Last month there was a significant article in China Daily strongly suggesting that Beijing will model some of its plans on the Tracker Fund set up by the Hong Kong government last year to deal with the massive volume of shares it bought during its successful stock market intervention against currency raiders in 1998. The intervention was of the order of 15 billion US dollars. It was possible only because of the large accumulated assets of Hong Kong's government. Anthony Neoh was formerly chairman of HK's Securities and Futures Commission. He is now significantly adviser to the China Securities Regulatory Commission and his press conference and interviews last month appear to be highly authoritative. Certainly this is capitalism, but it also indicates state policy at a high level trying to foster an increasingly flexible market but manage a) growing social security needs, and b) China's place in a turbulent international economy. Perhaps it is national capitalist, perhaps new democratic, perhaps "new economic". Millions of laid-off workers are not getting adequate welfare payments and some pensions remain unpaid. Last December Beijing announced it would cut its stakes in more than 900 firms listed on the Stock Exchanges from 62% of total share capital to 51%. Its efforts however to off-load shares fell flat because they were overpriced and the market feared other sales would lower prices generally. The government wants to use cash from these sales to build a social security net and to strengthen crucial industries once China enters the WTO. At the same time the reports argue it want to give non-State investors a bigger say in corporate decision making to increase industrial efficiency [or the efficiency of finance capital ?? - CB] Anthony Neoh's contribution was to suggest that an index linked fund could help. China will be exploring a nationwide unified stock index as one possible model for a national version of the Hong Kong tracker fund. Neoh also argued that such an index could be used for futures trading. He predicted that the index would be complied in six months and the fund, if approved, could be launched as soon as 10 months. He stressed that such a fund did not affect the normal operations of the stock market. Crucial point. Clearly therefore his press conference and his telephone interview with the Hong Kong desk of China Daily had the approval of the national government and was intended to fly a kite. It is clearly both a response to the challenges of globalisation and the entry to the WTO, and also a way of the national government having some control over the economy in a cohabitation with finance capital both domestic and overseas. The use of stock funds for social security echoes the practice of pension funds in the west, although nominally this tracker fund would be in the hands of the government. Similar political controversies exist between Clinton and the Republicans about the investment of government surplus in the stock markets. While China's model makes all sorts of compromises from a socialist point of view, it may still retain the possibility of the government shaping the nature of national finances. It would also be a way of the state fund benefitting from an increase in share values. In what way therefore would such a tracker fund differ from a gigantic state pension and social insurance fund in the west? Does anyone have more specialised knowledge of what may be an important aspect of China's economic transformation? Chris Burford London
