8
Prof. Yong Wang (HKUST) presented a paper on China’s state
capitalism, investigating the role of China’s state-owned enterprises
(SOEs) during the industrialization process. He argued that SOEs
now monopolize key industries in upstream sectors of the economy
(e.g., energy, telecommunications, steel and cement, etc.) while
private firms compete openly in downstream industries such as
manufacturing where lower-productivity SOEs are less competitive.
This structure delivers economic rents to SOEs (and thus political
elites), which benefit from the success of downstream private firms
because they demand inputs and services from upstream industries.
He concluded that it is the incompleteness of market-oriented reforms
rather than the greater efficiency of SOEs that has led to SOEs’
prosperity in the past decade. By reducing competition in upstream
sectors and protecting relatively inefficient SOEs, the system actually
imposes significant costs on the economy.
In a session on leadership, Prof. Barry Naughton (University of
California at San Diego) assessed China’s new national leadership
team. He asked whether the interaction between leaders and
bureaucratic institutions in China were likely to prevent or facilitate
the process of market-oriented reforms, concluding that China’s
economic bureaucracy is deeply troubled and faces severe
challenges. However, if the new leaders are determined reformists,
they still have the power to reform the bureaucratic system to more
effectively pursue their agenda.
Prof. Hongbin Li (Tsinghua University), meanwhile, focused on
China’s young political agents. He presented an empirical study of
the selective process of entry-level bureaucrats among recent college
graduates. Their surveys of graduating college students found that
although many college graduates prefer jobs in the government or
state sector, such jobs are less attractive to elite students and parental
political connections and economic advantage don’t increase the
willingness of graduates to join the public service but do improve the
probability of getting hired. The study raises concerns that the quality
of Chinese leaders may deteriorate over time.
One aspect of China’s governance system that has received a great
deal of attention by China scholars but is rarely studied in other
countries is the important role played by local leaders in promoting
growth. A question arises about whether the success of China’s
government is due to the system’s ability to recruit and select talented
individuals, or its ability to incentivize leaders to exert greater effort
to promote growth, either due to their desire to be promoted to a
China has achieved remarkable economic growth over the past
three decades despite relatively weak institutions as measured
by international rankings of corruption and property rights
protection. Many view this as evidence that China’s growth
model is unsustainable while others argue that these measures
fail to capture the key institutional foundations of China’s
economic success. To better understand these issues, HKUST’s
IEMS hosted a two-day symposium on Economic Governance
in China and the Developing World in 2013, cosponsored by
HKUST’s Institute for Advanced Study, Department of Economics,
Division of Social Science, and School of Humanities and Social
Science. The event brought together the world’s foremost experts
on the Chinese economic and political systems to discuss how
China’s governance system has contributed to its rapid economic
growth, and whether China’s experience provides lessons, if any,
for other developing countries.
In an opening keynote presentation, Prof. Pranab Bardhan
(UC Berkeley) contrasted China’s politically centralized and
economically decentralized system with India’s politically
decentralized, economically centralized one, noting that both
systems had advantages and disadvantages. He argued that
the deep involvement of China’s government in its economic
activities, which leads to misallocation of capital, build-up of
excessive capacity, and entrenched vested interests of political
elites, will handicap its future development; suggesting that
China needs to lift market barriers, free information flow and
encourage innovation to achieve sustainable growth. For India,
challenges arise from the short-term strategies of local politicians
seeking to deliver rents to their constituents, and the failure of
the system to invest adequately in infrastructure and human
capital.
Prof. Chenggang Xu (HKU) described the Chinese system as a
regionally decentralized authoritarianism regime (or RDA). He
argued that despite the success of RDA in incentivizing local
leaders to pursue economic growth, the growth-at-all-costs
orientation has also been the cause of many socio-economic
problems such as absence of rule of law, worsening corruption
and inequality, low domestic demand, etc. To restore appropriate
balance, China should reform its institutions to better establish
constitutionalism, perhaps starting by granting greater economic
freedoms (such as buying and selling land rights) and developing
local judicial independence and allowing for a free press.
SYMPOSIUM ON ECONOMIC GOVERNANCE IN CHINA AND
THE DEVELOPING WORLD
(2013.5.31-6.1)
