Globalization, the Chinese economy and a growing private sector in China were among the most interesting subjects discussed at Dalian during the Summer edition of the World Economic Forum. CCTV anchor Cheng Lei interviewed CKGSB Founding Dean Xiang Bing over impending issues in China’s economic development.
In the first of two exclusive videos (below), Professor Xiang discusses deregulation and globalization in the context of China’s powerful private sector. Interviewer Cheng Lei asked Prof. Xiang about impending issues in the economy, and he addressed pressing worries, with income inequality as of primary concern. China’s income inequality is among the worst globally”, he said, and “head to head with the US”.
He also mentioned environmental pressures, shadow banking, an impending asset bubble, the challenges of urbanization and the fact that the service sector is still under 50 percent of GDP. One solution Xiang proposed is to focus on sectors still to be deregulated. He said, “We can generate growth opportunities by deregulation. The key reason the private sector has flourished is that it has outmaneuvered many forms of discrimination in the economy.”
The private sector takes up a bigger share of the economy than in many European countries. He also suggested that there is considerable room for reduced taxation. Xiang said, “The transition from copycat strategy to one of more innovation will be a decade-long exercise. I advocate Chinese companies to be more globally minded. As a matter of paramount importance, they should learn how to leverage resources globally as this will prove essential to their survival and success.”
China’s 37 years journey of reforming its state sector has now entered its most complex and challenging leg yet. For investors, the reform plan outlines opportunities in seven industries – oil, gas, power, rail, telecom, resources and utilities. More restructuring among SOEs is on the cards. The latest moves by China Railway Group, China COSCO are part of the reform push and they have created much market buzz. The future SOE may look a lot different to the bureaucratic giants of the past.
When asked about the complexities of SOE Reform, Xiang warned that without a good relationship with the government, companies in some sectors would find it hard to succeed. Chinese companies, Xiang said, could be categorized as A and C types of companies, namely family-owned businesses and SOEs. As for B types like IBM, GE and Siemens that he believes are essential to the rise of any major power, China “doesn’t have many” and will need to develop more in order to become a major player in the global economy.