December 9, 2011
A change in economic model is necessary if China is to continue sustaining its economic growth. That was the message delivered by Hong Yinxing, Chancellor of Nanjing University, who spoke at the Watson Institute on Tuesday.
A former Fulbright recipient, Hong holds key positions on several national and provincial institutions in China, including the Jiangsu Development Institute and the Social Sciences Commission of the Ministry of Education.
In his talk, titled “Innovative Development of China's Future Economy,” Hong listed several factors that contributed to China's rapid growth of an annual average of 9.9% in the past 30 years, including the low cost of labor and a high investment rate. He highlighted that the low cost of labor, in particular, was due to the surplus of workers in the cities as a result of rural-urban migration and a large young population.
But he acknowledged that some of these factors are unlikely to hold in the future. For example, the low cost advantage of China is fast being eroded, because the entry of migrant workers into the cities is slowing. “In the east coast now, there is a clear lack of migrant workers,” he said. As a result, the average wage of a migrant worker in 2009 was twice that of 2001, making it increasingly difficult for China to sustain the labor-intensive industries that were key to powering her growth.
Thus, it is important for the country to move up the value chain and focus on technological innovation in areas such as renewable energy, life sciences, and new materials. Hong added that China needs to rethink what kind of foreign investment it is attracting and to place more emphasis on attracting foreign talent as well.
In response to a question from a member of the audience on the influence Chinese economists have on the government's decision-making process, Hong admitted that “Chinese economists do not have as great an influence on Chinese economic policy compared to American economists on American policy.” Prefacing his remarks with a disclaimer that he “cannot say for sure in other areas,” Hong nevertheless highlighted that in the economics discipline, people are allowed to express their own views freely.
He added that there are “direct channels” for economists in major Chinese research universities to send their views and opinions to the central government. For example, Nanjing University hosts an economic development conference every year, which local government leaders are required to attend.
Hong's talk was part of Brown's Year of China for 2011-12, co-sponsored by the Department of Economics, the Office of International Affairs, the Rhodes Center for International Economics and Finance, and the Watson Institute.
By China Conversation Managing Editor Kai Herng Loh '14