Beijing must learn from Asia's economic crisis

China has won the backing of the International Monetary Fund (IMF) for the tough but necessary economic reforms it plans to implement. The only question is: has the international institution underestimated the difficulties China will face as it puts those reforms into effect? A 25-year development forecast contained in the IMF's World Economic Outlook report was extremely optimistic. The report coincided with the closing of the 15th congress of China's Communist Party, which pledged to continue the country's economic reforms.

Generally speaking, the IMF report seems to be based on China's development in the past. And there can be no doubt that all the achievements of the past two decades were made under the economic reforms begun in 1979 by the late paramount leader Deng Xiaoping. In its own China 2020 report issued yesterday, the IMF's sister organization, the World Bank, urged China to speed up reforms of its state-owned enterprises, saying changes were vital to sustain economic growth.

While this undoubtedly is true, the Chinese leadership must be nimble, alert and creative in resolving the many difficulties that are almost certain to arise as those reforms are implemented. It is particularly difficult to reform a bureaucracy as entrenched, privileged and muscle-bound as China's has been in the past.

Beijing must learn from the recent currency crisis in Southeast Asia. Any country that wants to develop must attract foreign investment. But this must be controlled to avoid the risk of a chain reaction which will hit the whole economy.

China's leaders must also anticipate resistance from hardliners, who have often expressed unease in the past at Deng's "whatever works" philosophy. But President Jiang Zemin has left no room for doubt that he intends to press ahead with his own economic reform policies.

-- The Hong Kong Standard