Workshop: Understanding China's Economic Success: Adam Smith vs Keynes (Xu Xiaonian)
This workshop is organized to help students understand the success of China’s economic development and challenges ahead. With data and facts, we show that China’s economic growth has gone through two fundamentally different phases. A divergence that occurred in the late 1990s is the key to comprehend why powerful growth engine had suddenly lost steam in the past couple of years.
In Phase I from 1978 to the late 1990s, China followed what I called as the Adam-Smith Model to transform a centrally-planned economy into a market-based one. The China “miracle”, if ever existed, is not unique in the world history. It can be attributed largely to industrialization and urbanization other countries has also gone through. What makes China’s growth even faster than those of old industrialized countries is privatization. Private or quasi-private firms were legalized in the mid-1980s, and kept diverting resources away from the inefficient public sector ever since. After the late 1990s, China slid gradually into the second phase of economic growth, the Phase of Keynes. The government came back and regained influence on economic decision making at all the levels from Beijing, provinces to counties and enterprises.
Despite their short-term effects, government interventions failed to sustain growth. One obvious reason is that the government, no matter how large and powerful, has only limited capacity to implement expansionary policies. Fiscal spending is constrained by the budget deficit and national debt. To keep the China Miracle alive, the country needs to return to the Adam Smith model by relying on efficiency improvements rather than increases of inputs to drive growth. The change in growth model in turn requires both economic and political reforms, which are considered as major challenges facing the people and the government in the next decade.
Doctoral and master students as well as interested colleagues are invited.Xu Xiaonian is Professor of Economics and Finance at China Europe International Business School (CEIBS) in Shanghai. He is currently visiting professor at the Graduate School of East Asian Studies.
Time & Location
Nov 27, 2015 - Nov 28, 2015
Room K 18