Perspective of the Chinese Economy Opportunities and Challenges

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					       Perspective of the Chinese Economy: Opportunities and Challenges

                  An International Symposium in Conjunction with
                      CCER’s Tenth Anniversary Celebration

                         China Center for Economic Research
                                 Peking University

                                     Sponsored by
                                  The Ford Foundation

    The ten years since CCER was founded in 1994 have been a critical period for
China in terms of both her economic growth and institutional transition. Building on
the past achievements, these ten years have witnessed the establishment of the market,
privatization of the SOEs, emergence of a dynamic private sector, opening-up of the
urban labor market to rural migrants, and China’s accession to the WTO. After a
quarter century of continuous reforms, China’s transition to the market economy has
nearly finished. It is time for us to fold the past and look into the future. It is against
this background that CCER is preparing an international symposium “Perspective of
the Chinese Economy: Opportunities and Challenges” in conjunction with her tenth
anniversary celebration scheduled for September 16-17, 2004. The aim of the
symposium is to bring international as well as domestic experts to summarize China’s
transition experience in the last quarter century and identify the major opportunities
and challenges that China will face in the next quarter century. The Ford Foundation
has generously committed financial supports for the conference.
    The symposium will invite 10 international experts and 20 domestic experts to
participate. These are leading experts on the Chinese economy and the topics that they
will cover are pressing issues that China will have to find a solution in the near future,
so their opinions will be valuable for government policy-making. CCER will issue a
series of newsletters summarizing all the papers presented in the conference. These
newsletters will be distributed to a wide audience including major policy makers and
academic researchers. A book volume of the conference papers will be published after
the conference. In addition, the conference will be held in conjecture with other
CCER activities such as a roundtable conference of the deans of the economics
departments around the country. So the conference will make a definitive impact on
current policy debate as well as on domestic academic research.

Major topics

    The symposium will be opened by the keynote speech delivered by Jinglian WU
who will be invited to speak on the experience and lessons that China has gained in
the last quarter century transition. The rest of the program will be divided into six
sessions. Below is a detailed description of these sessions.

(1) An overview of the Chinese economy in the last quarter century
    China’s economic growth and institutional transition in the last quarter century are
both regarded as a success. China’s economic growth qualifies as a miracle in terms
of both magnitude and speed. China’s institutional transition has adopted a gradual
approach contrasting with the shock therapy adopted by the former Soviet Union and
Eastern European countries. This session will bring domestic and international experts
to summarize the Chinese experience and discuss its merits and shortcomings. Some
of the questions that this session is intended to provide answers with are: what are the
major factors contributing to the China Miracle? What are the factors contributing to
China’s smooth transition? What remain for further reform? What are the lessons that
China may offer to the developing world?

(2) SOEs and the banking sector
     Although privatization has transformed a large number of small and medium size
SOEs into private firms, the state sector still has many unsolved problems. The most
significant is the huge amount of debt accumulated in this sector. This has become a
stark contrast to the dynamic private sector. The state sector has sucked huge amount
of financial resources but its contribution to the national economy has decreased to
less than 30%. The problem is closely linked with the banking sector that provides
financial resources to the SOEs. Indeed, the banking sector is one of the few slowest
in reform. It is therefore sensible to discuss SOEs and the banking sector together.
Major questions that this session will address are: What remain for SOE reform?
What are the relationships between SOE reform and banking sector reform? How to
deal with the SOE debt? What is the direction for banking reform?

(3) Exchange rate regime, FDI and China’s strategy in the international market
    Export and FDI have been indispensable factors contributing to China’s
miraculous growth. China has actively provided incentives for exports and FDI
inflows. In addition, China’s exchange rate regime has also helped her to promote
export and attract FDI. However, the interventionary policy has been increasingly
challenged by international pressures. The recent call for China to revalue its currency
is but one example. As China assumes a more important role in international trade and
finance, it can be envisaged that China will face more of such pressures and strife. It
is vital for China to form a coherent strategy to coordinate international trade, FDI, as
well as domestic macroeconomic stability. Issues to be discussed in this session
include: What kind of exchange rate regime should China adopt in the near future and
in the long-run? Is there a way for China to achieve exchange rate stability and
domestic macroeconomic stability? Will international trade continue to play a role of
growth engine for China? How should China fully utilize the convenience offered by
WTO and regional trade agreements? Should FDI be continuously encouraged?

(4) Agriculture and urbanization
    Transforming agriculture and the rural society is still a daunting task for China.
By 2020 when China’s population is stabilized at 1.5 billions and its urbanization rate

reaches 60%, there will still be 600 million people living in the countryside. However,
the share of GDP of agriculture will further shrink, possibly to less than 10% of the
national economy. It is therefore a pressing issue how China will provide sufficient
employment to the rural population. The current government has set a goal to
integrate urban and rural policy in terms of employment, taxation, and social
protection. This is definitely a remarkable improvement compared with the
urban-biased policy that has been implemented for half a century. The details of the
integration are still in formation, though. Questions to be discussed in this session
include: What is the perspective of rural employment? What kind of urbanization
strategy is suitable for China? How soon will social protection be integrated between
urban and rural areas? What are the major issues in the integration?

(5) Population and environment
    China will soon become an aging society if the current trend continues. Weighing
against the experience of Japan, it is thus a natural question that whether aging will
constitute an obstacle to economic growth in China. However, China differs from
Japan in a significant aspect, that is, China has a much larger population than Japan
has. With a comparable age structure, the US has not experienced what has been
happening in Japan, possibly because it has a larger population. This leads us back
again to think about the linkage between population and economic growth.
Nevertheless, even if there is a positive linkage between population and economic
growth, over-population may have serious environmental consequences. Specific
questions to be addressed in this session thus include: What is the linkage between
population growth in general and age structure in particular with economic growth?
What are the implications of aging on social security? Is there a balanced path
between population growth, environmental protection and economic growth? Should
China change its population policy in the near future?

(6) Overall development strategy after transition
    Transition unleashes energy for economic growth by offering structural changes
and strengthening the institutions. As the transition draws closer to an end, China will
lose an important source of growth and will have to rely on conventional factors to
sustain future growth. This session will bring the conference participants together to
have a panel discussion on a coherent strategy for Chinese growth after transition. It
will serve as a policy forum as well as a summary session for the conference.

                          Tentative conference schedule

September 16, 2004

8:00 – 8:30

8:30 – 8:45
Chair: Wen Hai
    Opening remarks by Justin Lin and PKU vice president Wu Zhipan

8:45 – 10:00
    Keynote speech by Jinglian Wu
             A quarter century of reform: lessons and comparisons
    Introduced by Justin Lin

10:00 – 10:15: Coffee break

10:15 – 12:00

     Session 1. Review of China’s Economic History in the Last Quarter Century

Chair: Justin Lin
Presenters (each 20 minutes)
    Dwight Perkins: Chinese economic growth in historic and international
    Ross Garnaut: Causes of Chinese economic growth in the last quarter century
    Gang Fan: China’s gradual transition to the market economy

Commentators (each 10 minutes):
   Thomas Rawski, Yingyi Qian, Arthar Hussain

12:00 – 1:30: Lunch

Guest Speaker: Nicholas Stern

1:30 – 3:15
                      Session 2: SOEs and the Banking Sector

Chair: Ping Chen
Presenters (each 20 minutes):
    Justin Lin: The relationship between SOE and banking reforms
    Xinqiao Ping: Corporate governance and the financial market

    Chun Chang: Optimal bank system

Commentators (each 5 minutes):
   Xin Zhang and Dianqing Xu

3:15 – 3:30: Coffee break

                Session 3. Exchange Rate regime and Capital Market

3:30 – 5:15
                             Exchange Rate Regime
Chair: Yongding Yu
Presenters (each 20 minutes)
   Haizhou Huang: Exchange rate regime and long-run economic growth: Lessons
from other countries
   Guoqing Song: Exchange rate regime and domestic macroeconomic stability
   Fred Hu: Long-run exchange rate regime for China

Commentators (each 5 minutes):
   Gang Yi, Jianhuai Shi

6:00 – 8:00: Welcome Dinner

September 17, 2004

8:30 – 9:45
          Session 3. Exchange Rate regime and Capital Market (continued)

                                 Capital Market
Chair: Yang Yao
Presenters (each 20 minutes)
   Andrew Shen: Optimal financial structure for economic growth: lessons from
                  other East Asian economies
   Xinghai Fang: The future of capital market in China
   Xin Zhang: Regional capital market

Commentators (each 5 minutes):
   Ping Chen and Yang Li

10:00 – 10:15: coffee break

10:15 – 12:00
            Session 4: Agriculture, Rural Development and Urbanization

Chair: Xiaoshan Zhang
Presenters (each 20 minutes):
    Xiwen Chen: Chinese agriculture in perspective
    Xueyi Lu: Rural development as an integrated part of the national economy
    Jikun Huang: Sustainability of the Chinese agriculture

Commentators (each 5 minutes):
   Tiejun Wen and Sarah Cook

12:00 – 1:30: Lunch

1:30 – 3:15
                      Session 5. Population and Environment
Chair: Ling Li
Presenters (each 20 minutes):
    Yi Zeng: Population growth and aging in China
    Paul Shultz: Population and economic growth

Commentators (each 5 minutes):
   Fang Cai and Zhigang Yuan

3:15 – 3:30: Coffee break

3:30 – 5:15
                            Session 6. Round Table discussion

6:00 – 8:00: Closing Dinner