When the teacher is wrong, what can pupils do?

• Source: Global Times
• [00:46 September 14 2009]
• Comments

By Tian Wei

While participating in the Summer World Economic Forum in Dalian over the weekend, I noticed one question popped up most frequently.

More or less, it can be summarized as: If the "teacher" makes a mistake, what can the pupil do?

Those who asked the question were mostly from developing and emerging economies and they wanted to know: With the fi nancial system experimented and invented by the West going through one of its biggest crises, what attitudes should be held by the rest of the world, who, as relatively weaker players, used to try hard to get involved in that system and learn from that system?

Now, the established system is being questioned, and developing and emerging economies are wondering how they should react.

Answering that question can be easy, theoretically. There are only a few choices available. On the one extreme, the pupils can close their eyes and continue down the path previously chosen by the teacher as if nothing had happened. On the other extreme, the pupils can immediately despise everything the teacher did before and despise everything that has been learned from the teacher.

Of course, there is also the option that the pupils, feeling inferior before, suddenly are boosted with strong selfconfi dence, and therefore, feel free to do whatever they want, not because they have a perfect track record, but only because the teacher has done it wrong. Unfortunately, none of the above choices sound like what a mature pupil should do.

Whatever choice the pupils facing such a dilemma make would be understandable. After all, the economic slowdown has cut the external demand for China's products, resulting in a fall in exports.

This has resulted in social challenges, such as unemployment. In addition, the financial crisis has posed a threat to the security of China's foreign exchange reserves, which are predominantly in US Treasury bills. The depreciation of the US dollar means that those assets are shrinking, with the possibility of heavy losses if the United States slips deeper into the crisis.

The most devastating thing is the lack of a sense of safety and security. Suddenly, there are no absolute accurate answers in the world's global fi nancial system, as the current answers and principles are under question. That is scary for a country like China when reform of its banking sector is still far from being accomplished.

It is like in an emergency when one needs to jump offthe airplane. Yet you do not know if the parachute, once a well-respected brand, you carry is safe or not. Even after landing, you do not know where to go because there is not an accurate map.

This situation is destined to be a huge bump for others. But for China, it just might not be if the country continues its pragmatic attitude.

From the establishment and success of four special economic zones in the 1980s, to the explosion in town and village enterprises in the 1990s, and today's experiment to establish one of the world's biggest welfare systems, China has never had the luxury of treading a pre-set path toward development.

It has always had to learn from experimentation and to improvise along the way. Huge challenges in the past, such as the reform of State-owned enterprises in the 1990s, created enormous diffculties for social stability and employment.