly. You should consider to write it:)