China Needs New Economic Thinking

After talking to economics students, professors, consultant, investors, and people working in the finance industry in China, the general consensus is that the Chinese society and the government is paying little attention to economic thinking in China, let alone "new" economic thinking. Currently, Chinese society is collectively obsessed with making money, and has little patience for "thinkings" which doesn't materialize in six months. Also, to get rich in the short run, people find that they don't really need much new economic thinking. This is a very particular historical stage for the nation.

Economics students report that they do not learn much in college. They go to classes and take tests to get the degree. They also spend time on taking extra exams for various diplomas and certificates that enable their entry into accounting and finance. One economics professor told me: "teaching is teaching, real world is real world. When you teach, you don't need to worry about economic thinking." Some professors make more money by recommending stocks on TV shows than their university salary.

The economics and finance department in Chinese universities is being dominate by professors educated in American universities. There are very few Chinese-educated economics professors in the leading Chinese universities right now. Good universities in China all teach economics and finance using English textbooks. Which textbook they choose depends on what the teacher himself used when he was in school in the U.S. There isn't much presence of the division among different school of thoughts because thoughts are not important for people's career.

Also, in order to be promoted in top Chinese universities, the economics professors are required to publish articles in English language journals. Publication on Chinese journals doesn't count as much because of the low credibility. This situation is also created by the fact that many universities care a great deal about their international ranking, which looks at publications on globally recognized journals.

Another interesting point is that several people (students and professors) mentioned to me that they feel that the Chinese language is unsuitable or even inadequate in dealing with modern economics. My own experience confirm their feeling to a certain degree. The whole modern economics is built upon western system of thoughts and is thought out and developed in the English language. As a result, many notions and logic in economics couldn't find satisfying counter-part in Chinese. When an English textbook or article is translated into Chinese, I usually find it confusing and inaccurate.

One other thing to notice: economic thinking can not be separated from the political reality, and this is especially true for China, where the government (namely, the Party) still plays the most important role. If the business runs the government in the US, then in China, the government runs the business. If the government exists to serve the needs of the market in the US by providing regulations, public goods etc., then in China, the market exists to serve the needs of the government by strengthening state control and delivering political legitimacy. The government can use executive orders to stop retailers from raising prices; the government can ask the statistics department to "come up with" the exact data that it wants. The state owned companies has been consolidating control over national industries. All these signs tell us that we can't simply apply market economy model to China's situation. Chinese economy is a unique hybrid of past and present, of Confucian central control and modern economics. The situation also tells us that any economic model is only useful to a certain degree --- and a less degree in China than in the US.

It is at first surprising to think about how China is able to develop so rapidly without much real economic thinking. But the reality is that China's per capita GDP still ranks behind Albania and Ecuador, so China's economic growth up to this point is largely picking the low hanging fruit --- it is more precisely a "coming-back-to-normal" instead of real development. China is exploiting its own labor force, social well-being and environment to increase the GDP. Now the low hanging fruit is gone, and in order for China to go forward, it definitely needs new economic thinking.