Scholar-type officials lead China's future economy

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By Raymond Chan

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05 March 2018, 8:00 AM

"All of the world's attention to this 66-year-old Chinese academic official who has a major in economics, because his economic thinking will inevitably lead China's economic direction for the next decade."

In addition to the focus of this year's World Economic Forum in Woudas, In the re-implementation of protectionist US President Trump, another focus is on behalf of Chinese President Xi Jinping attended the forum of the Political Bureau of the CPC Central Committee, director of the Office of the Central Leading Group of Finance and Economics Liu He.

The world's attention to this 66-year-old Chinese academic-oriented official with economic professionalism will inevitably lead China's economic direction for the next decade because of his economic thinking.

Scholar-type officials lead China's future economy

Liu He graduated with a master degree in public administration from the Kennedy School of Government at Harvard University and taught at the Department of Industrial Economics at Renmin University of China. In 2015, his dissertation "Comparative Study of Two Global Great Crises" was awarded the highest honorary award in China’s domestic economic field – Sun Yefang’s Economic Science Award. Liu He was appointed to the post of State Council and the State. In 2013, he was promoted to director of the Central Financial and Economic Leadership Group Office. He was regarded as Xi Jinping's close associate and the most important economic think tank. 

Some people even said that if you look at Liu He, you will see the direction of the future of China's economy. 

In the process of economic and trade liberalization, China has often been criticized by Western countries as a set. In this regard, Liu He indicated that China will introduce open measures that exceed the expectations of the international community. One example is that in China, the foreign and domestic capital of banks and financial asset management companies has a single and total shareholding limit of 20% and 25%, respectively. This ratio was expanded to 51% last year and there is no cap at all after three years. 

As an emerging economy, China needs to adopt tactics that are gradually opening up, especially in the financial sector. At present, China's financial industry has reached an important opportunity for further opening up. Liu He indicated that China’s banking, securities, insurance, and other fields will be expanded and open, while at the same time strengthening protection of intellectual property rights and expanding imports. This level of openness is not only beneficial to foreign capital, but also an important step in realizing Liu He’s economic thinking and China’s economic structural reforms.

Cannot continue to develop without reform

Recalling the focus of Liu He’s more than 60 academic papers and more than 20 public speeches, he reflected that he was a thorough reformist. Liu He once quoted a sentence from former Chinese Premier Zhu Rongji that the Chinese economy has reached the point where it cannot develop without restructuring. In recent years, China’s economic reforms have the shadow of Liu He. 

First of all, Liu He does not think that inflation is a purely monetary phenomenon, especially in China. He believes that China does not belong to a society where the rich and the poor are homogenized. If you blindly learn from the West, simply relying on interest rate increases or interest rate cuts to regulate and control the economy will only make the economic overheating sector even hotter, and it will not be able to stimulate effective demand. 

Liu He believes that "too many money chasing too few products" is just an indicator of inflation. The issue of inflation in China is essentially the structural contradiction caused by the imbalance in the national income distribution pattern. Therefore, it is necessary to readjust the supply and demand structure to regulate the level of inflation. This is in fact quite different from the West. In the past few years, the "supply-side reforms" and "three gossips, one drop, and one supplement" that we often hear have clearly come out of Liu He’s economic thinking.

The primary goal: China's universal wealth

Just a simple explanation, eliminating the gap between the rich and the poor is the focus of Liu He's economic thinking. He believes that the gap between the rich and the poor is too large, and China cannot create a real market for domestic demand. For Liu He, the ultimate goal of urbanization is not to build a city, but to absorb a large amount of surplus labor in rural areas. 

If readers have traveled to or live in China, they will all know that Chinese people do not need to bring cash and credit cards to the streets and that they can pay for almost all goods and services on their mobile phones alone. As early as 2000, Liu He proposed that "the internet is a brand new social infrastructure" and described the internet as a necessity for everyday life just as China "turns into water, air, and highways." At that time, he made suggestions to support the new economy into another industrial revolution. 

In Liu He's speech and article, the author believes that the biggest challenge is to break the monopoly and the current market order. Liu He believes that the development of a new economy is to deploy the best resources in this field. However, if there is an administrative monopoly, it will lead to a mismatch in resources. At present, China does have such drawbacks in many areas. 

The upper limit of the proportion of foreign capital held by the banks, finance, and insurance industry mentioned in the beginning of this article will be abolished. It is actually a means to realize Liu He’s economic reform vision – by introducing foreign capital to combat monopolies.

China's financial industry is turned upside down

In the end, Liu He believes that the Western countries’ financial industry has an inverted cart before the horse, which has caused Western economies to often fall into crisis. 

He believes that the main function of the financial industry is to serve the real economy. Therefore, the degree of prosperity of the financial industry should not exceed the real economy. He believes that the financial industry should solve the contradiction between supply and demand for the real economy and help the real economy adjust its structure, rather than deepen the fluctuation of each cycle. , making the country follow the ups and downs of the market. 

As the author analyzes China's national conditions, he pointed out that for long-term development of China, we must avoid taking the old path of Western countries.

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