The 211th Luojia Lecture was held in the main library last December, Prof. Tian Guoqiang, dean of Shanghai University of Finance and Economics (SUFE) School of Economics, delivered his speech themed “the 19th NCCPC and rethinking the opening-up and reform policy”. Prof. Tian interpreted the requirements and content of the 19th NCCPC report, explained his understanding of the systematic logic behind fully balanced stable development. The lecture was anchored by dean of WHU School of Economics, Prof. Song Min.
Prof. Tian at the lecture
The report consists of two key questions:why former development was unbalanced and unsustainable therefore falling short of people’s demand; what the new concepts are and why it can solve the previous problems.
Prof. Tian then expounded his theory with three steps. Firstly, he pointed out it was the nearsightedness of financial, monetary and industrial policy to blame for the unbalanced and unsustainable development, the social masses failed to share the benefits from reform. From the perspective of economic theory, the influence of externalities for China’s economic growth decline was farfetched, so was the influence of economic periodicity according to Prof. Tian’s analyses. The true reasons for this phenomenon, which are also considered to be the driving factors for new reform, should be concluded as the following logic: essential production factors’ marginal revenue decreases, the factor-driven development mode (especially investment-driven mode) turned out to be unsustainable; the tax system reform in the early 1990s was a success, but due to the unmatched rights of financial and administration, local governments were encouraged to intervene in the economy to earn tax revenue; state-owned enterprises’ excess capacity squeezed the profit margin of the private economy.
Prof. Tian Guoqiang interacting with the audience
Consequently Prof. Tian introduced the logic for a rational system and stable development. Prof. Tian said that governance, incentives and social norms compose the fundament for social systems, which serves as the soil for innovation and entrepreneurship. Nevertheless, a good system is a result of social evolution; it can also be designed, which requires a capable, productive, effective, warmhearted and limited government. Simultaneously, an inclusive system and government implementation ability constitute a prerequisite condition for stable development.
Finally, as for the possible entry point for future reform, Prof. Tian proposed three directions in his report. The first orientation is the equalization of the private economy. Since the irreplaceable contribution towards employment, innovation and productivity, discrimination and artificial barriers obviously restricted its development. Secondly, the integration of the capital market. Now the over-regulated capital market is hardly functioning in financing the manufacturing industry and agriculture. Thirdly, the marketization of the circulation of land. The market distortion (especially in the land market) has been distorting the currency, labor and capital markets. A competitive land market would make land circulation more effective, thus accelerating the process of urbanization, which is a key driving factor for China’s development in the following decades.
Prof. Tian Guoqiang
Professor Tian Guoqiang was born in 1956, he graduated from HUST in 1982, and received his Ph.D. in 1987 from the University of Minnesota. He received tenure in Texas A&M University in 1987, as he joined the School of Economics at Shanghai University of Finance & Economics as dean in 2004. His areas of specialization include economic theory, mechanism design, mathematical economics, the Chinese economy, economics of transition and optimization theory. Up until now, Prof. Tian has published nearly 90 articles in major international journals and over 70 articles in leading Chinese journals.
Edited by Sun Jingyi, Edmund Wai Man Lai & Hu Sijia
Photo by: School of Humanities and Social Sciences
