The Seventh Annual Conference of Government and Economics
On June 7, 2025, the Seventh Annual Conference of Government and Economics and the launch ceremony for the Chinese Journal of Government and Economics, co-organized by the Society for the Analysis of Government and Economics (SAGE) in partnership with Tsinghua University’s School of Social Sciences and the Academic Center for Chinese Economic Practice and Thinking (ACCEPT), were successfully held at Tsinghua University. The Deputy Secretary of the CPC Tsinghua University Committee, Guo Yong, delivered opening remarks, with Professor of Tsinghua University’s School of Social Sciences, Liu Taoxiong, and the Deputy Editor-in-Chief of Tsinghua University Press, Shi Lei, also attending the unveiling ceremony for the journal launch as special guests.
Guest speakers participating in the conference included Eric S. Maskin, 2007 Nobel Laureate in Economic Sciences, Adams University Professor of Economics at Harvard University, and Co-President of SAGE; Daron Acemoglu, 2024 Nobel Laureate in Economic Sciences and Professor of Economics at the Massachusetts Institute of Technology; Dani Rodrik, Ford Foundation Professor of International Political Economy at Harvard University’s John F. Kennedy School of Government; Huang Hanquan, Director General and Senior Fellow of the Chinese Academy of Macroeconomic Research (CAMR); Dong Zhiyong, Member of the Standing Committee of the Party Committee and Vice President of Peking University, Professor and Dean of the School of Economics at Peking University and Editor-in-Chief of Economic Science; Wu Xiaoqiu, Director of the National Academy of Financial Research at Renmin University of China and Director of the China Capital Market Research Institute (CCMRI); David Daokui Li, Co-President of SAGE and Director of ACCEPT; and Liu Peilin, Chief Researcher of ACCEPT. The proceedings of the conference were presided over by Li Ke’aobo, Executive Deputy Director of ACCEPT.
Guo Yong fully affirmed the unremitting efforts made by ACCEPT since its establishment at Tsinghua University in 2018, with the research institute providing a high-level platform for academic exchanges aimed at summarizing relevant theoretical research and practice, as well as playing an important role in promoting the development of the field of government and economics. He expressed that the successive establishment of research centers for government and economics at the Central University of Finance and Economics and Zhejiang University is indicative of the fact that this emerging discipline has gained increasing recognition and support within the academic community. After successfully holding the inaugural Government and Economics Training Workshop in 2024, this year's workshop will be co-organized by Tsinghua University together with other partnering universities, further demonstrating Tsinghua's positive model and facilitative role within this field of academic research. In 2021, the Journal of Government and Economics was successfully established as an international English-language academic journal, and with the vigorous support of leading scholars in the field of economics at home and abroad, including five Nobel laureates in economic sciences, ACCEPT has now obtained approval to launch the Chinese Journal of Government and Economics this year, initiating a whole new platform to further promote academic exchanges within this field.
Guo relayed that Tsinghua University would continue to champion the development of the discipline of government and economics and relayed his hopes that the institute will persist in its efforts within the area of academic research to serve China by promoting its major national strategies and its establishment as a leading country in the education domain. He further expressed his wish that ACCEPT would continue giving full play to the key advantages of basic research and the coordinated development of academic disciplines, while sustaining its support for the formation of China's own independent knowledge system, providing the world a means through which to appreciate the significant example of China's economic development more comprehensively and objectively, as well as contributing the strengths of Tsinghua towards the development of economics as an academic discipline around the world.
Next, David Daokui Li proceeded to introduce the core concepts of government and economics. For instance, the government should be included in research as a direct participant in the modern market economy, with the goal being to empower the government with better incentives to cultivate and correct the performance of the market, in this way propelling the high-quality development of the overall market economy. He emphasized the innovative potential of the research paradigm adopted by this discipline, which recommends that research papers should take real-world cases as their starting point, before then proceeding to fully lay out a theoretical model and demonstrating the general applicability and significance of the topic under question through statistical analysis.
Li also delivered an account of the progression of development for the emerging discipline of government and economics, including the achievements made by the English-language journal within academic circles, in addition to the forthcoming publication of the Chinese Journal of Government and Economics as a Chinese-language periodical. This latest journal installment aims to serve the academic and policymaking communities, with the publication's main goals being to achieve fast-paced review times, a high degree of readability and widespread circulation. Moreover, the research institute is now planning on changing its name from the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) to the Research Institute for Government and Economics in the future, committing itself to the advancement of a new field of academic research garnering a high level of recognition that takes China's economic practice as its basis.
During the keynote addresses, Eric S. Maskin first pointed out the large number of changes to the economic policies of the United States since the new administration took office at the beginning of the year: imposing a high level of import tariffs internationally and implementing government reforms domestically, even despite its administrative goals and implemented measures having often proven self-contradictory. The imposition of tariffs has led to a sharp decline in the trade volume of goods, which has failed to achieve the goal of increasing fiscal revenues, and has ignored existing mechanisms for multilateral negotiations when it comes to handling foreign economic and trade relations. In place of that, a unilateral approach to negotiations has been adopted that is characterized by its lower efficiency and narrower scope, creating uncertainty and raising concerns among trading partners about the sustainability of current policies. The US federal government is readjusting its institutional setup and cutting spending in certain specially designated areas, most notably in terms of freezing and restricting some of the research funding provided to American universities. This reduction in public funding has failed to take into consideration the fact that basic research is a fundamental driving force for the country’s continued technological progress and economic growth, with its very nature as a public good meaning that it can provide a means to fill gaps in the funding outlays made by the private sector.
The fundamental reason for the emergence of contradictions between the administration’s objectives and its enacted measures is that decision makers are running the government like a private enterprise, only focusing on profits and losses, without fully understanding the public nature of government expenditures, nor properly understanding the role of the government within the market economy, while ignoring the importance of the government to the country’s overall economy and the provision of essential services. In addition, Maskin further mentioned that in order for the central bank to better moderate ongoing fluctuations in economic performance, the institution should maintain its independence so as to ensure that monetary policy is formulated from a long-term perspective, while avoiding the intrusion of short-term political motives or other considerations. Finally, he referred to differences in the composition of tax revenue sources between local governments in China and the US, with local governments in China having comparatively more room for making policy adjustments aimed at providing incentives for enterprises, which is more conducive for promoting enterprise development and local economic growth.
Huang Hanquan conveyed that the current imbalance in the world economic structure has made it especially imperative for China, as the world's largest manufacturing and trade surplus country, to rebalance its international trade with major consumer countries such as the United States. Since Trump took office, American trade policy has further upset the existing balance, forcing China's economy to undergo a transformation from its export-oriented model to one that is driven by domestic demand. Huang meanwhile suggested that structural reform on both the supply and demand sides has become a vitally important means to resolve this ongoing dilemma. On the supply side, it is necessary to accelerate the development of “new quality productive forces,” including promoting advancements in artificial intelligence and big data, as well as other technologies capable of empowering traditional industries, while at the same time transforming and upgrading the manufacturing sector. Furthermore, it is also vital to curb the “involution” characterized by irrational competition while working towards strengthening the overall resilience of industrial value chains. When it comes to demand-side reforms, the imperative to undertake restructuring is even more urgent. Given that relying merely on traditional fiscal and monetary policy readjustments is unlikely to generate the desired results, it is now crucial to undertake more extensive reforms to the country’s income distribution, social security and taxation systems, in this way fundamentally enhancing residents' capacity and willingness to consume. Especially in the context of insufficient consumption demand and industrial overcapacity, consumption has become the underlying “weak point” restricting the economy’s growth potential.
He stressed that boosting consumption requires both systematic policy supports, such as improving China's income distribution system, strengthening social security, promoting the development of green consumption and high-end consumption, etc., as well as removing certain institutional barriers, such as restrictions on the purchase of automobiles and residential properties, in addition to overly cumbersome approval processes. Only when the government is able to better play its proper role, including by guiding the allocation of economic resources and stimulating the intrinsic dynamism of the market economy, will the country be in a position to fully realize a higher-quality form of development and the stable functioning of the domestic-international “dual circulation” model.
Dong Zhiyong evaluated the relationship between government and the market from a historical perspective. He explained that the relationship between the two has arisen from the various challenging issues and main areas of concern that have always existed throughout the history of economic thought in both China and the West, with its common thread also following a periodic course of evolution and iteration over time. During the pre-modern era in China, thinking on the relationship between government and the market was long concerned with the “theory of weights” (i.e., monetary and pricing systems) and the “state interventionism” school of thought. From an objective point of view, China's climatic and geological conditions necessitated that the government assume certain special functions; whereas from a more subjective standpoint, there was the notion within Confucianism that the government is to serve as “the parents of the people” given its benevolent approach to administering the state. In modern-day times, meanwhile, the dual doctrines of laissez-faire non-interference and government interventionism emerged in China. During the worldwide economic downturn of the 1930s and the subsequent World Anti-Fascist War, the government interventionism faction ascended into the mainstream, having at the same time touched off a series of problems associated with encroachments into significant areas of the market, with a revitalized market having only begun to emerge in the 1940s. After the founding of the People's Republic of China, shifts in the relationship between government and the market occurred in the process of China’s quest for modernization. On the one hand, the country’s institutional advantages were leveraged to achieve major undertakings; while on the other hand, a management system was actively trialed and put into practice for the emerging socialist market economy. At present, amidst the strong push towards developing “new quality productive forces,” repeated lines of thought have materialized on a variety of subjects, such as reforms to the market for production factors and reforms to state-owned capital as well as the building of a unified national market and a high-standard market system.
In addition, Dong emphasized the quintessential role that entrepreneurs play in today’s market economy. Policymakers need to not only stimulate the initiative of market players, but also give full scope to the comparative advantages under the government’s sway. The government should work towards spurring innovation, fostering markets and revamping regulations, while simultaneously avoiding overstepping any boundaries in exercising its authority.
Wu Xiaoqiu observed that properly handling the relationship between government and the market represents the core issue facing China's economy. He alluded to the fact that the market should be regarded as the decisive force for guiding the allocation of resources, with China's economic success having hinged on its adherence to this principle. As coined by the concept of an “enabling government,” the meaning behind “enablement” can be reflected in the establishment of a favorable business environment, including by making improvements to the legal system, establishing fault-tolerant mechanisms and ensuring the continuity of government policy, in this way enhancing the security and confidence of market participants without directly steering the economy or the distribution of economic resources. As for an “efficient market,” Wu acknowledged that the current situation is characterized by short-term volatility and inefficiencies, but suggested that these factors nevertheless do not negate the decisive role played by the market. The efficiency of the market is achieved by way of a dynamic process of readjustment, with its internal logic ultimately proving superior to that of governmental decision-making. He therefore insisted that the policy-making process ought to abide by the principles of an “enabling government” and an “efficient market,” which includes carrying out institutional changes as necessary in order to further stimulate the overall vitality of the economy.
Daron Acemoglu's keynote speech concentrated on the significance and motivations of government agencies in the modern market economy. He first pointed out that government agencies represent a key “fourth pillar” for modern-day state governance above and beyond the traditional division of powers into three separate branches of government. At the present moment, the US government has shown itself to be at risk from increasing politicization, threatening the independence and impartiality of government institutions, which has therefore sparked serious concerns. Meanwhile, Elon Musk's Department of Government Efficiency (DOGE) has made significant budget cuts to the Department of Education, the National Institutes of Health and other agencies under the US federal government, inflicting heavy damage to the foundations underpinning the country’s ability to innovate. DOGE has blundered in its ideological attacks, undermining institutional stability and the once strong sense of mission at government agencies, triggering a mass exodus of skilled professionals and undermining the government’s long-term effectiveness.
As for the incentive mechanisms driving the behavior of government agencies and their staff members, Acemoglu suggested that such public institutions need not make use of powerful economic incentives, but instead should focus on recruiting the right personnel while at the same time remaining devoted to one clearly defined sense of mission, avoiding the confusion associated with pursuing a multiplicity of competing goals as stipulated by the Tinbergen Rule. He further argued that the main purpose of government reforms should be to direct greater attention towards important areas that require more regulation, such as the regulation of artificial intelligence, while at the same time doing away with ineffective regulations, such as licensing requirements and onerous approval processes. In lieu of burdensome regulatory procedures, carbon taxes and subsidies for instance can be used to address the climate change problem, which can in turn free up the vitality of the private sector. Moreover, the question of whether to increase or decrease the budgets of government agencies is not the core issue, with the main focal point instead centering around how best to make improvements to existing regulatory frameworks.
In reference to the US fiscal deficit, Acemoglu concluded that merely undertaking reforms to the country’s Department of the Treasury alone would not solve the problem. The root cause of the deficit can instead be traced to the malfunctioning political system that has resulted from increased polarization between the two political parties, resulting in low public trust and the poor functioning of democratic institutions, with this situation therefore having created an urgent need for fundamental democratic reforms. As to the proposition of potentially reforming the Department of the Treasury, he does not consider following the example of the US Federal Reserve model or preset contractual arrangements on fiscal spending to be viable. Given that fiscal spending is determined based on a dynamic process of political decision-making, a degree of flexibility is required in order to respond to any unforeseen events as they arise, with rigid rules otherwise constraining the government’s capacity to respond effectively.
At present, state and local governments in the US lack the appropriate incentives to stimulate local economic development. Acemoglu argued that a part of the problem is due to an over-reliance on transfer payments from the federal government, which weakens the fiscal autonomy and initiative of state and local governments. Even more notably, under the system of “fiscal federalism” in the US, states are often caught up in a race to the bottom or conversely err in imposing excessive regulatory burdens, all of which has seriously hampered the efficiency of government programs and policies.
Dani Rodrik advocated for rethinking the framework for global governance and the paradigm for implementing industrial policies. He explained that the conventional model of globalization, which requires countries to undergo a convergence in their economic practices and abide by strict international rules, has failed as a result of an inability to account for the differences in national development paths, as has been evidenced by the ongoing clash between the industrial policies of countries such as China and the United States. The ideal alternative would be a kind of intermediate regime: one that grants countries autonomy over a broadened policy space and establishes mechanisms for cross-border dialogue that distinguishes between “beggar-thy-neighbor” policies and legitimate domestic goals, thereby reducing negative spillovers from economic interdependencies through the building of mutual trust and confidence.
Based on this alternative framework, Rodrik proposed a new paradigm of “productivism” that can surmount the limitations of traditional industrial policies. As for its goals, this new paradigm not only promotes the upgrading of the manufacturing industry, but also emphasizes the potential of the service industry to innovate and create high-quality employment opportunities, in addition to favoring labor-friendly technological advancements that improve overall productivity. In terms of the methodologies for putting “productivism” into practice, this paradigm moves beyond solely providing subsidies and related incentives, proposing instead that governments and enterprises engage in the dynamic optimization of policies through iterative collaboration, while tolerating a process of trial and error alongside a preference for making corrections in a timely manner. Moreover, decentralization can be regarded as the most appropriate approach when it comes to actual implementation, which requires that local institutions become deeply involved in the process so as to avoid the proclivity towards centralizing management and control.
In specific reference to developing countries, Rodrik explained that the traditional export-driven path towards achieving industrialization is no longer viable, underscoring an imminent need for these countries to shift their development strategy towards an inclusive growth model driven by the service industry. One of the cruxes for delivering on such an approach is to expand the labor-absorbing service sector through the roll out of “labor-enhancing technologies.” Although the payoff schedule is longer than previous industrialization models, this development strategy nevertheless can directly benefit the broad majority of workers. Its essence is to move away from relying on global value chains and instead focuses on fostering the economic conditions necessary for developing a local service industry, which in turn can provide a means to fundamentally realize the core purpose of development—that is, improving the productivity level of the greatest number of people possible.
During the roundtable discussion segment of the conference, a panel of invited guests proceeded to express their respective views on several topics of current interest.
Liu Peilin relayed his perspectives on the institutional and cultural underpinnings that have given rise to China's competitive advantages in the manufacturing sector. He pointed out that China's manufacturing industry, especially when it comes to emerging industries such as electric vehicles, has demonstrated strong competitiveness at the global level. Such success has not only provided significant material benefits to domestic consumers (such as lowering the threshold for consuming higher-end automobiles), but has also delivered gains to international consumers. As for the deep-seated forces driving this set of circumstances, there are at least two main aspects to consider. On the one hand, there is a certain way of approaching policy that remains prevalent across China, with the historical memory of the “shortage economy” having brought about an inherent policy inclination that tends to emphasize production and investment while deemphasizing consumption. Given the internalization of the country’s intense experience of long-term material scarcity, a preference for increasing supply and expanding production and investment has since become an enduring source of received wisdom across the whole of society. This mentality of “preventing shortages,” moreover, has long been fully embodied in the country's institutional setup and policy orientation. On the other hand, one can also look to China’s distinctive fiscal and tax structure. The value-added tax (VAT) in the country’s manufacturing industry is closely linked to local revenue collection, while the consumption tax is mainly levied on the upstream production segment rather than on downstream points of consumption. This has led to an incentive structure wherein local governments tend to ignore the expansion of consumption while focusing much more attention on developing the manufacturing sector through the attraction of outside investments.
The rapid improvement of China’s manufacturing capacity is an essential requirement to achieve industrialization and modernization, with the country’s current industrial manufacturing capacity having won broad-ranging recognition around the world, effectively enhancing its national strength. However, the expansion of production volumes in the manufacturing sector must be brought more into balance alongside increases to consumption. If surplus production volumes considerably exceed consumption, the result will not be sustainable, contributing to poor internal economic circulation and triggering external trade frictions. In fact, this situation has already entered the picture and therefore must be addressed by policymakers through a shift in people’s mindset as well as changes in policy as necessary.
With reference to the argument that the development of China's capital market continues to lag behind the real economy, Wu Xiaoqiu offered up three explanations: First, there is the question of a certain cultural standpoint. Society does not hold capital markets in high regard, instead considering the gains accrued from operating a physical enterprise to be more valuable than those provided by way of the secondary market, with this backward way of thinking meanwhile also affecting the formulation of relevant laws and policies. Second, there is the issue of institutional flaws. From the perspective of past historical experience, the system of civil law in mainland China has created certain constraints on the development of such markets, putting into place penalties for violations that remain far too lax as well as inadequate mechanisms to effectively safeguard investors. Third, there is a misalignment associated with how the market is orientated. For a long time, the capital market has been treated merely as a financial tool, while its investment function has continued to be neglected. This has resulted in an insufficient risk premium, which therefore places limits on investor returns. Wu called for undertaking improvements to the mechanisms for protecting the interests of investors while imposing significantly stricter regulations and legal penalties, stressing that the China Securities Regulatory Commission must focus its attention squarely on monitoring transparency rather than on a multitudinous set of various objectives. He mentioned that the central authorities have already recognized that capital markets represent a centerpiece of modern-day economies and finance, with this awareness of the need for change providing a promising starting point for embarking on reforms.
Huang Hanquan stated that current government functions and policy resources remain oriented towards production and investment, with a long-term absence of any agency capable of taking on specific responsibilities for planning and coordinating consumption, which has hence resulted in the fragmentation of policymaking while generating lackluster results. He suggested that a cross-departmental coordination mechanism be established to study and promote consumption-related policies in order to break through the “stumbling blocks” and “sticking points” holding back the consumption sector.
As for the proposal to push forward with institutional reforms geared towards setting up a “National Bureau for Consumption,” Huang expressed that attention should be paid to making improvements to institutional incentives and coordination mechanisms, rather than simply opting to establish new government departments and commissions. He furthermore underscored, from the perspective of government and economics, that improving China's consumption capacity is not only the key to transforming its economy, but also represents a breakthrough in reforming the system of incentives underpinning the government's functions, which is necessary for reshaping its approach to development at a more foundational level.
After the morning session came to a close, students from a number of leading universities across China and around the world participated in breakaway thematic sessions, with presenters from Peking University, Beijing Sport University, Beihang University, University of International Business and Economics, Fudan University, Hosei University (Tokyo), Guangxi Normal University, Harbin University of Commerce, Hainan University, Henan University, Ho Chi Minh City Open University, Nanjing University, Nankai University, Tsinghua University, Renmin University of China, Shanghai Normal University, Capital University of Economics and Business, Turan-Astana University, Wuhan University, Xi'an Jiaotong-Liverpool University, Southwest Minzu University, Xiamen University, Chinese University of Hong Kong (Shenzhen), Indiana University East, Zhejiang University, Zhejiang University of Technology, Central University of Finance and Economics, and Minzu University of China, among others. They took turns sharing their research findings and insights on the two themes of “Government and its Policies” and “Firms, Development, and Government.”
