An Insider’s View on the Transformation of the Chinese Economy

Abstract:

Professor Li Yining is one of China’s leading economists. Professor Li worked out the theoretical foundation for China’s economic reform policy since 1978. Despite ups and downs in the implementation of China's economic reform over the last 30 years, its general orientation was based upon Professor Li’s theory and policy suggestions. In his lecture Professor Li will elaborate on the decisions made at the Third Plenary Session of the 18th CPC Central Committee in November 2012. In the late 1980s and early 1990s, Professor Li was the doctoral advisor of China’s present Prime Minister Li Keqiang<http://en.wikipedia.org/wiki/Li_Keqiang> and the advisor for the master thesis of China’s present Vice President Li Yuanchao<http://en.wikipedia.org/wiki/Li_Yuanchao>.

Professor Li Yining was born in 1930 in Jiangsu Province, China. In 1955, he graduated from the Department of Economics of Peking University. His major contributions to economics and China's economic reform and development are manifested in the following three aspects:

(1) Through comparative studies about the economic practices in China and many countries worldwide, Professor Li Yining developed the theory of disequilibrium in economy and applied it to elucidate the functioning of China's economy. He divided disequilibrium into two categories: first, disequilibrium under the condition of a market which is not well developed; second, disequilibrium of a market which is not well developed and in which enterprises are not under the budget constraint. China's economy has belonged to the second category throughout its whole transition process. Li Yining put forward the measures for China's economy to realize the transition from the second category of disequilibrium to the first. His viewpoint about carrying out reforms in a gradual way in order to achieve a steady economic growth originated from this theory.

(2) Li Yining pointed out that the primary task for the reform of China's economy lies in the reform of ownership. There existed for a long time hot debates about the policy options for China's economic reform: Whether priority should be given to price reform or to the reform of ownership. On the basis of profound studies of the process of China's economic growth, Professor Li criticized the prevailing view in the mid-1980s which favored the option of price reform. He pointed out: "The failure of China's reform may be caused by the failure of price reform, nevertheless the success of Chinese economic reform is by no means determined by the success of price reform, but by the success of ownership reform." From 1997, academic circles and government departments reached the common understanding of the importance of ownership reform advocated consistently by Li Yining.

(3) Li Yining developed the share-holding theory and made relevant policy proposals. Considering that China was under the planned economy which was tightly controlled by the government and that its state-owned enterprises held a dominant position but with poor performance, Li Yining raised the idea of reforming China's economy through share-holding system at the very beginning of the reform. His idea consists of transforming through share-holding system state-owned, collective, township and village enterprises as well as other enterprises the ownership of which is not clearly defined. Professor Li's theory and policy proposals helped propel the reform and growth of China's economy. Because of his advocacy of the share-holding theory which contributed to China's economic reform, Professor Li became known as " Mr. Stock Market Li."

Professor Li Yining has contributed to ethics, reflected in his works "The Problem of Ethics in Economy", "Economy, Culture and Development". He pointed out: "There are two foundations on which efficiency is built, one is the material and the other moral. With material foundation alone, people can only get ordinary efficiency, whereas with moral foundation, they can obtain extraordinary efficiency."

Li Yining has spent his entire academic career at his alma mater Peking University. He formerly served as the dean of the Guanghua School of Management<http://en.wikipedia.org/wiki/Guanghua_School_of_Management>, the university's business school.

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