Professor Xu Chenggang shared his insight on China’s centralized bureaucracy and economy at the CKGSB MBA session held on October 18, a part of the 18th World Knowledge Forum in Seoul
Since its reform, China has risen as the second largest economy in the world, and it is forecasted that the nation will become the largest within a decade. Members of various sectors from politics to financial in the world have been most interested in how China has succeeded in the economic rise – and what would be the possible obstacles and further prospect waiting for the nation.
It is the fourth consecutive year for CKGSB, China’s leading business school, to share knowledge and insight in the prestigious World Knowledge Forum (WKF) in Seoul, the largest forum of its kind in Asia. CKGSB joined the 18th WKF as a knowledge partner, holding its own brand session titled the “CKGSB MBA Session”.
On October 18, CKGSB Professor Xu Chenggang presented a lecture themed “The Pitfalls of a Centralized Bureaucracy”, where he introduced the incentive problems of hierarchically organized bureaucracy in China. Despite the early time in which the session was scheduled, nearly 200 participants attended to gain insight on China’s development through the lecture by the awardee of ‘China Economic Award’.
Approximately 200 audiences attended the session to listen to the presentation of Professor Xu Chenggang, the awardee of ‘China Economic Award’.
Prof. Xu introduced the concept of China’s institution, “regionally decentralized authoritarianism (RDA)”, as the background of China’s past 30 years of successful reform. RDA regime provides fundamental institutional condition for regional competition and experiments. Regional competition means provincial government, cities, counties and townships competing among themselves. Local governments were encouraged to experiment, which was institutional reform experiments.
He especially emphasized the importance of regional competition because of incentive issue; even if the leader wants to have growth and reform, how to do it depends on millions of bureaucrats. Thus, the key secrecy of Chinese economic reform is the solution of incentive problem. With the Chinese governance structure duplicating down to the county level – with each county having the same structure with dozens of offices – the structure allowed local governments to compete and coordinate experiments. In the first three decades, China implemented this scheme and local government worked very hard, showing fairly high growth.
Professor Xu Chenggang illustrated current problems that China is facing and possible outcomes depending on China’s action of reform
However, the situation has changed as multi-task nature of the government becomes more pronounced as China became a middle-income country. Prof. Xu indicated few problems that restrict China’s growth, such as low domestic demand, problems in debt-GDP ratio, and low penetration of the high school education in rural areas.
“If China could reform these institutions to correct problem, the country will have 30 years of very high growth rate. If China becomes high income country, its GDP in the world will reach 40% – larger than the total of US and whole EU,” Prof. Xu highlighted at the closing of the session. “However, if China is not able to reform these institutions, the growth will stagnate. Growth rate will keep declining, and it will become more unstable.”
With the last speech, the session was successfully closed. 200 Korean executives who listened to Prof. Xu’s presentation applauded enthusiastically for the new knowledge and insights on China’s economy and bureaucracy, which cannot be gained easily in any other occasion.
Established in 2000, the WKF has been providing a platform for high-level discussions on latest social and industrial phenomena to help bridging perception gap. Under the theme “Inflection Point: Towards New Prosperity”, around 250 speakers and 3,500 audiences from various sectors, academia, and media attended the session to gain and share knowledge. Some of the speakers include the world’s leading figures such as Hillary Clinton; the 67th US Secretary of States, François Hollande; the former President of France, and Ban Ki-moon; the former UN Secretary-General.
For further information about the WKF 2017, please click here.