Professor Wu Jinglian (bio) is a renowned Chinese economist and one of the leading figures in China’s economic reform. He came to Hong Kong University yesterday and delivered a public lecture named “Comprehensive Plan and Top-Level Design for China’s Reforms”. The following points are what I found the most interesting in his speech:
1. The meaning of “comprehensive plan”.
The term is borrowed from network architecture and was originally referring to a comprehensive initial plan for a big complex network in order to ensure the smooth functioning of the system. In the context of China’s reform, the expression can be viewed as a retrospect and careful investigation into the past thirty years of “crossing the river by touching the stones”. Today “the water is too deep for us to touch the stones”, as noted by a Chinese official (news article) recently.
This term, on the other hand, can refer to another method other than the “socialist market economy” that China has been adhering to during the reforms. In recent years, a perception of new “comprehensive plan” has taken off in China. It advocates strong national government power and more intervention into the economy, with big State Owned Enterprises (SOEs) dominating the economy. But this “state capitalism” approach, as was described by Economist, can easily turn into crony capitalism in the Chinese setting, since political reforms did not go hand in hand with economic ones.
2. Problems in China’s reform.
Starting from the turn of the 21st century, China’s reform has stagnated. The soaring economic growth and greatly improved living standards have made many people feel the reform not as urgent as before (obviously the urgency is incomparable with the wrecked China after the Cultural Revolution). There has appeared a vicious cycle: the slowing down of the reform causes rent seeking by the existing officials and thus increased corruption, further causing some people to oppose to the building up of the market and promote the state’s control over the economy. Gradually, the rent seeking and corruption increases.
3. Prospects of China’s reform
Recently the possibility of new reform census emerges among scholars and officials in China, suggesting the top-level redesign of China’s reform under the previous framework of market economy. The intensifying social problems in China is a sign that further and more complete reforms must be done to ensure the quality, not only the speed, of China’s economic development.
Local experiment plays an important role in this process, just like they did in the reform and open up era. Local governments focus on the need of the citizens and propose effective solutions according to their knowledge. For example, in Shanghai, SOEs are starting to exit some competitive markets. The service industry at Shanghai is starting to enjoy Value Added Tax (VAT) instead of sales tax, which will lower its tax burden and encourage its growth. In Guangdong, one of the most historically revolutionary provinces in China, the government is starting to allow villagers’ autonomy.
There are many obstacles as well. Regulations and law, allocation of power between the central and local levels, and many others are important and challenging questions for China to solve.