Comments from the Editor and reviewers:

(a)    It is difficult to be good at everything.  I prefer to work with a team of talented and motivated people.  Will I become the CEO of one of the most successful international companies in the world?  I know that my company will be in the field of Infinite Energy and Flying Saucers.  It will be one of the first and one of the best.

(b)   The lesson I learned from Tseung is that I must understand my own limitations.  Hard work and dedication are not sufficient to achieve success.  I need help from the various sources.  The job of a CEO is not to do everything himself.  The job is to motivate the right people and allocate the appropriate resources.  Make use of opportunities when they knock on the door.

(c)    To be an innovator, one must have very strong self-confidence.  Do you have that self-confidence?  What should you do to acquire it?

Comments from the Editor and reviewers:

(a)    The Mutual Credit idea sounds logical and reasonable.  Will its impact rival that of Infinite Energy or the Flying Saucer?

(b)   Who will object – International Bankers?

(c)    A government can print money to do some infrastructure work.  In mutual credits, two governments can print money to do work in each other’s country.  The openness will reduce corruption.  The experience can be shared.  A country must increase its money supply so that its citizens can be wealthy.  Mutual credits can increase the money supply in two countries simultaneously with pre-planned benefits.

(d)   Can you explain the concept of Mutual Credits to your friends or colleagues?

Introduction

The goal of this article is to provide a concrete plan for Chinese economic engineers to guide the country into the 21st century.  In this vein, we are approaching the topic from the point of view of an economic architect, and will first discuss broad concepts and visions and then outline the necessary steps for implementation.

The broad concepts are somewhat controversial.  They include:

1. We must replace Win-Lose solutions with Win-Win solutions.  China cannot possibly following the doctrine of "Survival of the Fittest" which worked for the West.  China must learn from the Asian Financial Crisis and drop the Win-Lose financial solutions of options, derivative and currency futures.  Otherwise years of hard work and sacrifice could be wiped out within weeks.
2. Money is only a number in some Trusted Financial Institutions.  It can change from positive to negative valuation without any wrongdoing by the individual. We must view Modern Wealth as the Quality and Quantity of Meaningful Economic Activities. 
3. A Country such as China must increase its own money supply.  It cannot just earn it.   An individual or a small city-state such as Singapore or Hong  Kong can accumulate its wealth by the simple process of earning more and spending less.  A big country such as China cannot do that. A very modest goal of 50,000 yuan in savings per person translates to 50 trillion yuan or US $6 trillion.  Raising such money by simply exporting more than China imports would create an inconceivably huge trade imbalance.

1. China should now develop the Experimental Zones as "Replication Masters".  The phenomenal growth of China in the 21st century will be via replication of these zones. The learning and observing phase is over. China should start the process of turning the "city building" art into a "factory style" science.  Every detail will be clearly documented.  There will be no more delay or hesitation due to lack of specifications.
2. China must create Companies as sources of wealth.  By developing a superior entrepreneur-support system, China will be the envy of the world.   Some innovative ideas include paying minimum or standard wages for 3 principals for six months for each startup; supporting Public Investors with 100,000 yuan each to fund the startups; merging capitalism and socialism through the government owning 50% of the founder shares; etc.
3. China must use Mutual Credit or Trade Balance Agreements with other cities or countries.  This powerful mechanism will enable China and other Asian countries to "spend their way out" of the present recession.  At the same time, it will prevent currency speculator attacks. This mechanism can be applied between cities within China.  It can also be applied between China and other countries including Japan and US. A US $2 billion Mutual Credit Agreement between Hong Kong and Shanghai can generate 100,000 jobs for Hong Kong and over 600,000 jobs for Shanghai. .
4. China must expand the relationship selling technique into a science.   In relationship selling, Chinese merchants would not always seek to buy low and sell high.  If a product from another part of China is not the best in the world, an effort will always be made to turn it into the best.  The merchants are encouraged to use the best entrepreneur support system in the world in this process.  No worthwhile projects or improvements will ever suffer due to a lack of capital, information or talent.
5. China must master the many-to-many capability of the Internet.   There is no need to argue whether a project should be approached top-down or bottom-up.  Any one can form his web and then link to other webs.  Re-weaving in multiple ways to present multiple angles and multiple points of view are encouraged.   Any one can propose and receive the cheers and jeers. China will no longer be limited by the vision of its leaders.

Controversial Concept 1 - Replacing Win-Lose solutions with Win-Win solutions

World War I and II were the results of such Win-Lose philosophy.

China cannot possibly copy and follow such Win-Lose solutions to build its wealth. Another World War with Nuclear Weapons will mean the end of the entire human race.  There will be no wealth left for any one.

Some Win-Lose Rules still dominate today's financial markets, such as options, derivatives and currency futures. If a speculator has sufficient financial resources to control the stock market of a small nation, then he can quietly buy call options to prepare for an up leg assault. He then buys stocks aggressively to push the market up and thus profit handsomely from the call options. He can then quietly buy many put options to prepare for the down leg assault. Once he has an excess amount of put options in his possession, he can dump the stock at any price and profit handsomely from the put options.

The Speculator then converts the local currency back into US dollars by mounting an assault on the currency.  The entire currency reserve of the small country can be drained within days.  What is truly amazing is that every transaction is legal under the Win-Lose Rules.  The Prime Minister of Malaysia, Dr. Mahathir Mohamad, has complained bitterly but so far no changes to these rules are in sight. 

Due to the loose control and monitoring, accurate estimation of the cash loss was difficult. Many estimated the actual cash loss to the Asian nations exceeded US $280 billion.   The asset depreciation was in excess of US $3 trillion. US $280 billion is more than the total foreign currency reserve of Japan, which took decades to accumulate.  All these were drained within a few weeks.   An example of such a report was in the China International News Daily on 26^th November 1997.

China must identify such Win-Lose Rules and replace them with Win-Win Rules if it wants to progress smoothly into the 21st century.

Controversial Concept 2 - Money is only a number in some Trusted Financial Institutions.  It can change from positive to negative without any wrongdoing by the individual. We must view Modern Wealth as the Quality and Quantity of Meaningful Economic Activities. 

Money is only a number in some trusted financial institutions. Wealth can change rapidly, from positive to negative valuations in many cases, without any wrongdoing by the individual investor. Economic systems would be better served if our view of wealth came to be the measure of the quality and quantity of meaningful economic activities. This would help stave off such fluctuations by having more realistic valuations.

Many Asian tycoons have had recent painful experiences with the dramatic fluctuations in the current system. Their stock and property holdings in Thailand, Indonesia, and other Asian nations lost most of their value in a matter of weeks.  In such a climate a person who has borrowed or has mortgages on his properties can easily be wiped out. 

For example, a tycoon might have a US $800 million mortgage on a building valued at US $1 billion in July 1997.  The man would be considered creditworthy and had US $200 million to his name.   By Oct 1997, the entire property market in Thailand dropped by 40%. The building would now be valued at less than US $600 million and the owner is considered a debtor of US $200 million. If he had borrowed in US currency and received rents in local currency, he could be forced into bankruptcy.  His net worth turned negative within weeks and he could do little about it.  His many years of hard work and achievement would be wiped out in just a few weeks.

Millions of people lost their trust in the Asian financial institutions during the crisis, and many have put whatever they could into US Financial Institutions. This helped the US economy and further depressed the Asian Economy.

Many economists and mainstream news reports in the West attribute the collapse of the Asian Economy to corruption, mismanagement, and oversupply of the local currency. These may all be true. However, these elements were also present during the many decades of the Asian Miracle. Our interpretation is that there will be dirty linen in the collapse of any organization. China is well known for its corruption and yet it suffered no collapse because its Financial Market was closed and speculators chose not to attack it.

The Asian Miracle before the collapse was due to the important fact that when a country is in catch-up mode, the pace of growth can be much faster than when a country is creating something new. For example, there is no need to re-invent the automobile, which took the West fifty years to perfect. A joint venture could enable domestic production within a decade.

The fast pace in Asia greatly increased the quality and quantity of meaningful economic activities. The Asians thought that they had mastered the art of Modern Wealth. They focused on expansion and speculation. They wanted recognition, such as building the world's tallest buildings.  In the rush, inefficiency, mismanagement and corruption were tolerated, and Asians let their defenses down. They adopted and fell victim to the Win-Lose Financial Rules.

Losing more than US $280 billion in a few weeks meant that some countries lost their entire currency reserves.  Meanwhile, the depreciation of more than US $3 trillion meant many Asian tycoons lost their fortune. The tycoons with mortgages on their properties might now be forced into debt or into bankruptcy.  Decades of hard work and achievement wiped out.  No wonder Asian confidence has collapsed!

So far, the Asian Nations are not changing nor protecting themselves from the Win-Lose Financial Rules.  China MUST not fall into the same trap. 

Asian countries should focus on increasing the quality and quantity of their meaningful economic activities. The IMF practice of closing down industries, creating high unemployment, opening the country further to the Win-Lose rules is causing more damage and will retard the progress of the Asian Countries.

Controversial Concept 3 - A Country such as China must increase its own money supply. It cannot just earn it.

This is one of the most important concepts for China to master if it is to progress into the 21st Century.  The prudent way for an individual to accumulate wealth is to earn more than he spends.  He can thus accumulate wealth or increase his investments in the financial institutions of his choice - banks, stock brokerage firms, properties, etc.

However, a country such as China must view money differently.  For example, if we set a modest goal that the average Chinese citizen will have a saving or asset of 55,000 yuan ten years from now.  Where would the money supply or asset come from?  The increase of 50 trillion yuan (50,000 * 1 billion), or US $6 trillion, cannot possibly come from exports alone.  The buyer nations will not tolerate such huge trade imbalances.

This means China must look for ways to increase its wealth from within. Printing money recklessly without justification will cause intolerable inflation and will give speculators a good excuse to attack the currency. Solutions such as mutual credits (more on mutual credit later) and creating companies as a source of wealth must be implemented.

Implementation steps

Step 1 - Use of Experimental Zones as "Replication Masters"

China has been extremely successful in the use of Special Economic Zones such as Shenzhen and Shanghai. This should be continued. China MUST not open up completely before it is ready.  If the dirty linen, corruption and poor business practices which are now plaguing the rest of Asia, are not cleared up, then trust will evaporate.  In such a situation, China could collapse suddenly, perhaps even within the span of a few weeks.

Previously, the Special Economic Zones were used by Chinese government economists to learn and to increase understanding.  Now the Special Economic Zones will be developed as "master cookie cutters" with the aim of rapid replication.  These "master cookie cutters" will be used to clone other zones. 

China may have many cities that look like Shenzhen or Shanghai with almost identical buildings, shops, facilities and infrastructures.  This cloning or replication process will make China the envy of the world in the 21st century.  The growth rate will be in multiple digits for the foreseeable future.

China must have the mindset that spending 100 million yuan in building roads in the Special Economic Zones is increasing the wealth by 100 million yuan.  Such accounting is acceptable provided that all resources in building the roads come from within China. (Foreign investors would expect a return on their investment and the money paid to them would have to come from the Chinese economy.)
Printing and circulating the extra $100 million to the contractors and the workers is good and necessary if the Chinese citizens are to be wealthy.

If the increase in money supply is open and it is properly communicated that the increase is backed up by real increases in resources and products that support the strength of the currency, then there will be no danger of runaway inflation. The citizens will support it wholeheartedly if they know that 50,000 yuan is targeted to flow into each of their pockets. This strategy must be discussed openly and promoted properly to citizens and trading partners both within and outside China.

The following steps will highlight many ways in creating wealth and putting more money into the pockets of Chinese citizens.

Step 2 - Creating Companies as a Source of Wealth

There will be Entrepreneur Support Policies which surpass anything practiced today.  The proposal is as follows:

Part A - Government Funded Facilities, namely:

1. Provide Free Space.
2. Conference Rooms and telephone answering services.
3. Fax, Copiers, and Computers with internet access
4. Access to volunteer lawyers, accountants, business people, and entrepreneurs
5. Free Seminars and/or recordings

Part B - Infrastructure support, namely:

1. The Chinese Government will own 50% of the startup company in return for providing the above facilities plus grants for the "Public Investors" (more on Public Investors later).
2. The company may sell additional stock, increasing the number of shares by up to 100% and thus diluting the entrepreneur's and government's holding to 25% each, to raise working capital for the company.
3. Provides a qualifying standard for startups, such as evaluating the business plans, and checking the background of the entrepreneurs.
4. Recommends a list of qualified startups or spin-offs for the "Public Investors," wealthy businessmen, and venture capitalists.
5. Provides Open Information Computer Systems to build public trust in the system. The many-to-many capability of the internet will be heavily used, allowing for public and open discussion about the companies.

Part C - Additional Enhancement

1. A draft business plan must be completed before the Government (or Committee) will provide the facilities.
2. Companies may have the government pay standard wages for a period of up to six months for as many as 3 principals for each startup. These three employees are to work on the development of the business plan, thereby increasing the chances of a solid, well thought out plan.
3. The Government may sell or use some of its shares to motivate others to help in the startup. Officials may own such shares provided the information is made public. There will be no accusation of conflict of interest. It will be seen as a sign of confidence by these Officials.
4. The draft business plan may be kept confidential at the request of the entrepreneur but if two or more draft business plans contain similar ideas, the Government (or the Committee) may optionally get the two groups together and combine their efforts.
5. Once the business plan is approved, it will be made public. The principals will be encouraged to work as if there were no tomorrow to develop the company.

Part D - Who are the Public Investors

1. Adult citizens in the Experimental Zone will have to pass a Public Investor Examination.  This examination ensures that the citizen is familiar with basic investment skills such as reading business plans, using information from newspapers, the internet, etc.
2. Each Public Investor will be entrusted with a grant of 100,000 yuan (Chinese Dollars) or approximately US $11,000. A recommended number of new Public Investors is 500 per month for a city the size of Shenzhen (population of about 2,000,000). The interest will be a simple 3%. All transactions will be open to the public via the internet.
3. If a Public Investor makes money, he must repay the grant totally before he can withdraw and enjoy any of the profit. Once he repays the grant, he is free to do whatever he wishes with the stock or the cash. It will be his money.
4. If the Public Investor loses money, he may repay from his own savings or do some community work, including discussion and publication of his experience. The grant will then be written off.

Every citizen can be a Public Investor once in his lifetime. If there are more qualified applicants, 250 of the "Public Investors" will be the winners of the dummy trades on the computer system (essentially a stock game to train investors) and 250 will be the winners of a random lottery system. Losers will automatically qualify for next month's lottery.

Part E - The Implications

1. Encourage the dreamers, visionaries and entrepreneurs to be millionaires so that they can maintain and fund their companies without further direction or subsidy from the Government.
2. Develop many investment-minded citizens who understand the workings of the investment system. Hopefully, they can stand the inevitable financial storms without the usual panic.
3. The Government invests 50 million yuan every month for startup or spin-off companies. This can be matched by any amount of investment from private banks, venture capitalists, investment angels and foreigners. The foreigners are anybody outside the Experimental Zone. They may be of any nationality.
4. The Government (or Committee) would have ensured that all recommended ventures are legal and properly prepared. Any failure will not be due to scams or gross inadequacy of the founders. 
5. The actual return on such investment is expected to be 500% or more when these companies go public. The entrepreneurs will become millionaires who at the same time are creating at least the same amount of wealth for the State.  This effectively merges Capitalism and Socialism, and is the power of creating companies as a source of wealth.  Many citizens will be happy holding shares instead of cash.

Step 3 - Develop Mutual Credit or Trade Balance Agreements with other Cities or Countries

Conceptually, the Mutual Credit Arrangement is easy to understand. Two parties exchange goods or services of equivalent value. Both sides will have roughly equivalent meaningful economic activities, creating a win-win situation. The earliest barter systems have the above elements.

For example, let us presume that Hong Kong and Shanghai plan to do a Mutual Credit Agreement worth US $2 billion in 1999. The Hong Kong Government sets aside Hong Kong dollars to the equivalent of US $2 billion (whatever the exchange rate is at present). The Shanghai City Government sets aside Chinese dollars or yuan.

The set aside amount can then be used to guarantee to the participating Hong Kong and Shanghai merchants that no matter what fluctuation in currency might occur, a fixed and guaranteed exchange rate will be used for their transactions covered by their Mutual Credit Agreement.

Let us examine the impact of a US $2b Mutual Credit Agreement for Hong Kong. If we simply divide the sum of $2b by $20K (assuming US $20K is the average Hong Kong Salary), we get 100,000. This means 100,000 jobs for Hong Kong. The impact to the total Hong Kong revenue is roughly 1.7% ($2b/($20,000 * 6m)). Would Hong Kong reject such a win-win proposal?

The impact to Shanghai is even more dramatic. The average salary is only US $3,000. This translates to 670,000 jobs ($2b/$3K).

A step-by-step process would be as follows:

1. The Hong Kong government gives HK $(2b * 7.7) where 1 US $ = 7.7 HK$ to the Shanghai City Government. This is the amount equivalent to US $2 billion but the currency in the hands of the Shanghai City Government is in HK$.
2. The Shanghai City Government gives (2b * 8.4) yuan where 1US$ = 8.4 yuan to the Hong Kong Government.
3. A qualified Hong Kong merchant within this agreement plans to buy 10 million yuan of clothes from a qualified Shanghai merchant. The Hong Kong Merchant buys the 10 million yuan from the Hong Kong Government at the fixed exchange rate of
        1 US $=7.7 HK $= 8.4 Yuan
4. There will be no risk due to fluctuating exchange rates. In addition, other non-money making or research type projects that are "meaningful" can be funded. This is the concept of "spending our way out of recession”.
   Hong Kong can be thought of as giving Shanghai US $2 billion to spend on Hong Kong made goods or services. Shanghai returns the favor.
5. In reality, the amounts are offsetting. Hong Kong does not need to physically deposit the Hong Kong dollars into Shanghai and vice versa. The numbers can just be stored and displayed on computer systems. Every one can see the offsetting amounts and the type of projects involved. Such openness will stimulate more ideas. It will be a model for the future Mutual Credit Arrangements.

The meaningful economic activities covered within the Mutual Credit Agreement may be the traditional money-making trade activities, such as:

(1) Manufactured Goods
(2) Tourism
(3) Re-exports
(4) Agricultural Products
(5) Training and Consulting
(6) Entertainment
(7) Investments
(8) Any other legal, meaningful economic activities

Some non money-making cultural activities such as student exchanges, joint conferences etc. may also be considered meaningful economic activities. The Shanghai City Government can provide interest free student loans for their students to visit and enrich their education experiences in Hong Kong. The "foreign currency" is already guaranteed by the Hong Kong Government. The reverse also applies.

Some research activities that usually have low priority can now take place. Examples of this include studies on the psychology of the single child; the social needs of the single child parent; the impact of the internet on the school systems; the interesting places for tourists to visit, the opportunities for the restaurant industries; the opportunities for the entertainment industries; the opportunities for the fashion designers; the opportunities for the software industry; the opportunities for franchising; etc. etc.

In times of recession, we have to "spend" our way out.  If we "spend" the right way --such as doing much more opportunity exploring-- we can get out of recessions much faster. The individuals who lost half their fortune in the Asian Financial Crisis would not be likely candidates to fund "non money-making" or "research projects". The Public Sector or the Government must step in.  In a Mutual Credit Agreement, Hong Kong "spends" on Shanghai and Shanghai "spends" on Hong Kong. We not only stimulate the economy but also generate good will at the same time. Isn't this a Win-Win situation?

The merchants and individuals in a Mutual Credit Agreement still think and do their transactions in money terms. They have the assurance of a fixed exchange rate that ensures stability. They also have the guaranteed payment from the Governments that already "hold" the needed currency.

Any company or organization that wishes to participate in the Mutual Credit Agreement needs to go through a qualifying process to ensure that it can deliver the goods or services. Once qualified, their information will be available on the computer systems. Any trade agreement reached will also be recorded and displayed on the computer systems. The offsetting amounts can be updated in real time.

This Mutual Credit Agreement will stimulate the economies of Hong Kong and Shanghai and increase the work ethic of their citizens. With US $2 billion to be had, the entrepreneurial spirit of the two cities will increase, and the economic activities which result are likely to exceed the money initially invested.

With Mutual Credits, there is no currency flowing outside the two parties for the Speculators.  In reality, the set-aside amount can just be numbers on the internet waiting for the merchants to do offsetting deals.

The foundation behind Mutual Credit Agreements is trust. For example, while Thailand does not have US $2 billion currency Hong Kong or Shanghai can still have a Mutual Credit agreement with Thailand valued at US $2 billion. Instead, the guarantee is that the minimum of meaningful economic activity will be worth at least US $2 billion to both parties.

Shanghai and Shenzhen can have Mutual Credit Arrangements with each other and with other Chinese cities. This means that the meaningful economic activities within China can be greatly increased without fear of inflation.

The increase in money supply is tied to increases of economic activities between cities. Chinese citizens can become rich through internal mechanisms! They have to work hard and in a clever way to earn it. Their increased capability easily justifies the extra supply of money.

So long as the overall balance of trade is zero or slightly in China's favor, there will be no excuse for any attacks by speculators. China MUST control its currency and build trust via open information systems. The Win-Lose Rules will not be allowed in the Experimental Zones and, hopefully, banned in all of China.

This Win-Win solution can be applied to any trading partner including Japan or the US. It will be one of the top trumps in the Trading Game. China MUST master and perfect it.

Step 4 - Develop ‘Relationship Selling’ into a Science

Let us examine the following example:

Suppose we are an importer who sells cattle from other parts of China in Shanghai. We can see that the cattle we buy are not as big or as well fed as the ones at other agricultural shows. We can bring up this point and use it at the bargaining table to drive down the price of the cattle. We follow the buy low sell high philosophy.

Alternatively, we can use the Relationship Trading technique and talk about how the cattle can be improved. We can talk about how a win-win scenario can be established if we can help to introduce a new breed, improve the feed, use newer technology, etc.

We may even go one step further and talk about entrepreneurial support as discussed in Step 2. We can talk about developing a business plan in an entrepreneur support center, getting Public Investors or other private individuals to pump in capital and exciting the General Public to prepare for listing as a stock exchange company. We can get partners from the agricultural schools - let the students do the vigorous research and stimulate them to become entrepreneurs.

Thus, even if the introduction of the new breed and the new technology costs $100 million yuan, investment capital will be available.  The Chinese citizens must treat such investment as investment into their collective future.  The new breed can be marketed not only to Shanghai but also to the rest of China and even to the rest of the world.  Chinese merchants must change their habit of hoping to finance operations via earnings or borrowing.  The right way is to team up whenever possible. Japan Inc. was successful.  We should think in terms of Hong Kong Inc., Shanghai Inc. and even China Inc. In conjunction with the greater monetary supply the Chinese Government will provide, the citizens will essentially be investing new money into new ventures. With the success of some of the ventures, the new money will have created new, real wealth, and the money's value will be supported by this new wealth. In this way the whole country can be enriched.

We can apply the same principle to pigs, chicken, ducks, apples, oranges or any other products. How can Shanghai or other Experimental Zones be short of jobs? Not all new ideas are high technology.  There are opportunities which can be implemented and that only involve low technology which has relatively little risk.

This mindset of "I scratch your back and you scratch mine" will create the next wave of very meaningful economic activities for China.  It will build China's image as the Win-Win solution provider, and Chinese citizens will see double digit percentage increases in their personal wealth.

Relationship selling coupled with Entrepreneur Support in a Mutual Credit environment virtually guarantees success for the Experimental Zones. As soon as one or more Experimental Zones are developed into "model cookie cutters," China can churn out dozens more.

If the increase in money supply (say, $50 trillion yuan) in the next ten years is tied closely with the increase in the quality and quantity of meaningful economic activities, there will be no danger of runaway inflation. China would have thousands of "Public Investors", entrepreneurs, business tycoons and civil servants studying and supporting it.  With the "cookies" popping up everywhere, the confidence of the Chinese will rise quickly. 

If the Chinese drop the Win-Lose Rules and adopt the Win-Win Rules in both domestic and international situations, they will be seen as the Win-Win solution provider. They will trust themselves and their own financial institutions.  And China will become the wealthiest nation in the world.  

It cannot, however, succeed by opening itself up to competition immediately. China must first improve its own products and business techniques through these methods outlined above before it can successfully compete with the West. Therefore, not only are we creating a level playing field for China, but also we can in the process train the players (the business people) to the level which they will need to be able to compete. At present, the calibre of Chinese players is nowhere near competition level. Most don't even understand the rules!

In the long run, China will open up its markets completely to competition, but not before it is prudent to do so. Both the advantages and pitfalls of this policy can be seen in Japan. Japan Inc. grew because its small companies were encouraged to compete against the world, not against each other. However, after many years the domestic infrastructure remained too heavily protected by relationships built between Japanese companies that consumer prices were extremely high. When Japan opened to the supermarket style of the West, many traditional small businesses failed -- causing the present Japanese economic crisis.

Therefore, China should protect its industries and support them and help them grow -- and then cut the strings and let them compete fully with the world and with each other.

Step 5 - The Web Way

The Web Way of openly developing ideas in a many-to-many environment is the way of the 21st Century. In the old days of software development, one was supposed to do a thorough system analysis and attack the problem from the top down. When a problem was too complex and involved too many factors, the analysis phase could take months. Sometimes, the analysis finally completed, the business environment had already changed, making the work done irrelevant.

With the Web Way, we just start anywhere in solving the complex economic problems in China. We just pump out the ideas and the proposed solutions as fast as possible. Let anybody jeer or cheer. Link to other webs to form a bigger web. Some people will attack the problem from the top down. Some will attack the problem from bottom up. Some will attack the problem sideways. Some will insist on a global vision. Some will insist on detailed, practical solutions. The important element is to share the ideas early. If the ideas were ill advised, then take the jeers and upgrade the ideas.

With Experimental Zones, the Chinese leaders do not have to worry about dirty linen. They can start clean or openly acknowledge that there will be dirty linen in the Experimental Zones.  One of the challenges is to clean the dirty linen.  Let the experts analyze the problems and propose the solutions.  Let these experts compete. Any one can propose and present his vision. There is no need to wait for the direction from leaders. In other words, China will never be limited by the vision of its leaders. So long as there is one clever Chinese or one friendly American proposing great ideas, China can surge ahead. 

With the Web Way, there is often no need for formal plans nor deadlines for many projects. Once the project ideas or challenges are raised, many experts will try to crack them.  When the concepts are clear, we can write proposals, followed by formal bidding.  China can easily contract the proposal writing to the contributing experts.   This will attract the interest and participation of many experts.  The Experimental Zones will not be short of ideas, information, knowledge or special skills if the leaders are willing to tap the Web.  

Summary

It is easy for China to maintain a high growth rate as it is in the catch-up mode.    However, it is clear from the Asian Financial Crisis that copying the Win-Lose rules from the West will invite disaster.  Decades of hard work and sacrifice can disappear in days.  China has to open up slowly.   China must identify the Win-Lose rules and replace them with Win-Win rules.  Some Win-Lose rules are options, derivatives and currency futures.  Some Win-Win rules are Mutual Credits, Relationship Selling and Creating Companies as a Source of Wealth.

China should continue its policy of using Special Economic Zones such as Shenzhen and Shanghai. However, the emphasis can be different.  Previously, the emphasis was on learning.  Now the emphasis should be on producing the replication masters.  The next phase of economic activity for China is likely to be the cloning from the replication masters.

We discussed many innovative proposals which cab be readily implemented, such as:

1. Developing the Special Economic Zones as replication masters.  The cloning process will generate the phenomenal growth for China in the 21st century.
2. The setting up of "Public Investors" each with 100,000 yuan to invest. There will be no lack of capital for well-conceived projects.
3. Government acting as Venture Capitalist owning 50% of the startup shares. This effectively merges Capitalism and Socialism.
4. Use of a US $2 billion Mutual Credit Agreement to provide 100,000 jobs for Hong Kong and probably more than 600,000 jobs for Shanghai.  This technique will also prevent speculator attacks.
5. Promote Relationship Selling that can easily get 50,000 yuan into the pocket of every Chinese within 10 years.  This technique will enable China to get the best products and services.
6. Increase the money supply by 50 trillion yuan without fear of inflation.  The increase is internally generated instead of earning via exports.  This technique will make China the wealthiest nation in the world.
7. Using the many-to-many capability of the internet to get international support. Some startup companies such as ‘VOICE’ are planning to participate and to become the Visa of International Commerce earning a 1% fee or more. 

The Chinese Economic Architect has now presented the blueprint.  The Chinese Economic Engineers will have a busy and fun time implementing it.

Comments from the Editor and reviewers:

Innovative ideas do not need to be restricted to science.  The above Blueprint for the Economic Development for China in the 21^st Century article demonstrates this.  Ideas in the field of Economics, Social Science and Philosophy do not need experimental confirmation.  Many new ideas (or unpolished diamonds) can be proposed.  The ideas presented in this section are all very impressive.  But the one that strikes me most is the new roles of Rulers.  They are no longer just defenders from other Rulers.  They are a key element in defining, implementing and maintaining meaningful economic activities.  Money is just a number in trusted financial institutions.  The Rulers or Governments are responsibly in maintaining these trusted financial institutions.  They are responsible for increasing the number (money supply) so that the citizens can all be wealthy without the need to rob others.

Comments from the Editor and reviewers:

(a) Tseung had his share of bad health.  The second stroke almost destroyed his brainpower.  Or did that allow his brain to redevelop and reach new heights?

(b) One should never despair.  Miracles do happen.  Age did not seem to have an effect on the innovative concepts from Tseung.  Physically, he could not run or play tennis.  His swimming was more like floating and gently kicking his arms and legs.  However, his innovative ideas and scientific insight are still impressive.

(c) Have you had blessings in disguise?

Comments from the Editor and reviewers:

(a)    Tseung finally moved back to Hong Kong. 

(b)   Is the environment better in Hong Kong than USA for innovators?  The New Energy and Flying Saucer inventions have major economic and political implications.  In the USA, Tseung might get funding similar to the 225 HP Pulse Motor.  His work would be treated as confidential.  None of it would probably be published.  (There might even be the worse fate of disappearing from the surface of the earth.) 

(c)    Hong Kong might be the best place as it is one of the freest cities on Earth.  Hong Kong is never famous for it innovation or scientific achievements.  Citizens care about money above everything else.  The presentation and internet posts from Lee and Tseung were initially treated as jokes.  One of the semi-government officials even said the following to Tseung: “After you have won the Nobel Prize, we shall fund and support you”.

(d)   Can you think of one idea that can change the economic future of your country?  Write it down and share it with your friends or post it on the internet.

Comments from the Editor and reviewers:

(a) The Book on Economic War was written to stimulate.  The Vietnamese Officials appreciate it more because someone important introduced it to them.  Do we need someone important to introduce this Book on Innovation? 

(b) Or will the working electricity generator be sufficient to make this Book a best seller?

(c) Is it likely that a small Country takes the ideas and technologies outlined in this Book and changes the future of the World?  Is it possible that powerful countries like the USA, China and Russia focus too much on classifying such technologies as top secret that they actually fall behind?

(d) Can you explain the concepts of mutual credits, meaningful economic activities, sure win businesses now?  Do you think that such powerful concepts can replace the theory of survival of the fittest in the political world?