2
In a double-billed presentation on China’s recent market reform
efforts, HKUST IEMS Director
Albert Park
addressed the topic of
China’s latest labor market reforms, and HKUST Assistant Professor
of Economics and IEMS Faculty Associate
Yong Wang
discussed
reforms to China’s state-owned enterprises (SOEs).
Prof. Park detailed China’s phenomenal economic growth which
has accelerated demand for labor and, in the process, pushed up
wages. In considering ways in which employment in China has
become more inclusive, he noted that since 2007, rural migrant
workers have experienced faster wage growth than urban workers,
contributing to lower inequality. In addition, analysis of labor survey
data shows that labor markets have become more integrated over
time, making jobs more accessible to workers around the country.
Nonetheless, some occupations remain out of the reach of migrant
workers, and many institutions hamper their mobility, such as
unequal access to education and lack of clear and transferable
property rights over agricultural land. China has also implemented
new labor regulations to increase the availability of high quality
jobs, but many migrants still lack social insurance coverage (e.g.
pensions, health care).
To alleviate the problem, Prof. Park advised that central policymakers
further reduce institutional barriers to labor mobility, correct skill
mismatches in the labor market, and speed up industrial and
service upgrading to create new jobs in an increasingly competitive
economy.
On the topic of SEO reform, Prof. Wang addressed a puzzle related
to China’s SOEs, namely that their profits have exploded since 2000
despite consistently poor performance in the 1990s.
Prof. Wang’s research shows that the strong recent performance of
SOEs may paradoxically come at high cost to the overall economy.
Because SOEs were unable to compete with private firms in
downstream industries such as consumer goods, they retreated to
In the inaugural Global CFO Forum on Emerging Markets, hosted
by the Financial Times and EY in Singapore, and attended by over
100 CFOs and executives of major global corporations, Director of
HKUST IEMS
Albert Park
was invited as a panelist—along with
Jardin Matheson’s Finance Director
James Riley
, and author and
global strategist
Parag Khanna
—to discuss macroeconomic risks
and international growth prospects in emerging markets.
With respect to macro-level challenges for emerging markets in Asia,
Prof. Park and the other panellists pointed to ever-increasing cost
pressures, especially with regard to labor, which create challenges
for sustaining growth momentum in the region.
Another challenge is growing “economic nationalism” in the
region such that, despite talk of strengthening bi-lateral and multi-
lateral trade agreements, there is often poor follow-through in
implementation as domestic interests work to maintain barriers to
international investment rather than tearing them down. As such,
the panelists recommended caution over optimism when hearing
news of multinational trade deals.
Perhaps the largest challenge mentioned during the discussion was
with respect to China, which in the near-future may experience
slower growth for both cyclical and structural reasons. Structural
factors matter most for growth in the medium and long terms.
Structurally, China is rapidly aging, and has reached a tipping
point where the absolute size of the workforce will be decreasing
over time. This shrinking of the labor force will exacerbate labor
cost pressures, creating challenges for China to maintain growth
momentum through additional reforms.
The Market and the State in China's Economic Reforms
HKUST Business Insights Series (2015.04.22)
Going Global from an Emerging
Market CFO Perspective
FT/EY Global CFO Forum: Emerging Markets
(2015.06.24-26)
Video recordings available at
upstream, protected industries that provide key intermediate inputs
such as energy, telecommunications, and financial services. This
has created a vertical structure of ownership in China’s economy.
The success of China’s private, export-oriented firms, which thrived
thanks to abundant cheap labor and trade liberalisation following
entry into the WTO in 2001, increased demand for intermediate
inputs sold by SOEs, fuelling their profits. However, the inefficiency
and market power of SOEs increases the costs of the inputs they
provide, which may compromise the competitiveness of China’s
downstream producers. Thus, diversifying ownership of SOEs and
promoting free entry in upstream sectors should be a top policy
priority.
Thus far, Chinese President Xi Jinping has focused on battling
widespread corruption, which is essential for improving governance
for the management of the economy in general. In other key
reform areas such as reforms to China’s state-owned enterprises
(SEOs) and liberalization of the capital market, progress has been
markedly slow. Ultimately, as Prof. Park argued, “the future success
of China depends on what actions the government takes next.”
Despite efforts by China’s central government against corruption,
Prof. Park and the other panellists questioned whether China’s SOEs
can be reformed in the current economic and political environment.
Jiatao (J.T.) Li (HKUST), Albert Park, Yong Wang
Jennifer Hughes (Financial Times), Parag Khanna
(Hybrid Reallity Pte Ltd), Albert Park, James Riley
(Jardine Matheson)
Find out more about the event at
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