The most obvious one-word answer to the question why did China boom is capitalism. As Peking University economist Michael Pettis puts it, China boomed simply because the government got rid of "idiotic policies" rooted in Stalinist and Maoist economics, letting the market do its magic. Indigenous market energy attracted diaspora, East Asian, and eventually global capital investment, allowing Chinese products to reach markets worldwide. The Behemoth was born. But questions remain as to the nature of China's economic model, as opinions range from skeptical to triumphalist. Capitalism is at the essence of the boom-- but what kind of capitalism? And where will it lead?
Xu Xiaonian is professor of Economics and Finance at the China Europe International Business School (CEIBS), an international business school located in Shanghai. He has worked for China International Capital Corporation Limited (CICC) since 1999 as Managing Director and Head of Research. Xu was ranked the No. 1 economics researcher among domestic brokerage firms in 2002 by Chinese institutional investors. Prior to joining CICC, Dr. Xu was Senior Economist with Merrill Lynch Asia Pacific based in Hong Kong, and a consultant for the World Bank in Washington, DC before that.
Xu obtained a Ph.D. in Economics from the University of California, Davis and an MA in Industrial Economics from People's University of China. He received the prestigious Sun Yefang Economics Prize in 1996, the highest Chinese award in the field, for his research on China's capital markets. Xu was also named one of China's Most Powerful People by BusinessWeek in 2009. His research interests include: macroeconomics, finance, financial institutions and financial markets, transitional economies, and China's economic reform.
I was stunned to see the poverty in the countryside of China, and such a low standard of living. And the agricultural technology was not so different from what I saw in the museum. The tools they used were so backward...the economy, and the farmers barely made enough to keep their family going. It's just so poor. Their families and their village, and the area, so under-developed, it's really an education. And Mao Zedong sent us to the countryside to receive reeducation from the farmers, and I think that is a very valuable education for me, but at a very heavy cost. So, ten years, I didn't study high school. I didn't get a chance to study high school. I just graduated from elementary school and was sent to the countryside, away from my parents, from my sisters, on my own. So, that was an extraordinary experience for me, but I learned a lot about what the real China looked like and how people lived in the small villages. And after that, I went back from time to time to visit my family, friends and their children and grand-children. And just a few months ago, I went back again. Of course, after thirty years of economic reform, the living standard now is much higher than thirty years ago when I lived there. They made tremendous progress. In Yenan, when I was there, no running water, no electricity and people in that village never saw trains or airplanes. They had no idea whatsoever about the modern world. And today there is running water, electricity, school, hospital. Economic reform brought them from a primitive economy into the modern economy. And the rural economy integrated so much with towns and cities. So farmers' income is ten times as high as what they received thirty years ago. And the farmers all use televisions and mobile phones now. But when I was there, there was no phone, no video. So, it's very hard to imagine and the shock[ing] contrast between now and then.
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