5/1/2016 Economists who helped reform China’s economy profiled in The Economist

ECONOMISTS WHO HELPED REFORM CHINA’S ECONOMY

PROFILED IN THE ECONOMIST SHARE:

January 11, 2016

RELATED

CHINA’S REFORM REQUIRES A

GLOBAL CLIMATE OF IDEAS

China’s economy began to thrive in the 1980s and ’90s when the government started to
abandon central market planning, allow private shareholding in state-owned
enterprises, and dismantle international trade barriers. A recent profile in the Economist
celebrates the work of three groundbreaking economists who helped provide the
intellectual foundations and the practical pathway for market reform in China. One of THREE KEY TRENDS IN THE
them, Mao Yushi, founded Atlas Network partner the Unirule Institute of Economics in BATTLE FOR FREEDOM IN CHINA
1993 along with five other economists. Unirule is an independent Chinese think tank
committed to the growth of a market economy and to reforming Chinese government
policies.

“Atlas Network is not a major supporter of Unirule, but its continuous encouragement
has been precious, as has its foresight,” Mao wrote in a 2015 Atlas Network analysis. “We
have been invited to activities held by Atlas Network in Asia, and have had the
opportunity to participate in training courses in the United States and India. That enables
Unirule to avoid estrangement from worldwide trends, and provides the institute a EXPLORING SOLUTIONS FOR
CHRONIC GOVERNMENT DEBT
global audience. For instance, Unirule’s research findings on China’s state-owned IN PAKISTAN
enterprises, China’s food security, the influence of China’s public policies on income
disparity, etc., were widely cited by international academic circles as a consequence.”

Unirule’s work on China’s state-owned enterprises (SOEs) explains how public-sector

incentives lead to a regulatory system that favors SOEs over market competitors, fosters
the inefficient use of resources, and effectively grants SOEs monopolistic powers.

“Today’s economic situation has given us more direct consequences,” Unirule Director
Sheng Hong wrote in “Whom Do Chinese State-Owned Enterprises Serve?” “China’s IEA ENCOURAGES TEACHING
economy embraced a big slowdown this year. In the first half of 2015, the eight provinces VARIETY OF ECONOMIC
and cities with a GDP growth rate at or below 7% are those with the most SOEs, especially PARADIGMS
Heilongjiang, Jilin, and Liaoning Provinces, as well as Shanxi Province. As we know, SOE
industries have been a bigger proportion to the economy in Northeast China than the
national average, and Shanxi Province has the most SOEs in the country. SOEs do not
only drag down economic growth with their low efficiency and unfair competition, but
also poison the social environment by their very existence. They show that unfair
competition can win the game, and favours and partiality can gain profits. However, this
growth pattern is unsustainable. It shows that the SOE reform is not only a theoretical
issue, but also a pressing problem.”

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5/1/2016 Economists who helped reform China’s economy profiled in The Economist

The Economist profile also explores the influence of economist Wu Jinglian, who
“advised the government from the earliest years of China’s ‘reform and opening’ in the
1980s, through the 1990s when the great China boom got under way”; and economist Li
Yining, whose “big idea in the 1980s was that selling partial stakes in state-owned
companies to the public would improve their performance.” Their work, although not as
firmly rooted in a classical liberal perspective as comprehensive as Mao’s, was crucial in
aiding China to open its markets and spur substantial growth.

 “Wu Jinglian, Li Yining and Mao Yushi—their real names—were born within two years
of each other in 1929 and 1930 in Nanjing, then China’s capital,” the Economist profile
explains. “Whether it was that or pure coincidence, all three grew up to demand an end
to Soviet-style central planning and to propose, to varying degrees, capitalism in its
place. Their influence has waned with age, but their powers of analysis remain sharp.
And they do not much like what they see.”

Read “Three wise men: Ageing reformists diagnose the economy’s ills.”
Read “Whom Do Chinese State-Owned Enterprises Serve?”

Find out more about: Unirule Institute of Economics

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