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What China's Leaders Could Learn From Poland

  • Ex-Polish finance chief tapped for PBOC/IMF Beijing Conference
  • "I understand the politics because I have been there."

When it comes to China’s managing the transition of an economy from socialism to a free-market led system, its leaders could do worse than looking to Poland for lessons.

That’s according to Grzegorz W. Kolodko, a professor at Kozminski University in Warsaw who as Polish finance minister in the 1990s helped oversee the country’s economic revival in the aftermath of the Iron Curtain’s collapse. Kolodko, who is scheduled to speak in Beijing next week at a conference organized by the People’s Bank of China and the International Monetary Fund, advises shaking up the state-owned sector by tackling monopolies and allowing privatizations.

Those calls dovetail with many observers, along with his urging a clean-up of bad debt in the banking sector and restructuring it to allow for greater competition, including from foreign lenders. Less commonly heard are recommendations for China’s authorities to attack rising inequality and spend less on the military, while boosting funds for education and health care.

"They have to make a bold decision to decentralize, denationalize and deregulate the economy even further," Kolodko, who served as deputy premier and finance minister between 1994 and 1997 and 2002 to 2003, said in a telephone interview. "Definitely China can learn from what worked in Poland and what hasn’t worked."

Similar to Poland in the 1990s, China is grappling with how to tackle bloated and debt-ridden state owned enterprises and how to free up the nation’s currency and its capital flows while ensuring that growth remains on track. Poland saw a period of turbulence, both economic and political -- something China has little stomach for, with President Xi Jinping set on keeping the Communist Party at the center of steering the economy.

Even so, Kolodko’s invitation for the April 28 conference indicates interest in the Polish experience. "They consider that Poland is a successful story and they may learn from Poland’s successful experience," he said.

The former Polish minister advocates a policy of "gradualism" rather than forcing through sudden changes that could leave the economy reeling, such as those rolled out in Russia and in the early stages of Poland’s post-communist transition.

The eastern European country went through phases of restructuring that saw closures of everything from coal plants to car factories.  The government lifted price controls, capped public-sector wages, liberalized trade and made the zloty a convertible currency. Entry into the European Union in 2004 gave the economy a boost, and the economy managed to navigate the global financial crisis, though growth has slowed since.

"China can view Poland not as a blueprint, but a case study," Kolodko said.