The Economics of China’s New Era – Prof. Lin from Peking University

Prof. Justin Yifu Lin from Peking University delivered a lecture to a full auditorium at Goethe University (Frankfurt, Germany) on the new Era of the Chinese Economy, on this Jan. 21st. The event was made possible by IZO, the Interdicsciplinary Eastern Asian Studies, on its 10th year aniversary. Professor Lin acquired his PhD from the University of Chicago, and was the Chief Economist of the World Bank between the years of 2008 and 2012, currently working as a professor at Peking University.

Prof Lin started his talk by reminding us of how, 40 years ago, China started its reforms and openned up to the global economy. In 1978, China’s GDP per capita was 156 USD a year, according to the World Bank. Back then, 90% of its production was not linked to global production. However, nowadays, China is considered to be the second largest economy in the world, the largest exporter, and the largest trading country in the world. In 2018, the country reached 9.740 USD GDP per capita.

“China has entered a new era”, stated Prof. Lin, questioning about the implications of such transformation. According to him, people will have different interpretations, but his talk was to give voice to his own. He continued by acknowledging that the Chinese growth in recent decades was very impressive, especially if you compare it to other traditional economies in the Western world, that collapsed with the forces of the global crisis. Meanwhile, China mantained its stability and continues presenting itself as the only country in the world that did not experience a financial crisis in the last 40 years.

Prof. Lin considers this phenomenon a result of a pragmatic gradual reform in the Chinese economy, and he believes that these reforms will continue to be taking form on the long run, in order to maintain stability. He also believes that the secret behind the the country’s economic stability was its competitive advantage in specific sectors of the economy.

But China also paid some costs. The Chinese economy grew alongside with widespread corruption and income disparity in the country, and the Chinese people are not happy with these two factors, creating great social discontent.

But even after 40 years of continuous economic growth, China still has huge potential. According to him, developing countries have the “late comers advantages” – you can input technology by buying new technology from developed countries. This explains why China could achieve the high growth rates. A high income country already has the highest income, productivity and technology in the world. They would have to invent the new technologies. But new inventions require huge capital input, and are of high risk.

He mentioned that a study done in 2010 showed that there’s a potential for China to achieve 8-9% growth until 2028. Now it’s 2019, so there’s still 10 years of this potentil growth. But in a scenario where the global economy doesn not pick up from the 2008 crisis (which most countries have not yet recovered completely (US, Japan and countries in Europe), China can still mobilize resources internally and achieve 6% growth, continuing to be a major driver of economic growth in the world.

Closing his talk, Prof. Lin sounded very optimistic, mentioning that China serves as an inspiration for other developing countries. The experience of China demonstrates that once you have the right policy and ideals, a country can be changed. The country will have to continue deepening its reform, and though it has huge potential for growth, the external situation will be very challenging. The country will also have to show more responsibility for the world (i.e. developing international aid programs). Its growing economic significance implicates greater political significance as well.

Author’s note: My observation is that Prof. Lin failed to address the issues of environmental and health impact that the economic growth brought to its country. He was very enthusiastic about presenting China as this growing economic and political force at global scale, but his analysis – at the event – lacked some of the emerging reflections over the importance of performance indicators other than capital in a country’s development initiatives. This stagnant mindset seems to be leading to the same problems of traditional development policies, which can be only be accentuated by China’s worrying demographics.

Brazil investments in its Infrastructure and transportation system

One of the greatest development challenges for Brazil lies in its infrastructure; be it its communication, information technology, energy, civil construction or transportation systems. Financial resources is available like never before, high end technology is today offered by national and foreign intelligence production and services organizations, and public policies are strategically steaming for economic growth.

But Brazil is a culturally complex nation. Its vast territory and historical colonization process, and later dictatorial government have led the country into a corrupt political structure and society. And here is where foreign investor might find hardest to deal with, when looking for good investment opportunities. Younger generations strive for better educational and health systems, higher quality of life, and higher standards for moral and ethical values, but they are still very much conducted by a misleading and alienating mass media, along with a limited communication system.

In shorter words, it is my advice to foreign investors to hire highly qualified and ethical professionals for assistance in their business deals in the country. Hence my passionate approach to International Relations in Brazil, when in this article I speak about the improvement of its transportation system as indeed one of the top priority issues.

Economic growth means a stronger and more productive industry, and therefore logistics is very necessary for establishing efficient supply and distribution chains. The Ministry of Transportation is the federal governmental institution who coordinates national transport infrastructure expansion and maintenance through the National Department of Transport Infrastructure. Brazil is still highly dependent on its road system for national distribution, which holds the country in a position of a highly expensive and oil dependent internal logistics chain.

There are strong public policies for rail road expansion, urban metro systems, and air and sea ports expansion and improvement calls, and we can see a lot more work getting done nowadays through PAC – Growth Acceleration Plan and growing investments due to the major international events hosting in the near future like the World Cup 2014 and the Olympic Games in 2016.

Bellow is a few official sources for strategic investment planning, available in portuguese (please use google translator for better understanding).