On March 20, 2011, Tsinghua University Center forChinain the World Economy (CCWE) held its seventh forum, entitled, “Challenges China Faces from a Shifted Focus of Development.” The forum focused on adjustments to economic policies proposed by the Chinese Communist Party and government that shift focus from mere GDP growth to more of an emphasis on improving people’s livelihoods. The panelists discussed the main goals of the adjustments, the major challenges and problems that those adjustments will present and offered their thoughts on how Chinese policy-makers can implement this shift in a way that is most beneficial to the country’s long-term development. In addition, the forum addressed the recent earthquake/tsunami inJapanand its implications forJapan,Chinaand the rest of the world. Professor David Daokui Li, Director of CCWE and Member of the State Monetary Policy Committee, served as the forum’s moderator.
Forum panelists included: Gu Yunchang, Chairman, China Real Estate Association; Yuan Gangming, Senior Research Fellow, CCWE and Chinese Academy of Social Sciences; Francis Lui, Professor, Department of Economics, HKUST; Li Ling, Vice-Chairman, Chinese Health Economic Association and Professor, Peking University; Zhang Yansheng, Director, Institute of Foreign Economics, NDRC; Xiang Songzuo, Deputy Director, International Monetary Institute, Renmin University; and Eiichi Sekine, Chief Representative, Beijing Representative Office, Nomura Institute of Capital Markets Research.
The forum began with a mini-panel discussion regarding the situation inJapan, featuring Yuan Gangming and Eiichi Sekine. The two discussed the impact that the earthquake/tsunami will have on a wide range of issues. In terms of energy and resources, both expressed the opinion that the ensuing problems with the damaged nuclear power plants will most likely result in efforts to rely less on nuclear energy in the future. At the same time, they said, the situation could causeChinato reconsider its own views on nuclear power. Economically, the earthquake/tsunami will have an obvious impact.Japanwas already struggling with high levels of debt and recession, and the recent events will further complicate matters, especially in terms of financing the reconstruction and the disruption of supply chains. It will also have an impact onChinaand other countries that have integrated global supply chains. Furthermore, the earthquake/tsunami has led to an unusually sharp appreciation of the yen, with possibility that Japanese companies may sell off a large amount of their foreign assets in order to finance reconstruction projects at home. This has resulted in the intervention of the G-7 in order to curb the appreciation, a move Mr. Sekine says was necessary, since Japan would have had great difficulty accomplishing this on its own.
The forum then moved on to the main topic: the challenges thatChinafaces from the shifted focus of development from mere GDP growth to more of an emphasis on improving people’s livelihoods. Real estate and healthcare were the focal points of this discussion. Housing remains a focus of economic concern as prices continue to climb. Housing has a big impact on people’s happiness inChina, and over the last several years, people inChinahave become increasingly sensitive to increases in real estate prices because they feel more and more like they will never be able to afford their own home. Gu Yunchang said that it is important to help middle/low income individuals buy or rent homes. He believes that building more affordable housing is the only solution to the problem. In addition, people’s happiness is also linked to having a better sense of security, which includes affordable access to healthcare. While relatively good progress has been made and the infrastructure is much improved, the healthcare situation still falls short of people’s expectations. Li Ling said that she feels that government should change its basic concept of reform and the main focus of improvement should be on public hospitals.
In addition to real estate and healthcare, the panelists addressed a number of other challenges thatChinafaces. They discussed how difficult it is to control inflation, especially when there are so many significant events occurring around the world. To a large extent, much of the inflation is “imported inflation,” since oil and other resources and commodities are affected by the large number of uncertainties in the external environment. This will ultimately propel inflation and lower GDP growth. Another topic addressed at the forum was income distribution and an increasing gap between the rich and the poor in China, which, all panelists agreed, is a significant problem. Private consumption remains at a comparatively low level inChina, as, overall, the nation is wealthy but the people are poor. Being able to more fairly distribute income will play a major role in improving people’s livelihoods. In regard to political reform, majority of the panelists agreed that this issue must be approached in a step-by-step manner. The first step came with economic growth; now comes social development/advancement/enhancement with GDP as one of the many criteria. Political reform should come along with socio-economic development.
The forum also featured the release of the most recent economic report jointly produced by CCWE and HKUST Center for Economic Development. The report analyzes the performance ofChina’s economy in 2010 and forecasts the economy for 2011 and 2012, covering GDP, CPI, M2 supply, import and export and fixed asset investment. The report predicts thatChinawill experience a GDP growth rate of 9.5% and 8.6% in 2011 and 2012, respectively, a modest slowdown from the 10% growth experienced in 2010. CPI will remain at a high level of 4.2% and 3.3%. M2 will grow by 17.9% and 16.0%, slower than 2010, which saw a growth rate of nearly 20%. The growth rate of exports will decrease to 11.9% in 2011 and then rise to 14.1% in 2012, while the growth rate of imports will remain relatively steady at 27.0% and then 26.4%. In 2011 and 2012, the trade surplus will decrease sharply. Fixed asset investment will see its growth rate remain relatively high at 27.4% and 27.7%, respectively.
As a timely and effective platform, Tsinghua University will continue to invite extraordinary policy-makers, experts and business leaders -- domestic and international -- to address current and long-term Chinese domestic issues in relation to the international political and economic environment. The objectives of the forum are to brainstorm/inform and provide a solid basis for policy debate and recommendations.
