Dr. Li Yining, considered to be the foremost economist in the People's Republic of China and the principal scholar involved in its recent phenomenal economic growth, outlined some of the remaining difficulties his country still faces to a large group of BYU-Hawaii students.
Speaking through an interpreter in the Aloha Center Ballroom on November 29, Dr. Li delivered what BYU-Hawaii Vice President of Academics Dr. Keith Roberts described as a "very prestigious lecture." Dr. Roberts also compared the Chinese professor to the late Milton Friedman, while others have called him "the Alan Greenspan of China."
From 1988-2003 Dr. Li, president of Peking University's Guanghua School of Management, was the standing member of the China National People's Congress and is currently Vice Chairman of the Economic Committee of China National Political Consultative Conference. Over the years Dr. Li has consistently advocated ownership reform of state-owned enterprises and the development of share-holding, or a private enterprise stock market, as keys to China's economic future.
He noted that many businesses in China are now privately owned, "and we are reforming the large state-owned enterprises. One of the difficulties when this happens is…surplus labor: Where can these workers find a job, so they don't create an unstable factor in the society?"
The answer? "We encourage or promote the growth of the private sector...that takes up a significant number of workers," he said.
Dr. Li pointed out the second difficulty is that state-owned enterprises, "under the old regime, had very bureaucratic structures that took care of everything" — including hospitals, schools, graveyards, etc. — "so what do we do with these very complicated structures?"
As a possible solution Dr. Li recommended that state-owned enterprises "sell or give these functions to local governments. Then the enterprises can really concentrate on their own business," he said, but acknowledging it might sometimes be difficult for local governments to take them over.
A third difficulty lies in the historical "relationship between the state or government, and business firms. Under the old regime, government had direct control [of] everything in daily operations. Now," he continued, "the enterprises are supposed to work under market conditions, or the ‘invisible hand,' but the other ‘hand' still controls operations."
"Government should do what a government is supposed to do: Promote a market-driven system," Dr. Li said, and added he's optimistic that 2007 "will be the year that government in China will undergo significant reform in terms of regulating the economy."
The key, he said, is the "growth or development of the private sector in China." He pointed out by the end of 2005, "half of the GDP [gross domestic product] was produced by the private sector," and by the time he finishes analyzing the recently released data for 2006, "I believe the contribution of the private sector toward the GDP will amount to 75 percent."
Still, he continued, the private sector in China faces four difficulties: 1) State-owned monopolies "in certain areas or industries [such as telecommunications and electric power generation]. Private enterprises find it very hard to survive or compete." 2) "Private enterprises do not have equal treatment. For example, they pay higher taxes than state enterprises." 3) "At the present time private enterprise has very difficult access to financing," he said, stating that banks are reluctant to give them loans. 4) Private companies "lack information. They often miss the opportunity to bid on the larger projects. The state controls the information."
Dr. Li Yining (front, fourth from right) and his party with BYU-Hawaii faculty, staff and others. (Photos by Mike Foley) |
Dr. Li said he feels both state-owned and private enterprises can do a good job. "China is building a harmonized society," he continued. "But we recognize that with fast economic growth, income disparity has become a problem. The difference between the poor and the rich is getting larger. We also look at the regional disparity of growth. In the western provinces the income is very low and the economic growth is slower. That's why we're talking about harmonizing the disparity. We want to build this harmonized society so everyone will help each other."
Dr. Li predicted China "will continue to maintain its current strong economic record, which in the past has been growing at a real GDP of 9 percent. China will soon become the second largest economic power, just behind the U.S. [and] I can tell you China's strong economic growth will be maintained for at least another 20 years."
He cited three major reasons for this outlook: 1) "China has a very large domestic market with about 900 million people living in rural areas." 2) "China wishes to maintain good relations and a strong trade program with every nation in the world." 3) "China has a huge labor pool...and the ability to continue growing fast," he said, but acknowledging the country "is still very much behind other nations in terms of education levels."
"China is now trying to do everything it can to encourage people to start a business, to conduct local entrepreneurship innovations, including encouraging students to start their own businesses," Dr. Li said.
"China needs more innovative ideas and a new generation of entrepreneurs. We expect you to go back and contribute to the economic development of China."
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