The Banking Executive Magazine - March 2021

Chinese Education System cautionary example. During its post- 1945 growth spurt in the 1970s and 1980s, the Ministry of International Trade and Industry (MITI) acquired an almost mythical global reputation for the apparent success of its efforts to channel resources toward strategic sectors. Many countries were ad- vised to emulate its model. But in the 1980s, Japan’s real-estate bubble burst, and growth slowed sig- nificantly. As it turned out, many of the sectors MITI supported had not actually succeeded. What had really been driving Japan’s growth was not MITI’s prescience, but a high savings rate and the rapidly increasing edu- cation level of a disciplined work- force – much the same factors that have driven China’s development. Not long ago, China’s leaders seemed to understand the limits of state intervention. In fact, the Com- munist Party of China’s general ad- vice to authorities was to scale back the state’s involvement in the econ- omy, because state-owned enter- prises (SOE) generally remain far less efficient than private firms, and only about one-third as profitable. And yet, while SOEs continue to under- perform, compared to private firms, ISSUE 147 MARCH 2021 the BANKING EXECUTIVE 55