“Although Chinese economy has been controlling risks in the short term, there is a possibility of a mid-term financial crisis. Chinese economy has been developed through liberalization, which is a direction the nation has to continue pursuing.”
Such was the explanation by Professor Li Wei of Cheung Kong Graduate School of Business (CKGSB) during his interview with Munhwa Ilbo, one of Korean general dailies, which had taken place at CKGSB Beijing Campus on October 26.
During the interview, Professor Li emphasized that Chinese economy has to be further liberated in the long term, and one should not reverse this movement. He also emphasized that opening up Chinese market should not be deterred by other factors, and the nation must form an economic union with neighboring East Asian countries, such as South Korea, Japan, and Singapore.
When asked about his outlook on Chinese economy, he explained that the problem lies in the mid-term perspective rather than short- or long-term perspective.
“The possibility of financial crisis is not very high in both long and short terms. However, most of current Chinese policies are based on the short-term perspective and lack plans for structural problems.”
Professor Li explained that the reason for such structural problems could be referred to policy decision makers’ lack of recognition. He gave an example of the problem which the rapid rise of the land price and over-production of housing is causing for explaining the structural problems in China. Currently China has been restructuring organization in a top-down direction, but it is a hard task to accomplish due to a number of stake holders and weak driving force.
However, he also explained in detail why China would not face critical problems in a long-term perspective.
“Looking ahead more than 20 years, Chinese economy would not experience huge problems because the government has learned the ways of developing economy in a broad direction. I believe the government is aware of the fact that it is important to encourage individuals and companies to start businesses with risk, rather than provide policies from the government.”
“Thus, I think the future of China depends on how far liberalization will be allowed. In order to realize ‘Chinese Dream’, the expansion of liberalization is mandatory. The nation still has sectors where liberalization must be realized, such as international investment and trade.”
Professor Li also shared his insights on various topics, such as the need to be prepared against possible financial risks, the rising populism within China, the industries that the nation has to focus more in the future, and the cooperation with South Korea.
On the topic of President Xi Jinping’s second term, Professor Li suggested that the government has to pursue RMB internationalization more actively.
“’One Belt, One Road’ policy – which is supported by President Xi – is congruent with RMB internationalization. The nation could expand to countries with solid capital foundation, but it could also choose to expand to less developed countries. When executed successfully, investing in less developed countries will offer huge benefits due to high risk. Those countries could become the leaders in driving the world economy rather than Western nations and China.”
To read the original Korean article in Munhwa Ilbo, please click here.