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Qian Yingyi:Economics Research and Education in China

 

 

(Professor Qian Yingyi received Master of Mathematics from Tsinghua University, 1981. After graduation, he studied at the University of Columbia and received a master's degree in statistics from Columbia University, a master's degree in operations research / management from Yale University and a doctorate in economics from Harvard University. Professor Qian taught in Stanford University, University of Maryland, University of California, Berkeley.)

 

Today I want to talk about the current status of economics research and education in China. This is a general subject; I would like to take this opportunity to talk about two specific topics. Firstly, I would like to review historic contribution of China’s economic research and education in the past 30 years. This is a critical topic with few discussions. I heard too many criticisms but we should have fair assessment. Another topic is how should economic research and education advance with the time.

 

First of all, I would like to talk about the historic contribution of economic education and research in the past 3 decades. Over the last 30 years, academic education of modern economics progressed together with China’s economic reform, opening up and development as both direct beneficiary and proactive driver of the economy, further promoted the progress of China’s economic reform and opening up. During this period of time, the poor, closed planned economy was quickly transformed into an open, middle-income emerging market. One can say that economics research and education made great historic contribution for the current economic status of China. Comparing pre- and after- reform and opening up, the most important, fundamental and significant changes are deeply rooted in the two phrases— “open” and “loosen”. “Open” means opening to the world and allowing cross-border flow of goods, talents and capital; while “loosen” refers to the introduction of market resource allocation mechanism, reform of property, ownership and other incentives.

 

It is easier for us to review the history for now, but back then, the basic philosophy, academic and policy research came from contributions made by economics study and economics education for many years. Thinking about economic terms such as market, price, property rights, rent-seeking, incentive, macro-control, troika and M2—all these technical words became both daily phrases of common Chinese people and standard language in documents of the central government and the State Council. It is hardly possible without 30 years of market orientation and efforts of economists.

 

Economic reform promoted in the decision of deepening comprehensive reform during the Third Plenary Session of the Eighth Central Committee is the best example to understand how pervading and profound modern economics became over 30 years. If we still cannot convince ourselves, we can compare economics with political science and law to see the obvious development of economics in the past 3 decades.

 

I would like to raise 3 examples, actually 3 conferences to illustrate how economic policy research drive economic reform in China.

 

The first example is the Moganshan Meeting hold on September 1984. Targeted to practical problems when reform rolling out from rural areas to cities, this academic seminar was held by a group young scholars before the Third Plenary Session of the 12th Central Committee in October. Critical issues of economic reform such as two pathways of price reform, enterprises’ responsibility of their own profits and losses, opening up of 14 coastal cities, financial system reform, shareholding economy, grain purchasing and marketing system were discussed. Looking back in history, this meeting not only greatly impacted high-level decision-making, but also allowed a group of young market-oriented scholars stood out from the crowd. 30 years later, young scholars became senior economists, who are still academic pioneers, policy makers and enablers of modern China.

 

The second conference is the Bashanlun Conference. While economic reform reached to the climax, a series of macro issues emerged, such as the space-time nature of bank loan, fast growth of investment and consumption and inflation. Under such context, China Economic System Reform Research Society, the Chinese Academy of Social Sciences and the world Bank co-organized an international symposium on macroeconomic management on cruise “Bashan” that travelled from Chongqing to Wuhan. The biggest impact of the meeting was the introduction of the concept of macroeconomic regulation and the concept, theory and methods of macro-control. Many western economists also participated this meeting including Professor James Tobin from Yale University and Professor Jarno Kornai from Harvard University. So this is the second meeting.

 

The third meeting was the "Jinglun Conference” held in 1994. After the Third Plenary Session of the 14th central committee held on November 1993, constructing the basic framework of market economy had become a priority. Unlike BashanLun Conference that saw macro economy as the major topic, the theme of Jinlun Conference was micro-economics, especially about property right of transition period, corporate governance, debt restructuring, bankruptcy procedures and etc..Me and Professor Xu Chenggang also participated this meeting.

 

The above three examples illustrated how policy research impacted economic reform. Now I would like to give another 3 examples to show the significant role of economics academic research and education in the past 30 years. The first example is the Chinese Economists Society established in 1985 in the U.S. The Society has been devoted to the development of economic reform and economics concepts in China and the dissemination of modern economics theories over 30 years. For instance, the Modern Economics Frontier Research published in 1985 was an influential book introducing modern economics frontiers. In 1993, the Society also organized the compiling a set of market economics collection of 14 volumes, which played an influential role on introducing economic knowledge to China. They also invited oversea economists to give lecture in Chinese Universities, greatly promoted modern economics education in China.

 

The second example is the establishment of China Center for Economic Research (CCER) in Peking University 1994 led by Lin Yifu, Yi Gang, Hai Wen, Zhang Weiying and other scholars. The CCER aims to inviting oversea Chinese economists teach modern economics systematically back in their motherland. CCER also organizes China Economics Annual Conference and publishes the China Economic Quarterly, both of which can be seen as pioneering contribution to China’s economics education. This is a successful example of promoting economics education with a special institute within a major research university in China since CCER is “special vehicle” independent of the School of Economics in Peking University.

 

The third example is the Tsinghua Distinguished Professor Project for Tsinghua University School of Economics and Management initiated by me and Professor Bai Chongen and Professor Xu Chenggang in 2002. Since then, 15 oversea economists came to teach in Tsinghua. This is a successful case of promoting economics education through the reform of school system. Later, more and more universities started their economics education reform. The Distinguished Professor Project became more influential when 10 of 15 distinguished professors were appointed as Deans and deputy deans in many Chinese universities. Me and Professor Bai Chongen are Dean and vice dean of Tsinghua SEM, Li Daokui is serving as Dean of the Tsinghua University Su Shimin College, Tian Guoqiang serves as the Dean of the School of Economics of SUFE, Zhou Lin serves as the Dean of Antai college of Economics and Management in Shanghai Jiaotong Univeritys, Hong Yongsen is the Dean of the School of Economics in Xiamen University, Xie Danyang serves as the Dean of the School of Economics and Management of Wuhan University, Bai Jushan as the Dean of School of Finance in Nankai University, Li Qi as the Dean of International School of Economics and Management in Capital University of Economics and Business, Wang Yijing as the Deputy  Director of CKGSB. In addition, Ai Chunrong served as Dean of Shanghai Finance and Economics Institute, Tan Guofu once served as Dean of Shanghai Finance University Business Administration. I believe that by taking such important positions, these economists who taught in western universities for many years had played such important role on promoting economics education in Chinese universities.

 

There are many other stories happening now beyond the above 3 examples. Therefore, comparing with 10 or 20 year’s ago, China’s economics education of today is not only improved, but totally changed. We have learned, absorbed and obtained huge improvement in terms of the standard utilization of economic theories and concepts, especially the advance of research methodologies and analysis tools. From papers published on domestic economic journals, we can tell that there is no such a research domain or research methodologies that are not familiar with Chinese researchers or students, which was not the fact 10 or 20 years ago. These are all historic changes happened with trends. When we compare with other social science, we can clearly see how far economics has gone.

 

I believe that China’s economics education and research has made historical contribution in the 30 years of reform and opening up, while experiencing great transformation itself. This is my first topic, review and assessment.

My second topic is how should economics research and education advance with the time. This topic is more about the status quo, issues and potential solutions. Some of contents were mentioned the previous sessions.

 

After 35 years of reform and opening up, China is no longer a poor country. It is not a developed economy yet but a middle-income one. With the start of the “new norm”, how China's economic research and education keep advancing with the times? We need to answer 3 questions. First, how to make academic contribution to economics research. Actually, this is the major purpose for the establishment of the foundation. Second, how to provide policy-related contribution to the innovative economic reform and development. Third, how to provide greater access of economics education while improving education quality. I think these 3 questions deserves systematic discussion. Due to time limitation, I would like to 3 views from the perspective of economics academic research.

 

First, I believe we should focus on general problems especially those related to China’s economy. This is based on one of my observation. No matter natural science or social science, all scientific research has two pathways: problem-oriented and tool-oriented. Physics is both problem-oriented and tool-oriented with “telescope” as the tool. Both pathways are important and can be used to conduct good research independently as many examples have proofed. When the two combined, we can develop better research on critical problems and with the best tools. For the status quo of China’s economics research, we achieved rapid development on the utilization of tools and methodologies, especially in the past 10 to 20 years. That is to say, China’s economics research tends to be more tool-oriented. In other words, we identified problems based on tools we chose. However, in this sense, the problems we studied may not be the greatest nor the most important problems. This is why I believe we should put special focus on critical problems related to China’s economy. This is the first view.

 

However, I would like to say that we should not blame students and young researchers for the pursuit of mathematical techniques and methodologies, nor for their adaptation of tool-oriented research. We still need to encourage them keep learning cutting-edge methods and advance tools. Why? Because based on my personal experience of research and teaching, I understand that whether it is in personal life or academic career, people have different priorities at different stages. For most scholars, when they are young and working with their PHD thesis or as assistant professors, they have good opportunities of learning the best methodologies and tools. These are very critical and helpful foundation for future research, no matter applied science or policy research.

But on the other hand, I think senior scholars should devote more on the thinking and researching of crucial problems. Senior scholars have the responsibility of taking profound and long-term issues that closely relevant to China’s economy (probably not relevant to the reality) as research priority. China’s economic issues will become world’s problems. This is especially true in the recent 1-2 year unlike 10 or 20 years ago. It can be said that no one will ignore China's economy. But I want to emphases that economy and economics are not the same thing. You can tell that from the previous questions, which were all about economy beside the journalist from yicai.com asked one question related to economics. Good economic development also not equal to good development of economics. Japan and German have good economy but don't have famous economists. India’s economy is not as strong as China’s, but there are many good Indian economists. This is a casual example without systematic statistics. But it explains the issue. Economic power not necessarily means strong in economics, and it is not necessary for the best economics research on a certain county come from a researcher born from that country.

 

Let’s me give an example from management (I deliberately avoid using examples from economics). Toyota's lean production is based on management theory found by an American from MIT instead of a Japanese scholar. China’s special development offered great materials for major economics problem. Chinese researchers also enjoy some innate advantages for instance deep understanding on policy details and better resource of data collection. But we need to be clear that converting these innate advantages into academic advantages is not easy since academic research is not only about economics, but also related to the whole social science. Compared with natural sciences, the development of social sciences in China has always been hard and the two took very different ways. In terms of both thoughts and methodologies, natural science in China integrated into the world hundred years ago. So many natural scientists published their article on Science or Nature. However, economics only started to pick up with the global mainstream in the latest 30 years. Also, as a part of social science, economics studies problems not only related to economic issues but also closely related to philosophy, history, political science, sociology and other humanities and social science disciplines, which are also delayed in education and research. Therefore, it is difficult to promote economics alone and need great efforts of several generations.  

Second, I think we must understand the meaning of economic innovation correctly, especially the academic innovation of China's economic problems. When we are committed to the study of China's economic problems, we can easily see the gap between the Chinese phenomenon and existing theories—we all quite sensitive about it. But it is not easy for us to identify in-depth reasons behind; it is even harder for us to figure out mechanism and principles within. But for all theoretical, empirical or policy research, rigorous, systematic and in-depth study is needed. Economics innovation could not be satisfied with a surface description but should be based on in-depth analysis. Undoubtedly, Chinese characteristics exist objectively, but how to interpret takes a lot of learning. Superficial explanations are hardly convincing. That is to say, over-emphasizing special characteristics of China may only makes your Chinese story an extreme case, losing its universality and generality.

 

Imaging industrialization and modernization are only possible for Christian culture, will it be universal? If Toyota’s management experience is entirely based on Japanese cultural elements such as Bushido spirit, it may lose the universality. The reality is, in non-Christian countries, industrialization and modernization will be achieved still. Lean management is applicable without the Bushido spirit. This is the power of universal and general theories—originated from specific context but are universal and replicable.

 

Therefore, only when we put our studies and researches into a broader analysis frameworks or test it with other countries’ experience, these studies based on the Chinese problems can be convincing instead of being special cases. Therefore, it starts from a general theory and applies it in China’s problems and generate another general theory. I found that it is not western economists do not have interest on China’s problems. The fact is they have some obstacles when appreciating researches on China’s economic problems. First, they do not know the details of the Chinese institutional environment and the reliability of Chinese data. Second, majority of economists are not biased, but adhere to the basic concepts of economics and will be convinced by only theories and facts. So we need to conduct convincing research. This is my second view.

 

I would like to use examples to illustrate my third view, which is about the possibility of conducting economics innovation while studying China’s economic problems. I will give two examples that are familiar with me from Tsinghua SEM. There are many new and up and coming economic policies in China with significant scale and means. Assessment and response to these policies may intrigue many interesting studies. It is said that Friedman’s Quantity Theory of Money was inspired by South Korea’s inflation.

 

Another example of significant government intervention is China’s 4 trillion stimulus in 2008. Although happened in China, I believe the stimulus was a big action with universality. People have their own judgements but mainly based on intuitive imagination or belief on theories. In a paper co-authured by Ouyang Min and Peng Yulei, the stimulus plan of 2008 was closely studies. According to the result, the stimulus plan directly caused GDP increased by 3.2%, for temporary. I would like to emphasize that first, this is a study with quantitative conclusion; second, to achieve this conclusion, the existing econometrics tools were far from enough. Therefore, they improved the existing computing tools, which is just like improving telescope in physics. This is only a small but specific example, indicating that the research is only of great meaning but also driven the development of research tools.

 

Another example is a research on the relationship between property tax and housing price conducted by Professor Bai Chongen, Li Qi and Ouyang Min from Tsinghua SEM. Housing price is the biggest concern of people, while the property tax is a great issue of the government. Their published paper Property Taxes and Home Prices: A Tale of Two Cities was based on two property tax pilot cities—Chongqing and Shanghai. Considering the special Chinese context, their study found out that the introduction of property tax caused property price drop in Shanghai but rise in Chongqing. The contradictory results can be explained by economics—specific property tax designing methodologies that are closely related to housing taxation. Again, this research need to use and develop econometric tools. Although this study is of “Chinese characteristics”, but there is indeed “general law” behind since the fundamental economic principle is not unique to China.

 

Finally, I want to talk about a potential development. I feel that political economy will become the most likely area realize theoretical research innovation, empirical innovation, academic innovation and received widespread attention. Political economy studies politics-economy, politics-enterprise and politics-business relationships. Economics problems have never been just economic issues no matter which country we studied. In China, the state and government play a powerful role, for historic reasons, reality reasons and many other reasons, making politics-economy, politics-enterprise and politics-business relationships even more complicated. These problems are within the research scope of political economy and are undoubtedly big problems.

 

China's economists also have some innate advantages in this research domain. Politics-economy, politics-enterprise and politics-business relationships are the least familiar things for many foreign researchers, who may pull their strings to understand China’s situation and may lead to inaccurate judgements. So there are some possibility to conduct economic innovation on China-related issues in this very attractive field. But it will not be easy. Although we have some advantage of information, but that not necessarily lead to in-depth understanding since profound understanding need historic knowledges and many other knowledges beyond economics, sociology or political science. If we want to extract a general theory form the research, precise and systematic theories and empirical research are must needed. This is, I believe, the mission of Chinese economics scholars.

 

 

 

 

◆please indicate the source if authorized: National Economics Foundation

◆photo:National Economics Foundation