Essence of a "Harmonious Society" is Lost in Translation

Every 5 years the CPC and Chinese Central Government devise a 5 year plan that will more or less direct the coming five years of development within China. It essentially serves as a road map defining the path the country should strive to travel over the next 5 years identifying areas of focus, specifying industries that should be built up, social issues that should be addressed, ect. The release of the 11th 5 Year Plan (2006-2010), was accompanied by the overall theme "to build a Harmonious Society."

This theme begs the questions, what exactly is meant by "build a harmonious society?" Answering this question is a bit subjective in nature. You'll get a different interpretation depending on who you as.

Below are a couple of interesting quotes from local media as to the meaning behind the theme. I'll leave it to you to draw your own conclusion:

"The resolution highlights the importance, guidelines and goals of building a socialist harmonious society. It puts forward the principles to be followed, the main objectives and tasks for building such a society by 2020, such as further improving the socialist democratic and legal system and narrowing the gap between urban and rural development and between different regions."

"The society in China now is generally harmonious. However, we do see disharmonies happening occasionally. This could be reflected in various gaps in development, between regions, between urban and rural areas, and between other areas. The increasing gaps are the problems we need to solve."

Building a harmonious society is not like building a bridge. How can you plan to have achieved that in 10 years or 15 years? How do you measure success of these efforts? Cultivating the mentalities and attitudes of people takes generations not 5 quarters. It isn't an infrastructure project. So what does this mean?

The best analogy I can think of is the scene in Bill Murray's "Lost in Translation" where he is sitting there shooting the whiskey commercial. There is a Japanese director instructing Bill Murray what to do, how to sit, ect. The problem is, the director is saying everything one hundred miles an hour in Japanese. Watching Bill Murray's facial expressions while the guy is yelling at him in Japanese is worth the price of admission. At the end of the director's 1 minute tirade, Bill's interpreter's say, "he said lower your head." Bill displays a very confused look on his face and responds with, "Is that everything? I mean, it seemed like he said quite a bit more than that." Bill's question is a reasonable one and one we should be asking regarding what exactly is meant by building a "harmonious society."

To many local Chinese, the government's aim with this theme is to try and solve fundamental problems within society, such as the blind pursuit of money. The government wants to cultivate a happy and peaceful culture and society in which people are content. But to me, the first questions that goes through my head is "is that everything? I mean, it seems like quite a bit more."

No one can question the progress of the Chinese economy over the past two decades. The growth and development has been nothing short of phenomenal and unprecedented in modern history. For that, the Chinese leadership should be commended. Having said that, many Chinese like to say "China is different." This statement comes up over and over again, regardless of the topic, when a Chinese person believes a foreigner isn't quite grasping what China is all about. I've stopped taking this personally because I've discovered, in some cases, Chinese people will say this to each other. If someone shows up in Shanghai from another province around China, local Shanghainese will be quick to say "you don't understand Shanghai" or something to that effect. This is a nice way of saying either "I don't know how to answer your question" or "you have no way of comprehending the answer to your questions, so I wouldn't bother wasting time giving you one." To me, every country in the world "is different" so I am not satisfied with this statement as an answer to everything.

To me, China isn't so different. It is much like many other countries in the world. The overreaching goals are to grow economically and provide people with a better life. China just happens to be bigger and have a longer history. Every time someone wants to engage me about the US, I could just as easily say, "you don't understand, the US is different" because it has a smaller more culturally diverse population and it is a younger country.

Regardless of how different China might me, laws of modern economics still apply. There has been lots of chatter both by onlookers abroad and economists/experts within China that China's economy is overheating and something needs to be done to slow growth. To me, this is the essence of the "build a harmonious society" theme for the 11th 5 Year Plan. The Chinese leadership is a sharp group. They realize the economy needs to be slowed down and have reverted to common economic tools to achieve this end such as raising interest rates 3 times in the past year, increasing the required reserve ratio for banks and even stating that many of the domestically listed companies lack the intrinsic value implied by their stock prices and in some cases should be delisted.

Despite these efforts to slow the economy, the China growth engine isn't listening as the economic growth is estimated to have accelerated to 11% in 1Q 2007 increasing from 10.4% growth in 1Q 2006, the local stock market is up over 30% during the 1Q 2007 following a sizzling 130% increase in the A-share market in 2006, a healthy pipeline of IPOs wait to list on the Shanghai Stock Exchange, exports experienced double-digit growth in 1Q, there are over $2 trillion in local savings that continue to be diverted into stock trading accounts to be invested in what is perceived to be a riskless market (oh contrar), the government has $1.2 trillion in foreign currency reserves, and fixed asset investment increased. What is not to like? The Chinese are a smart enterprising group that recognize opportunity when it presents itself.

To me, the translation for "build a harmonious society" is quite simple: slow down the growth by any means possible. Every approach using modern economic tools has been taken to slow growth to no avail. The fact that there are capital controls and a stock market that seems to only trend upwards at a 90 degree angle actually make these tools less effective rather than more effective. So, the approach to slowing growth is a softer one. The idea is to tell people not to focus so much on running after the all mighty dollar. As a result, people might stop focusing so much on making money and the economy might slowdown.

The logic behind the approach is understandable. People are probably listening and saying to themselves "yeah that is a good idea, other people should do that" as they scamper off to the local securities firm to make their next trade and continue ride the stock market tidal wave. Who can blame them? Where else, justified or not, can you get a 30% return in a week? I'd be doing the same if I could trade A-shares.