China Looks to Japan as Role Model : Capitalism: Leaders are concerned about the chaotic mixture of vast, inefficient state companies and burgeoning private enterprise.

As China gropes to find the right model for its economy, many scholars think the best example is the closest--Japan, the only Asian country to become an economic superpower.

They argue that China has much to learn from Japan’s mixture of a market economy with strong bureaucratic guidance, widespread worker participation, low income disparity and wealth in the hands of companies and industrial groups, not individuals.

China should not follow the models of Ronald Reagan’s America or Margaret Thatcher’s Britain, said Feng Zhaokui, vice director of the Institute of Japanese Studies in the Chinese Academy of Social Sciences.

“They were too laissez-faire. Nor should we go the way of Russia, where a strict planned economy system was suddenly abolished, leading to chaos,” he said.

“There is much we should learn from the Japanese experience in which the government has played a key role in directing and guiding the economy since 1945,” Feng said.

Since beginning economic reforms in 1978, China has tried to create what it now calls “a socialist market economy.”

The result is the world’s fastest economic growth and a chaotic mixture of vast, inefficient state companies and burgeoning private enterprise.

Chinese leaders admit they are concerned.

Huge disparities in wealth have sprung up between the prosperous coast and the poorer interior, and corruption and favoritism have let a lucky few get fabulously rich.

Feng’s institute is in a sprawling brick building in central Beijing that was the headquarters of the Japanese army during its occupation of the city during World War II.

The institute’s members are regularly summoned to brief China’s leaders on Japan’s economy, the subject of more research by Chinese specialists than any other foreign economy.

Writing in the People’s Daily, columnist Yan Shanping pointed to three aspects of Japan’s experience that China should use as an example.

In the late 19th Century, the Japanese government auctioned off most major industries, retaining only key sectors such as steel and railways. The government took on the role of regulator and supervisor and in the postwar period developed an industrial policy to promote certain sectors.

Secondly, Japan’s keiretsu system, grouping major companies with hundreds of sub-contractors through stable, long-term relationships, had created the conditions for the modernization of entire industries.

*

Thirdly, Japan’s labor system encourages long-term employment, worker participation in developing products and stresses training and improving skills, he said.

A recent article in Economic Reference News said Japan’s labor system was better than that in Western countries because it gave more authority to lower-level workers and reduced the gap between the work force and management.

Feng said China and Japan have similar historical experiences--cut off from the world for centuries, latecomers to industrialization, overpopulated and short of resources.

*

“The idea that China is rich in natural resources is wrong. In per capita terms, we are below the world average in all resources except coal and rare earth metals,” he said.

“Japan became an open economy again in 1945, we in 1978. It had its high growth period in the 1950s and 1960s, we are having it now,” he said. But to many Japanese analysts it is the differences rather than the similarities that stand out between the two economies.

“We have developed our system gradually since the Meiji Revolution in 1868,” said one Japanese economist in Beijing.

It rests on a stable and efficient tax, regulatory and legal system, public confidence in the law and national institutions and a high level of education and public service, he said.

“Do such conditions exist in China? Are Chinese people prepared to pay taxes? Do they have confidence in the government and long-term stability?” he asked.