The three most influential schools of thought throughout pre-modern China were Confucianism, Taoism and Legalism, all of which originated between 500 and 2,000 BC. While differing in their approaches to governing a society, they share a common trait in their disdain for private wealth.

While Confucianism never explicitly rejects the accumulation of wealth, Confucius himself lived a rather Spartan life. When his only son died before him, he couldn't even afford a decent coffin. On many occasions, Confucius admonished his students: "Gentlemen pursue ideals in their lives; small people pursue wealth."

Taoism's ideal state divides the world into many small countries where citizens are so content with their lot that they don't harbor any desire to visit or trade with people in neighboring countries.

If for some unexpected or unexplained reason a person comes into wealth, he must immediately distribute all of it freely to other people because, otherwise, that wealth will attract jealousy that could endanger one's own life or the lives of family members.

Legalism is preoccupied with sustaining the rule of government. Hence, confiscating the wealth of rich families, if they are threatening the government's rule in any way, is not only necessary but also proper. Because Legalism was often the real governing theory behind the facade of an overly Confucian ideology for successive dynasties, Chinese history is filled with instances of government confiscating the wealth of families or even killing them after they were judged to have shown even the slightest disregard for arbitrary government rules.

No wonder China had evolved into a very poor country by the turn of the last century. After all, pursuing wealth was unworthy to begin with and possessing it was both wrong and dangerous.

Laissez-faire policy

Chinese economic history didn't have to turn out this way. Sima Qian, a great Chinese historian who lived around 150 BC at the height of the Han Dynasty, had a radically different view toward wealth and economic activity. Sima Qian devoted a long chapter to the subject of wealth in his masterpiece "The Historical Records." After observing that all men in history, including kings and nobles, had sought wealth to their utmost capabilities, he proceeded to advise the then emperor and later rulers that the best way to cope with mankind's natural hankering for wealth was to "let them pursue it."

He didn't elaborate on that very short sentence, but one can deduce from the context that he was referring to something much like the laissez-faire policy that free market economists would embrace some two thousand years later.

The second best policy, he said, was to incentivize people to pursue wealth. And after that, it was best was to educate people so that they wouldn't pursue wealth so single-mindedly.

Further down his list of suggestions was the creation of policies to prevent people from making wealth too freely. The worst possible response from a ruler, he said, was to compete with people in becoming wealthy! Think about this advice carefully. One can't help but admire the depth of Sima Qian's fundamental understanding of human nature and government policies!

Some 2,000 years later, China began to heed Sima Qian's teachings. Under the slogan "to get rich is glorious," China was transformed almost completely in the last 30 years. If anything, some Chinese people have indeed begun to pursue wealth too single-mindedly. They perhaps do need some education from the government or some other sources!

However, following Sima Qian's wisdom is clearly a far better way for China to develop into a well-to-do country than by following Confucianism, Taoism or Legalism. In particular, his warning against governments competing with their people in wealth creation deserves serious consideration today.

Unshackled from a 2,000 years of tradition of either disdaining or fearing wealth, the 1.3 billion people of China are now following their natural inclinations to acquire wealth. The forces unleashed are like a tsunami that has already washed over the economic landscape of the world, and I believe will continue to do so.

Need for rules

It is in this historic context that Shanghai proposed to turn itself into an international financial center some 20 years ago. We have achieved a lot since then. Recently we added the goal of becoming a wealth management center to our international financial plans. But it is our common experience that merely having a lot of people eager to get rich does not guarantee that a country or a city will become wealthy.

There needs to be a set of rules that both allows people to follow their natural desire to get rich while ensuring that no one person's wealth comes at a cost to others. In that regard, Shanghai has just begun and has much to learn from successful international financial centers such as London, Singapore and Sydney.

The article was adapted from a speech Fang delivered at the Sydney-Shanghai Financial Symposium held in Sydney on March 29.