Note: Look out for TOC’s first media release at 3pm today, Wednesday, August 27.

Tan Kin Lian / Columnist

The concept of “One Country, Two Systems” was created by Deng Xiaoping to accommodate the absorption of capitalist Hong Kong into communist China on the return of the territory to China in 1997.

This concept worked quite well, judging by the social and economic progress of Hong Kong over the past decade. The social and economic life of the territory progressed and offered a high quality of life to its people.

China has also boomed during the past decide. The concept of a capitalist and free-market economy was applied in many urban areas. China fitted well into the global economy and benefited from the inflow of foreign capital and investments.

A large segment of the population of China continues to enjoy the relative security and low cost of living under socialism. Although prices of the basic essentials have to be adjusted to reflect global prices, there is some measure of protection against the worst effects.

Can this concept work in other countries?

I believe that the concept of two systems, i.e. capitalism and socialism, in co-existence can apply to other countries too. Actually, this is already in existence in the form of a public and a private sector in many countries. It also fits into the needs of the population, as I shall explain below.

In any country, there are two groups of people. The first group prefers the excitement and rewards of the free-market capitalist system. The second group prefers a more stable and secure life, and to be protected from the uncertainties of the market economy.

The second group, which comprises the lower and middle segments, forms the majority of the population. They prefer to work in the public sector and in large companies. They are willing to work hard in return for a fair wage that is sufficient to sustain a reasonable standard of living and have some savings for the future. They do not like the uncertainty of the free market and do not wish to make many difficult decisions in their lives, for example, on how to invest their money or manage their wealth, issues on which they are not equipped to handle.

A mixed economic system offers more choices that meets the needs of both groups of people.


The free-market capitalist system, which is now favored in many countries, has several serious drawbacks which are not well understood. This system requires all businesses to compete fiercely for their share of the market to survive. It is the law of the jungle. It seems to be all right to kill off a competitor, even if undesirable methods are used, so long as it is not against the law.

Some businesses resort to cheating their customers, in order to survive. This goes beyond the need for survival. Some cheat their customers in order to make more profits. The end, namely pursuit of shareholder value, seems to justify the means and is more important than ethical behavior.

People have to compete for jobs. They work long hours to keep their jobs. They are afraid to lose their jobs and face the uncertainty of unemployment. This leads to a poor balance of their family and work life.

Economic theory says that competition will lead to greater efficiency and lower cost, but this is not the only outcome. In practice, it leads to duplication and wastefulness, with too many varieties of the same product and too much excessive capacity in producing products that are not really needed.

If there is less wasteful production, less time is needed to produce these goods. People will have more time for other important aspects of their lives, such as their family and friends. The products that they buy can be made to last a longer time, and not be thrown away too early.

Planning with flexibility

We need an economic system that has better planning. Planning helps to determine the types of products and services that are needed by the people and to allocate the resources to meet these needs. The setting of these national priorities and organising the resources is the role of the elected Government.

There is a similar role in the corporate sector. Companies adopt corporate planning to determine their strategy and use of resources to do their business and serve their customers. They do not let these matters be decided in a haphazard manner.

In recent years, there is a belief that decisions can be best left to the free market and national planning is unnecessary. I disagree with this view.

Advocates of the free-market system quote examples of the negative aspects of the rigid central-planning system adopted by communist regimes in past years.

This does not mean that all planning will lead to this negative outcome. It is possible to find a better and more effective way to plan our economy, to make the best use of the resources to achieve the desired outcomes. It should focus on the strategic issues and provide guidelines and flexibility on how to deal with operational issues.

We need planning to make the best use of human and other resources, such as the number of people needed for the various sectors of the economy. This allows people to plan their careers and their future with greater certainty.

Business ethics

We need a stronger sense of business ethics and purpose to govern our economic activities.

People at all levels should be paid fairly for their services. Professionals and business entrepreneurs can earn more than ordinary workers, but the difference in earnings should be kept at a reasonable ratio. They should not be allowed to earn excessive remuneration at the expense of workers by depressing their wages.

Businesses should offer products at a fair price to consumers. A fair price should be determined by a product’s actual cost plus a fair margin of profits. The business should be encouraged to reduce its cost by operating efficiently, and not by exploiting workers. They cannot make excessive profits by misleading or exploiting the customers. They should be prevented from making wealth through corruption and cheating.


The world has accepted that the capitalist, free-market system is the best way for the past two decades. It is time to reconsider and see if there is a better mixed system that can provide a happier and better life for citizens.


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