Economics in China

My favorite class, by far, during the week was about economics, and it was titled “Can China Save the World? Rebalancing the Economic Environment.” The Chinese professor explained the financial crisis from China's perspective and how it has impacted the country’s economy. Here are just a few of the many points that I found most interesting:

The US borrowed/consumed too much and China saved/invested too much. Neither approach is sustainable. He argued that the Chinese should save less and spend more. He argues that allocation of resources should not be based on need because there are always needs. How does a country allocate limited resources with unlimited desires/needs? He says that the criteria should not be based on market demand, but instead should be based on profitability. He thinks that China’s investment in the high speed train will create debt for the country. How do you stimulate personal consumption in a country where everyone saves? One method would be to provide better social security instead of invest in the railways.

He also explained the potential challenges that the country may face in terms of growth, and he provided recommendations regarding what should be done. For example, he argues that the country needs to move from manufacturing to service, but the service industries are heavily regulated by the government. He recommends privatization, deregulation, and stable macroeconomic policy, which I was surprised to hear from a Chinese professor in China. This perspective created a fascinating discussion among students and the professor.

He included a lot of data about the US economy in the presentation. However, he had very little data about the Chinese economy and explained that it is difficult to be an economist in this country. He has to spend a lot of time figuring out which data he can trust and which he can't. For example, the levels of disposable income are hidden or understated, which he says is common in the developing world.