On the morning of December 4th, 2016, the inaugural awarding ceremony of China Economics Prize and China Outstanding Doctoral Thesis Prize in Economics was held by the National Economics Foundation in Beijing. Professor QIAN Yingyi of Tsinghua University and Professor XU Chenggang of Cheung Kong Graduate School of Business won the first China Economics Prize for their contributions to the research of government and enterprise incentive mechanisms in the transition economy.

The “China Economics Prize” follows the nomination procedure based on global recommendations. The final laureates are selected by The China Economics Prize Committee in accordance with the related selection procedures. The “China Outstanding Doctoral Thesis Prize in Economics” follows nomination, expert anonymous review and other procedures to select the final winners. The two prizes are awarded annually.

Mr. XIA Bin, Chairman of the National Economics Foundation, said at the ceremony, “All the economies in transition from a planned economy to a market economy require reform of its system to address the issues of incentive mechanisms, including the incentive mechanisms between the central and local governments and the incentive mechanisms between the government and enterprises. Compared with other transition economies, China has made great achievements in the past 30 years with robust economic growth in parallel with institutional transition, but it still faces difficulties and challenges. These are closely related to the various incentive mechanisms under China’s institutions. The two laureates this year present a set of analytical frameworks and theories that address these issues.

QIAN Yingyi and XU Chenggang, together with their collaborators, conducted in-depth research on different incentive mechanisms in the M-form economy organized by the Chinese government and the U-form economy organized by the Soviet government. Their research provides important insights for understanding the alternative reform paths in different transition economies with different outcomes, as well as for making contributions to the theory of enterprise development. Together with their co-authors, they also studied the mechanisms of soft budget constraints, such as its impacts on innovation, and they significantly promoted the research on soft budget constraints.

QIAN Yingyi, in collaboration with Barry Weingast, Gerard Roland, Lawrence Lau, CHE Jiahua, JIN Hehui and others, studied the institutionalized decentralization in China. This attracted many follow-up studies in economics and political science both inside and outside China. They analyzed the positive role that fiscal federalism played under the Chinese institutions, which contributed to the theory of fiscal federalism and provided important insights for understanding the Chinese economic development. They also rigorously analyzed the positive role that local government played as an owner of enterprises in protecting property rights and helping enterprises acquiring critical resources, as well as the positive effects of the dual-price mechanisms in reducing the resistance to reform while enhancing the efficiency in resources allocation.

XU Chenggang conducted comprehensive political economy analysis on decentralization in China. On the basis of joint research with QIAN Yingyi, Eric Maskin, Gerard Roland, et al., he proposed the concept of Regionally Decentralized Authoritarianism (RDA) which provides a theoretical analysis framework for comprehensively analyzing China’s system and helps people to fully understand the reform and economic development in China from the perspective of institutional influence, including the major achievements and limitations achieved in the past 30 years. From institutional perspective, it analyzes and understands the main issues and challenges that China’s reform and economic development are faced with as well as the system basis that caused these issues. The incomplete law theory co-proposed with Katharina Pistor points out the basic principle for designing incentive compatible law enforcement system including the court and the regulator. These works provide principles of Social sciences for reforming administrative system and law enforcement system.

A video congratulation message from János Kornai, Professor of Economics Emeritus at Harvard University was shown at the Awarding Ceremony.

In his video message, Eric Maskin, the 2007 Nobel Laureate in Economics, said:“I would like to offer my very warm congratulations to Yingyi Qian and Chenggang Xu for winning this important research prize. I’m particularly happy about this event because Yingyi and Chenggang were students of mine here at Harvard. ......Yingyi and Chenggang have had a long and fruitful collaboration.”

Professor WU Jinglian, a renowned economist in China, said in his congratulation speech that the two scholars have won this prize in full compliance with the expectations of many economists he is familiar with.

In his congratulation letter, Oliver Hart, the 2016 Nobel Laureate in Economics, expressed his appreciation for the launch of the Prize and his admiration for the two laureates in their contributions to the research on China’s economic reform as well as the vitality they brought to the economic academic research environment in China.

In his speech, Professor QIAN Yingyi said: “The essence of the transition from a planned economy to a market economy is to replace the planned economy with a set of market-based resource allocation mechanism and incentive mechanism.” “Therefore, in all economic transitions, including China’s, there are two main focuses: one is the issue of resource allocation, and the other is the issue related to incentives, as well as the interactions between the two.

Professor XU mentioned in his speech: “In any political, economic and judicial fields, nothing than the military, fire brigade and other emergency organizations can solve incentive mechanism issues, even the top-down system that rules resources and manpower...... The top-down bureaucratic system cannot effectively solve the incentive mechanism of bureaucrats at all levels. The top-down judicial system cannot enforce laws effectively. The top-down fiscal-financial system will cause soft budget constraint problem.”

The ten winners for the inaugural China Outstanding Doctoral Thesis Prize in Economics are: GONG Xiaolin of Shandong University (Measuring and Analyzing China’s Macro-Financial Risk); LI Kunpeng of Tsinghua University (The likelihood-based analysis for factor models under high dimension: Theory and methods; LI Lili of Renmin University of China (A Research on the Economic Thought of Hyman Minsky); LI Meng of Nanjing University (The Influence of Local Government Behavior on China's Macroeconomic Fluctuation); MAO Qilin of Nankai University (Trade Liberalization, Heterogeneity and Firm Dynamics: Empirical Study Based on Chinese Manufacturing Firms); TAN Zhibo of Peking University (Financial Structure, Corporate Financing and Savings, and Current Account Imbalances); TANG Yanhua of Tsinghua University (Estimating the Invisible Economy Considering Underreporting Motives); WANG Qian of the University of Hong Kong (The Real Effects of Credit Default Swaps); WEI Jie of Northwestern University (The Theoretical and Empirical Research on China’s Macroeconomic Structure Imbalances); and YU Wei of Zhejiang University (Size-expansion and Efficiency-impairment: The Impact of Chinese Private Enterprises’ Political Connection on Firms’ Development).