Economic path debate rages on
A two decade- long debate between two prominent Chinese economists on whether China should continue a governmentbacked industrial development model has gained new momentum, as the world’s second- largest economy undergoes structural changes in the midst of slower economic growth.
Former World Bank chief economist Justin Lin Yifu said the government’s industrial development plan has helped bring the Chinese economy to where it is today, and that such policies should continue.
Zhang Weiying, a professor at Peking University’s prestigious Guanghua School of Management, said he believes the success of the Chinese economy is primarily due to the opening- up that let the market play a larger role, adding that China should scrap industrial policies and let the market play an even larger role.
Though the debate between the two economists goes back to 1995 with their views remaining essentially the same, it has attracted much attention lately from media, economists and officials, because of the concerns and uncertainty surrounding the future of China’s economy, observers said, noting that such debates are likely to have an impact on the economy at this critical time.
“There is nothing new in their debate, but it’s again in the spotlight because of China’s economic conditions and the public’s unease over their future,” said Tian Yun, director of the China Society of Macroeconomics Research Center, told the Global Times on Monday.
That unease is largely rooted in the housing bubble and surging government debt, especially on the local level, according to Tian, adding that these issues have even led some to bring up “the China collapse theory” again, though such a theory has “no basis.”
“People are searching for answers in times of uncertainty, and at this stage in the Chinese economy, it is natural that such discussions gain renewed attention,” Tian said.
In an article attributed to Lin that has been circulating on social media, Lin said that though he believes government industrial policies boosted growth, a “double- track” reform path is best going forward – one that keeps favorable policies to support certain industries, while maintaining stable growth.
In response, Zhang, in an article published by the Nanfang Weekly on Sunday, continued to make the case against government industrial development policies, saying economic development must rely on entrepreneurs because they would make judgments and decisions, in the face of an uncertain world, that are “new, unpredictable and not found in existing data.”
Making adjustments
Gao Liankui, a professor at the Department of Economics of the Renmin University of China, told the Global Times on Monday that having such a discussion is a “very positive thing,” which brings more perspectives to the debate and help officials set the most “feasible and promising” path for the Chinese economy.
Gao is in line with Lin’s view that industrial development policies are necessary to steer industry in the right path.
Top economic officials have taken note of the debate. At a briefing on September 14, Zhao Chenxin, National Development and Reform Commission spokesperson, said industrial development policies have played a “positive role” in areas such as economic growth and structural adjustments, and is the “key guarantee” for domestic industries to thrive.
Zhao also said adjustment will be made to the country’s industrial development policies to accommodate “the new normal,” saying current policies face “remarkable challenges” that need to be urgently addressed.
Though there have been many opposing views over the path forward, they generally agree that the Chinese economy faces difficulties that need to be addressed, according to Tian.
“While discussions are important, actions speak louder. It’s not enough to just talk about it, we have to move the reform agenda [ under the 13th Five- Year Plan] forward,” Tian said.