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Cai Fang: More Competition Needed for Future Growth

DATE: 2019-06-24


On April 27th, 2019, the Launch Ceremony of the Society for the Analysis of Government and Economics (SAGE) and the Inaugural Annual Conference of Government and Economics was held at the Mong Man Wai Concert Hall, Tsinghua University. Chen Xu, secretary of the CPC Committee of Tsinghua University and director of the School Affairs Committee, and Li Daokui, initiator and co-founding president of SAGE and president of ACCEPT addressed the conference respectively.

Cai Fang, Vice President of the Chinese Academy of Social Sciences, said that around 1990, it was the point of divergence for the international trade pattern. Before that, developing countries and former planned economies were relatively less involved in international trade, whereas the opposite held true afterwards. As a result, middle-income countries and low-income countries tend to benefit from globalization, thus speeding up their development. On the contrary, the income of high-income countries has declined in relative terms, and the world economy has converged for the first time. The population stricken by absolute poverty in the world has decreased dramatically since the 1990s, of which China has contributed 76%. However, the benefits of globalization have not been equally distributed. The increase in capital gains in the United States has not been shared by all workers, resulting in a decline in the population of the middle class and the disappearance of jobs in the intermediate skills industries. For China, the abundant labor supply before 2004 prevented the wage level from increasing obviously. After 2004, the shortage of labor force led to the rapid increase of wage, the disappearance of population dividend and the decline of the growth speed of the total factor productivity brought along by capital allocation. To sustain future growth, we need more sufficient competition and Schumpeterian creative destruction. Which is better, the government or the market? And how to integrate them with each other? People’s opinions on related issues change with the times.

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