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Lu Zhongyuan: China's New Mission on Economic Research

Jan 21,2015

China is in the process of an economic and social transition and significant changes are taking place in many areas, meanwhile, the world is also seeing profound changes and adjustments to the economy and governance. So, economics researchers need to shoulder a new historical mission to raise the academic level, develop theoretical innovations, provide intellectual support for China's economic restructuring and reform, and contribute more to global economics.

The economics research should describe the trends and patterns of economic and social development rather than just some superficial phenomena and short-term changes.

Currently, one of the greatest changes in China's economy is the growth slowdown, which is fundamentally the result of changes in three areas – labor growth, capital growth, and efficiency -- all of which affect the medium and long-term economic growth. To be more specific, there was an earlier reduction in the labor force and a slowdown in capital growth resulting from a decline in the savings rate because of the aging population. In addition, costs rose to squeeze profit margins and efficiency was limited by technical, institutional and developmental factors. So efficiency becomes a slow variable so that it is not strong enough to dramatically offset the economic slowdown. China faces a challenge that the mid-to-long term economic growth will continue this gradual slowing down. The growth pattern and profit model that China has depended on for a long time are unsustainable and there will be great changes in the revenue sources, material benefits and public services. And, the traditional ways of stimulating the economy won't work anymore, and there will be contradictions in various ways. So, research should focus on trends and law of economic and social development, promote theoretical innovation for practical problems, and not get stuck in some study of superficial phenomena and short-term changes.

At the same time, China's economic slowdown has brought many new opportunities, and even revolutionary changes that have not been noticed. For instance, service industry develops rapidly, industrial transfers are active, and some new regional growth poles are taking form. And what are the trends of these positive changes? Well, they're still unclear and need a lot more study and exploration. So, researchers should be responsible for figuring them out and reporting the results to decision-makers, business, and the general public and for helping them comply with the reforms and the trends for a smoother transition to the new economic state featuring harmonious development.

Researchers need to continue to emancipate their minds, integrate theories with practice and have the courage to bringing forth new ideas.

China's economic researchers have been active since the beginning of the reforms and opening-up. They have established new economic disciplines, introduced and developed new research methods, broadened view to observe economic and social issues, and put forward new theoretical perspectives and policies, with a good understanding of China's conditions, a broad vision of the world and the courage to break the shackles of outdated theory. With many new perspectives and ideas accepted by decision-makers, economics researchers have contributed a lot to sustainable, rapid economic development and changes in the economic model.

During China's reforms and opening-up and economic transformation, emancipating the mind has been an inseparable part of it at every moment sealing the fate of the reforms and every historical moment of economic and social development. Carrying out the reforms and economic restructuring guided by theoretical innovation has been invaluable experience in promoting reform. The logic of reform and opening up and development transformation demands that we summarize our experiences, learn from it, remove constrains to our thinking and come up with innovative ideas that can become policy with universal significance or even a new system after standing the test of practice. In the process, researchers will gain experience and their results will be tested in practice.

At this new stage of comprehensive reforms, the researchers should have new responsibilities and contribute more. We do have a new platform of think-tank participation in the top-level design of reform plans and third-party assessment of reforms and their effect. Some think tanks are booming in China and are becoming an important way to promote reforms and improve economic research. So, it is important to make full use of them in assessing the effects of reforms scientifically, identifying conflicts and problems accurately and proposing instructive and constructive ideas on how to deal with the problems. Clearly the greater the economic reforms are, the more likely they will affect the whole process with even a slight change in one part. To continue to improve the quality and influence of think tanks, researchers need to keep focusing on their professional research and increase interdisciplinary studies and make full use of interaction.

Economics researchers need ambition and capacity to give them a greater voice in the world.

China now is the world's second largest economy and is taking part in global governance changes. It has increasing interaction with the international community. Since the global financial crisis, especially the European debt crisis, it has been assessed by many foreign governments, think tanks and organizations, with some of them objective and others far from it, for example, overestimating China's strength. China was even seen as the biggest economy in the world in purchasing power parity, this year, even greater than the US, by the International Monetary Fund, which caused quite a stir. But, even though China has indeed seen some great success in its economy, it is still far behind the developed countries. If we consider average per capita GDP and the development imbalance, China is still the largest developing country and, while China's voice in the world is louder than before, it is far from strong enough.

When we consider its academic level and economic research influence, China has gained more influence and recognition in its study on economic policies, working out plans, and summarizing practical experience from reforms, but less in basic, innovative economic theory, use of new methods, and finding new research areas. And, in spite of the Western world’s prejudice about China's ideology, its economic academic level and influence on the world are far from that of developed countries. This is the result of several factors, including the fact that China is at a lower stage of economic development and its imperfect economic restructuring and structural reforms. Also, the law in many areas is not easy to see, and an economic system for a socialist market economy is being explored. In other ways, it comes from a lack of academic norms and creative ideas and sticking to the entrenched policy explanations.

China's think tanks' and economic researchers' voice in the world depends on the country's power in every field and the value of its research, or the influence of its ideas on the "idea market". To give China a louder voice and to increase its international influence, it needs to build more think tanks, research teams, and better operations, and it has to take China's conditions into consideration, broaden its horizons, raise its academic level and its ability to lead people, and increase idea exchanges with the outside world. One example of how to do this is that the ideas on employment, green, low-carbon sustainable development, and improved livelihoods in China's 12th Five-Year Plan (2011-2015) are quite similar to the ideas on smart, green, inclusive development contained in the EU's 2020 Development Strategy and they gained high recognition from the EU who thinks China's 12th Five-Year Plan as a cool plan with advanced ideas and effective measures. So, if China wants more exchanges and discussion that give it a positive image, think tanks and economics researchers need greater intellectual results.

China is taking a more active part in economic globalization and this calls for international responsibility and commitment, while China has to stick to the bottom line of considering its national conditions and seek support from economic restructuring. Carbon emissions are one example, where China has promised absolute carbon emissions reductions by 2030, but it will be difficult for China to reach the goal. And, for its resource-intensive, labor-intensive provinces in the Midwest, it poses a great challenge to the inclusive development that favors employment. China's think tanks need to find ways to let the international community understand that,China is undertaking significant international obligations by making great efforts to overcome its own difficulties and solve problems of survival and development. Just criticizing China's economy for being dependent on exports doesn't consider China's situation and is no help. The country's labor-intensive, resource-intensive situation and its position in the international division of labor mean that China has to stabilize and expand its exports or it can't solve the employment problem of hundreds of millions of Chinese, or issues of urbanization and developing resource-rich areas. China's think tanks and economic researchers need to take its resources and development stage into consideration, have a keen insight into economic globalization and global development, study ways for it to fulfill its global commitments and come up with cutting-edge ideas and ways to cope with the global challenges.

As for the future, China is likely to have more influential economic research in development and transition economics internationally. China's socialist market economy theory is a creative, unique contribution to the world's economics and, as the largest developing country with a socialist market economy, its economic reforms and transformation will have a more far-reaching influence. To summarize the successful experience in the process and establish an economic theory system in compliance with academic standards mean that China has become more mature in its economic research and contributed Chinese wisdom to the field of global economics.

The author of the article is Lu Zhongyuan, a senior research fellow and a former Vice-President, at the Development Research Center of the State Council (DRC)

The article was published on the People's Daily, on Jan 8, 2015.