Panel of “China in the World System” in Beijing Forum
November 7th, 2009
14:00 pm -15:00 pm
On the afternoon of November 7, the panel of “China in the World System” was hosted in Peking University as a separate section of Beijing Forum (2009). Chaired by Professor Rustem Nureev, this panel focused on China's specifically demanding issues both in the short term and in the future.
It is of particular interest that whether China has laid off the burden of the global crisis. As the first speaker, Wing Thye Woo, Professor of University of California, shares his view on the pitfalls in China's macro-stimulus program in response to the global economic crisis. He fist acknowledges that China's fiscal policies have successfully maintained the impressive economic growth and also helped the neighboring countries to get out of the crisis. However, he then argues that given the shrink of G7 countries' wealth and expenditure, China's export will inevitably suffer in the near future. Equivalently, China's current growth pattern is probably not sustainable. He also shows that the effects of China's policies is intertwined and complicated, since policies that cope with short term problems could probably stimulate other problems in the future. At last, Professor Wing Thye Woo suggests that Chinese government take actions to provide financial support for returned migrant workers and laid-off works to open-up their own business, launch housing program for residents that could not afford housing, and abolish “Hukou” to unify the national labor market.
To learn from China's success in mitigating the negative effects of the crisis, Professor Wan-wen Chu from Academia Sinica in Taiwan asks why China is able to perform better in this subprime crisis. The causes are the pro-active policies of the government or favorable macro conditions rather than its relatively lower internal and external debts or the relatively enclosed financial sectors. The legacy of central planning during the thirty years before the reform and the fact that the central command system has not been totally disbanded are partly responsible. These remaining institutions are reasons for promoting sustainable growth in the past three decades, since China has learned from past mistakes in macroeconomic management. The advantage of Chinese market socialism has three implications for economic theories. The first one lies in the need of the Keynesian economics to manage aggregate demand; the second is lending supports to the theory of Gerschenkron (1962) that economic backwardness may induce latecomers to leapfrog to catch up with the West; the third lesson is the merits of socialist mode of development, which is relatively more difficult to discuss.
Due to official affairs, Professor Deborah Brautigam from American University , the next speaker of this panel as scheduled, could not attend this session in person. He asks Professor Yang Yao to share his understanding of international financial aid with all the participants.
Apart from the effects of global crisis, China's internal problems are also disturbing. To get out of the impacts of crisis, China should spare no efforts to deal with its domestic problems. Professor Guanzhong James Wen from Trinity College claims that the impact of the financial crisis on China's external demand will be long-term. China must find a way to use its own internal demand to fuel its growth. He argues that China's official urbanization rate is lower than the world average level, which is not due to shortage of housing or slow growth in urban infrastructure and development. If China can use the service sector like most other nations instead of using manufacturing sector to absorb its huge rural surplus labor pool, China also can reduce the pressure for revaluation of its currency. However, in order for China to boost its domestic demand, China must thoroughly reform its land system and household registration system. Professor Guanzhong James Wen summarizes that, if China can reform its land system and household registration system, China will find a really sustainable internal source to fuel its long-term growth.
Every speech in this panel provides insights into the interested issues. Guests and participants ask various questions on the financial crisis and China's policies. Some of them also provide their own view for discussion. The panel ends with a complete success.
Panel of “The International Financial Architecture” in Beijing Forum
November 7th, 2009
15:45 pm -17:00 pm
The panel of “The International Financial Architecture” in Beijing Forum focuses on the emerging issues in international financial market. Established scholars from different background share their views and findings with all the guests and participants.
According to traditional development theory, developed countries are the drivers of the global economy while the developing counties follow the developed countries. Having witnessed the rapid growth of developing countries, the whole world would like to ask whether developing countries could develop independently. Professor Sanjay G. Reddy alleges that although whether developing countries will lead the global economy is still not clear, it is definitely true that China could grow as a polar of the world economy. He also points out that China's success up till now could not prevent challenges in the future. To develop smoothly, China still needs to promote technology development and seek cooperation with other developing countries.
Monetary regimes and policies are the focus of the panel. Professor Yiping Huang, from Peking University, provides a prospective account of the international currency system. First of all, change in reserve system means that China has to think again about our RMB exchange system, which is very important for domestic structure adjustment. The second issue regards regulatory framework at the micro and macro levels. Professor Huang thinks that in the past 60 years, what really matters for the economy could be summarized with the two experiments. The first 30 years banned all the free markets, which turns out not very successful. So the second 30 years focuses on the market economy and the growth turns out very successful. But the experiment is only half done. Professor Huang argues that it is true that the goods and service markets have been almost completely liberalized, yet the factor sectors are still suffering severe distortion, such as in the land, labor, capital, and resource markets. Some of these distortions are even caused by the government policies. All these distortions, similar to the policies in pre-reform period, produce a subsidy equivalent. Professor Huang hopes that the next experiment will be the liberalization of the factor markets and also the liberalization of the exchange rate system.
Following Professor Huang's Speech, Professor So Young Kim presents his finding on the reactions of developing countries in East Asia to U.S.'s financial Crisis. He uses different models to examine the differences in interest rate and exchange rate policies among these countries, which provides very solid empirical evidence for the dynamics of international financial markets.
The presentations on monetary policies arouse participants' keen interest. Professor Frank M. Song, from the University of Hong Kong, then talks about the internationalization of Renminbi. He first talks about the current state of international currencies with the help of various figures, which implies the declining importance of the US dollars and the rising influence of Euro. Then he argues that the next issue is whether China should indeed push up RMB to the international front, which leads to the necessity of benefit and cost analysis as for different parts. Naturally it is quite difficult to quantify the benefits and costs, yet in general, the benefits seem to outweigh the costs. Professor Frank M. Song also talks about some prerequisites for the internationalization of RMB, which include economy size and growth, financial market's depth and breadth, and so on.
As the last speaker of the panel, Professor Gang Gong shares his views on the reforms of China's foreign exchange regime. He first summarizes the differences in exchange regimes in developed countries and developing countries. Then he presents his framework of the reforms of foreign exchange regime.
After all the speeches, guests and other participants hold a heated discussion over the interested issues in international financial markets. They exchange ideas and understandings with each other. Undoubtedly, the panel brings fruits for thought for all the participants.
