CKGSB Professor Liu Jing in Fortune Korea: “The Growth of Market Power is Vital for China’s Successful Economic Reformation”
Based on the world’s largest domestic market, China is transforming its economic paradigm from investment to consumption. During his interview with Fortune Korea, Liu Jing, CKGSB Professor of Finance shared his views on ‘Liconomics’, China’s economic reformation plans named after the Premier of the People’s Republic of China, Li Keqiang. Professor Liu claimed that the reformation of state-owned enterprises (SOEs) and the financial systems are vital to wards leading successful Liconomics, as well as the abolishment of the Hukou system(family registration system).
Professor Liu said that Liconomics is China’s new paradigm of economic revolution and there should be an increase in investment in private enterprises, as the power of economic reformation should stem from the market and the public, not from the government. In addition, China’s economic growth rate, which has been maintaining over 10% over the last 30 years, must be marked down. He explained that the economic reformation will improve the efficiency of the economic system and encourage competition that transitions SOEs’ market power to private companies, which will spur a redistribution of wealth and vitalize the public sector.
With regards to the correlation between China’s urbanization plan and the increased local tax burden, the unfair distribution of tax revenue between the central and local governments is the major factor for the increased liabilities. However, Professor Liu believes that the local government liabilities are still manageable and unlikely to rise in the future. Rather, he focused on the relative deprivation of local peasants. Because of low productivity and work efficiency, peasants are relatively disadvantaged to accumulate wealth. So, Prof. Liu claimed that the urbanization must be accompanied with a redistribution of wealth.
Predicting the future of Liconomics in 2014, Professor Liu maintained positive predictions, yet explained that it is difficult to lead tangible results in a short term. He suggested that the service sector would achieve a significant growth via public competition. Above all, Professor Liu summarized what it counts the most to the successful Liconomics is a ‘will to reform’.