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without understanding the institution
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left over from the cultural revolution
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people would not understand china's
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economic reform
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because the whole thing started from
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the inherited institutions from the
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cultural revolution
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so here the key is really
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regionally decentralized totalitarian
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system
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in the sense that all the local
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governments
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all the different levels of local
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governments
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have the resources and uh control
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what they are going to do my name is
00:00:39
chen gangshi
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i'm a professor of economics at ckgsb
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which is a private business school
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in china when people claim
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that the rights of china
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is the biggest event
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in the recent economic history in the
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world
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the qualification is the following
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if we look at the issues from the
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point of view of the total gdp so
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within 30 years in terms of a growth
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rate
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of total gdp china
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has break the record
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and then the other issue is the other
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qualification
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is poverty relief so within this
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30 years of time the largest
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poverty relief happened in china so
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that is a very important issue
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and then the third aspect is the
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relative economic development the
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so-called relative
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economic development is measured by
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the per capita gdp compared
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with the world frontier so for example
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if we take the united states per capita
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gdp as
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world frontier then comparing with
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the world frontier from the beginning of
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this 30 years
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to the end of this 30 years so what is
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the change level
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so actually these three aspects are
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closely related number one issue
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is the the population of china so
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given china is the most populous nation
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given the profit the size of population
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then once you have a fast
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relative economic growth
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the growth of relative economic
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development and then you have
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this total gdp
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increase so these are intimately
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related and another intimately related
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issue
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is that at the very beginning of the
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chinese economic reform
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china was one of the poorest nations
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so this is actually a key point so
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when the reform started if we are
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talking about
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relative relative economic development
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level
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china was about something like 120th
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of the u.s level so that's significantly
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below the level
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of the average africa per capita gdp
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we are talking about at such very very
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low levels so it's
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desperately desperately poor
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so starting from this very low level
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and then after 30 years nowadays
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the chinese relative development level
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is close to one quarter
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of the u.s level so started from one
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twentieth
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up to uh nearly one quarter
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so in that in that sense it's a huge
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change so if we only look at these
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factors then yes this is the biggest
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event in economic history but
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some other claims are without
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qualification can be exaggerations
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so when people talk china as a
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superpower for example
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if we look at the per capita gdp level
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it's less than one quarter of the us
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level
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so if we compare china with the soviet
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union
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at its peak time soviet union was
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more significantly more than one-third
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of the u.s per capita gdp level so china
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is
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still below that level so
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we have to keep in mind in our
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understanding
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and also when we talk about this growth
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rate
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the key point is that the starting point
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was
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very very low that's actually that's
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terribly important
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so without understanding that talking
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about
00:05:05
the rights of china can be misleading
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so because at the beginning china was
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so weak so
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poor so in general the whole
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national economy is in at a poverty
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level
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so when we talk about this growth
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achievement
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in china in the recent four decades
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we always associate with this
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with the economic reform so why reform
00:05:38
this is the key issue actually so at the
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beginning of the
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establishment of the people's republic
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of china
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the chinese per capita gdp level
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relative
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to the u.s level was uh
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one of the twenties when the reform
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started
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the level is about the same the relative
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development level
00:06:03
is slightly higher but they're so
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marginal so
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basically we could ignore that so in
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1950 the level was 5
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of the u.s level in 1980
00:06:18
it was 6 of the u.s level
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so basically there was no substantial
00:06:26
change in the first 30 years of the
00:06:29
people's republic of china
00:06:30
so then why reform is so important
00:06:34
it's so clear that before the reform
00:06:38
uh basically there's no catch up and
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also we know that what happened
00:06:45
before the economic reform so there were
00:06:48
two
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disastrous movements one is the great
00:06:52
deep forward movement
00:06:53
the other is the cultural revolution so
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reform means no greatly forward movement
00:07:01
no cultural revolution and the whole
00:07:05
way of organizing the economy has to be
00:07:08
changed
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so there is a sort of misleading
00:07:13
explanation about china saying that
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china was a centrally planned economy
00:07:19
and then
00:07:20
changing to a market economy this is not
00:07:23
quite accurate the so-called
00:07:26
centrally planned economy usually
00:07:30
by describing in this way implies
00:07:33
the soviet model china
00:07:36
won since 1950 when china
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established this people's republic of
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china
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established this system they fully
00:07:48
implemented or copied the sovereignty
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model
00:07:53
but since 1958 china has changed
00:07:56
the institution so it's no longer
00:08:00
a suicide type of centrally planned
00:08:03
economy anymore
00:08:04
so the institution has been changed
00:08:08
centrally planned being abundant
00:08:11
so it becomes a administratively
00:08:14
applied planned but not centrally
00:08:18
planned economy so i characterize
00:08:22
that kind of system as a
00:08:25
regionally decentralized totalitarian
00:08:28
system
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because in the political economy the
00:08:32
soviet system is
00:08:34
described as a totalitarian system china
00:08:37
changed that a little bit
00:08:41
in terms of administration so
00:08:44
although the whole economy the overall
00:08:48
society is governed in a totalitarian
00:08:52
way
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but in terms of administration in terms
00:08:56
of
00:08:57
resource allocation it's regionally
00:09:00
decentralized
00:09:02
in the sense that the local governments
00:09:05
control substantial amount of resources
00:09:09
and they manage their local economies
00:09:13
so based upon this institution so there
00:09:15
are two
00:09:16
waves of changing from the soviet system
00:09:20
into this kind of a chinese type
00:09:23
of administratively planned
00:09:26
economy which i call the regionally
00:09:29
decentralized
00:09:31
totalitarian system so based upon this
00:09:34
kind of
00:09:34
institution at the end of the cultural
00:09:37
revolution
00:09:38
the economic reform started then in the
00:09:41
earlier
00:09:42
decades of the economic reforms the
00:09:45
major strategy
00:09:47
is regional competition so this
00:09:50
so-called regional competition is a
00:09:52
qualitatively different
00:09:54
from market competition here the
00:09:56
competition
00:09:57
is not in the sense of a profit
00:10:00
maximization it's not
00:10:01
in the sense of competition in the
00:10:04
market
00:10:05
instead these are a sort of a tournament
00:10:08
competition
00:10:10
that the local governments are ranked
00:10:13
so they compete for ranking they compete
00:10:16
to become number one so for example
00:10:19
within the city you have
00:10:21
several so about the 10 counties
00:10:25
and the counties within the city
00:10:28
they wanted to become number one they
00:10:31
compete
00:10:32
for the number one position and within
00:10:35
a province you are going to have roughly
00:10:39
about 10 cities and each city
00:10:43
is they are competing each other they
00:10:45
want to be
00:10:46
the number one in the province and in
00:10:49
the whole nation
00:10:50
you have a little bit more than 30
00:10:53
provincial level
00:10:54
regions they compete each other as well
00:10:57
and here the key issue is what are the
00:11:00
targets
00:11:01
of the competition so at the earlier
00:11:04
stages
00:11:04
of the economic reform the competition
00:11:07
target
00:11:08
is a gdp grocery and turns out
00:11:12
this is a very effective approach
00:11:16
in terms of promoting the economic
00:11:19
reform
00:11:20
and the growth so this is how the reform
00:11:24
is associated with growth or growth
00:11:27
is associated with reform because
00:11:31
in order to grow the regional
00:11:34
governments
00:11:35
have to find their way so to
00:11:38
grow actually is a big challenge
00:11:42
how to grow this is a big challenge
00:11:45
so at the very beginning of the reform
00:11:48
there were lots lots of emphasis on the
00:11:51
reform of the state sectors
00:11:55
but turns out that is not working well
00:11:58
that didn't work well and the first
00:12:01
successful reform was in agriculture
00:12:06
actually it involves the land reform
00:12:09
it's a partial privatization it's
00:12:11
partial means
00:12:13
there's no fundamental change in
00:12:15
ownership
00:12:17
but the using rights have been
00:12:19
privatized
00:12:20
so with using rights and also
00:12:23
the exchange of using rights these are
00:12:25
privatized
00:12:27
so based upon that there is a sort of
00:12:32
industrial revolution in the sense of
00:12:35
the rural industrial development
00:12:37
so in at the very early stage of the
00:12:40
economic reform
00:12:41
most of the growth actually occurred
00:12:45
in this area the so-called township
00:12:47
village enterprises
00:12:49
starting from a very low base
00:12:53
up to the mid 1990s the largest
00:12:56
sector is this sector in the whole
00:12:59
chinese economy
00:13:00
and that actually is also the base
00:13:04
for the private sector when the private
00:13:08
sector
00:13:09
uh became uh partially legalized
00:13:13
in the 1990s so then in the whole
00:13:16
1990s and early 21st century
00:13:21
china had a very
00:13:24
rapid growth of the private sector
00:13:27
from zero to nowadays is more than
00:13:31
half of the gdp being produced by the
00:13:34
private sector
00:13:35
so if we look at the chinese
00:13:37
constitution
00:13:39
both the state constitution and the
00:13:41
party's constitution
00:13:43
then we find that by constitutions
00:13:48
party constitution and state
00:13:49
constitution
00:13:51
private sector was not allowed until
00:13:55
2002 the change of party's constitution
00:13:59
and 2004 the change of the state
00:14:01
constitution so
00:14:03
until the early 21st century
00:14:07
a private sector was not legal
00:14:10
however up to that point
00:14:13
the private sector was already half of
00:14:16
the gdp
00:14:17
so if we are talking about the so-called
00:14:20
china miracle
00:14:22
what is the miracle this is the miracle
