On September 22th, 2019, the “International Symposium on 70 Years of Chinese Economic Development: 1949 -2019” was held. It was organized by the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) of Tsinghua University. David Daokui Li, the Founding Dean of ACCEPT and Chief Economist at the New Development Bank (NDB) issued a report with the same title of the symposium. The report laid out the significance of reviewing the economic and social development since the founding of the People's Republic of China, proposed to learn from experience, and contemplated the future and the challenges ahead. Leading scholars from home and abroad attended the symposium, including Thomas J. Sargent, the American economist who was awarded the 2011 Nobel Prize for Economics, and Gao Peiyong, Vice President of the Chinese Academy of Social Sciences (CASS). The symposium was presided over by Dr. Li Keaobo, Executive Vice Dean of ACCEPT.
David Daokui Li believed that China had achieved extraordinary results in economic development during the past 70 years. It was necessary to tell our experience, stories and theories and summarize experience and lessons from theoretical perspectives. This approach was not only a stepping stone to further development but also a good way to promote mutual understanding and resolve misunderstanding in the world. After reviewing the 70 years’ history, Daokui Li believed that the economic development of the later 40 years kept the main trend of the first 30 years but there was also a sheer difference in terms of thinking, mechanism and institutional arrangement. Therefore, these two parts of development stages should be analyzed separately.
The first 30 years started from the founding of the nation in 1949 to the reform and opening-up in 1979, during which China established an independent and complete industrial system and national economy. It laid a solid foundation for the development in the later 40 years. What’s more, we got to know two precious economic principles: 1) public health, basic education and infrastructure were the basis of rapid development; and 2) it was definitely feasible to promote independent innovation as long as we opened learning knowledge and managed to introduce and use talents. The three lessons learned included: 1) if the function of market was fully replaced by administrative forces, the efficiency of economic development would be minimized; 2) economic growth was not possible without incentives offered by the government policymakers; 3) over-concentration of decision-making authority and processes would lead to major failures.
The later 40 years witnessed the most special and the largest economic growth of China. It was unprecedented in human history. The non-market economy, beginning with strict management and control from the government, also initially transformed into socialist market economy with Chinese characteristics. Daokui Li believed that there were five economic points worth mentioning: 1) Economic growth required the creation and growth of new enterprises, local government should be motivated to create a sound business environment; 2) rapid land-use changes were the key to economic growth. It was necessary to encourage local governments to change the use of land from agricultural to industrial or commercial ones; 3) a stable and sustainable finance should be maintained to help convert household savings to investment in the real economy; 4) the fundamental role of opening-up was to offer a chance for study, rather than simply capitalizing on the comparative advantages or taking advantage of foreign capital and technologies; 5) prudent macro control helped prevent big economic fluctuations due to irrational behavior of micro entities.
According to the report, within 5 years, China would achieve the goal of finishing the building of a moderately prosperous society in all respects and might probably enter the ranks of world high income countries; within 15 years, middle-income group in China would expand from 400 million to 800 million people; and China would become the world's largest economy and the major global research center within 30 years, during which it would also complete the most distinctive and leading economic and social governance system in the world. However, several challenges remained on the road of realizing such grand goals, such as 1) the challenge to sustain industrial upgrading and economic development; 2) the challenge to shape the market economy with Chinese characteristics in modern times; and 3) the challenge to play a better leadership role at the international arena. These were challenges we must respond to.
The Nobel prize-winning economist, Thomas J. Sargent, currently the Professor of Economics at New York University, also shared his views: 1) during the past 70 years, China had achieved great results, particularly in public health and education; 2) an incentive mechanism was very important for the operation and mutual cooperation of economies; 3) every country should review its history and comb through theories and practices in the past to learn from experiences and lessons; 4) free trade was important and reciprocal. Sargent noted that the policies taken by the U.S. government to increase tariffs would only continue to harm American interests.
Dr. Subramanian Swamy, who is the former President of Bharatiya Janata Party (BJP), former Cabinet Minister of Commerce and Law and economics PhD from Harvard, delivered an address based on the research results of China-India comparative economics over the years. First of all, he reviewed great achievements made by China before 2010, including the rapid GDP growth, restructuring and structural optimization, greater infrastructure input, the decreased unemployment rate and the narrow gap between the rich and the poor. Then, in terms of the decline in GDP and TFP growth rate after 2010, he believed that in the past, as China mainly relied on the capital and labor growth, it was constrained by diminishing marginal returns. As the labor cost increases and the competition in the international market becomes fierce, China needs to further promote innovation, adjust policies toward foreign trade, and relieve private enterprises’ difficulty in obtaining loans.
According to Vladimir Popov, Principal Researcher in the Central Economics and Mathematics Institute of the Russian Academy of Sciences and Research Director for the Dialogue of Civilizations Research Institute, foreign countries were amazed by the high economic growth that China achieved over the past 40 years of reform and opening up. However, the economic marketization and liberalization were not the root causes. Instead, as the research report pointed out, it was development in the first 30 years that laid the foundation for the economic dynamism: health, education, infrastructure, strong state power, government implementation mechanisms. Stable social order and rational government regulation were prerequisites. Then, only after the market-oriented reform was introduced did China witness the miracle of economic growth. Secondly, as Vladimir Popov put it, the slowdown in recent years was originated from the policy development, which was reflected in exchange rate appreciation, absorption of surplus foreign exchange reserves and stagnant investment. In his opinion, if China shifted from export-oriented economy to domestic demand, there still would be room for economic growth.