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Prof. Wang, prominent Chinese economist
Prof. Jianmao Wang, of the China Europe International Business School (CEIBS), is one of China’s most prominent liberal economists. At a seminar organised by Nyenrode University’s Europe China Institute, prof. Wang presented his views on the future development of the Chinese economy. This is part two of two-part report on the professor's seminar, you can read part one here.
“Reforms needed for overheated economy”
China’s fast-growing economy needs some serious maintenance. Institutional reforms are necessary, particularly the legal system that currently offers insufficient intellectual property (IP) protection for foreign investors. The list of necessary changes is long, according to prominent Chinese economist Prof. Jianmao Wang.
Wang is particularly worried about certain ‘bugs’ that hinder the development of the Chinese economy. “China used to be the economic miracle, but the real miracle was thirty years ago. The current Chinese economy has some serious issues that need to be taken care of.”
Steps to modernisation
Prof. Wang insists that many steps have already been taken in the past
decades to modernise the Chinese economy. But more steps are necessary to ensure
a healthy development in the future. “For example, real estate speculation
drives up housing costs in coastal areas. This stops workers from coming to work
in these areas. Production companies in some areas already face worker
shortages. This speculation has to be stopped by tax measures”, says prof. Wang.
Another reform that is long overdue is in the legal system. “Intellectual property rights deserve better protection in China. “If we really want to engage in the production of ‘knowledge’, we need to ensure protection for companies. If local governments do not enforce the existing IP laws on copyright, patent and trademarks, they will scare off foreign investors.”
More checks and balances
“We also need a judiciary system that is truly independent; local governments have too much influence on what happens in court. Right now they actively prevent punishment of local companies who have violated IP rights of foreign investors. The effect is that Chinese firms do not want to invest in R&D. There is no incentive”
“In general, China needs more checks and balances, accountability and transparency. We also need our People’s Congress to play a stronger part. A more free flow of information. I can go on for a long time.” Which adds up to… more democracy? “Yes, eventually we should have a form of democracy as a part of socialism. We need to move up the democratic ladder.”
Prof. Wang advocates abolishing the, what he calls, policy of financial repression, that offers Chinese (state) companies cheap capital through low interest rates. “We need a switch from an investment driven to a consumption driven economy. That will happen only when we allow the market to set the right price for capital, for labour, for everything, including environment, resources, you name it.”
The reforms will lead to balanced, sustainable growth, leading to what prof. Wang calls ‘the new silk road’ scenario. “Too fast growth is not an achievement, but a mistake. It has made some Chinese overconfident, this really worries me. The incentive for much needed change may not be strong enough. In China, changes have been delayed many times. People do not understand the urgency. What could be the wake-up call for them? Who knows… a crisis?”
What do you think the most prominent issues are the Chinese government needs to work on? Do you agree with Professor Jinmao or are there other issues you think he hasn't taken into consideration? We'd love to hear your thoughts in the comments...
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