The Economic Summit of the China Development Forum 2018 was held on March 24. In the first parallel session on the morning of March 24, themed “China’s Reform and Opening-Up: 40 Years On,” experts discussed the priorities for China’s reform and the risks ahead.

This session was hosted by John Zhao, the chairman of Hony Capital and executive vice president of Legend Holdings Co. Ltd.

The speakers were: Lou Jiwei, the chairman of the National Council for Social Security Fund, Michael Spence, Professor at Stern School of Business at New York University and 2001 Nobel Laureate in Economics, Justin Yifu Lin, the director of the Institute of New Structural Economics at Peking University, and Stephen Roach, Senior Fellow at Yale University.

The panel began by addressing the question of why China was able to transform its planned economy into a market economy, in contrast to so many others who had failed, particularly the former Soviet Union (USSR).

Lou Jiwei suggested that China managed to succeed because it was more flexible than its communist neighbor. It benefited due in part to that it never completely severed itself from capitalism.

Furthermore, when it was time to change to a more market-oriented system, China was able to purge its leadership that was beholden to the planned economy, but the Soviets could not, Lou said.

Justin Yifu Lin added that China succeed in its reform and opening-up because it took its time. In the 1980s and 1990s, there was a consensus that neoliberalism offered the best way forward. However, as China embraced opening-up its markets and dismantled its state-run economy, it did so slowly and carefully, Lin said. The leadership of the time knew, for example, that removing all state support for certain industries could lead to collapse. So they proceeded slowly.

“China was different at the time because China was pragmatic and China was gradual (in its execution of reforms),” Lin said.

Now as China has succeeded at transforming its economy, the question becomes what it can do to become an important and respected player on the global stage, said Michael Spence.

Spence believes there are three areas where China can make a contribution. The first is to maintain some version of the multilateral global leadership structure.

Secondly, China should use its wealth, power, and investment capacity to invest in other developing countries. This is because raising investment levels to the point where they can provide sustainable economic growth is one of the key challenges that developing countries have always faced. “China has done better than any other country in that aspect,” Spence said.

Spence’s third recommendation for China was to open more of its domestic markets to other countries, particularly to early-stage developing countries.

“Along with success, there are new challenges and new responsibilities,” John Zhao added.

Stephen Roach, who has been to 18 China Development Forums, expressed his concern for the challenges that China will face over the next 40 years, even though China had succeeded by opening up its economy in the past four decades and had made the “China’s economic miracle”.

“So we’re here to celebrate the miracle, but we can’t just assume that because you’ve pulled off this great miracle then you can just press the button and do it again,” he said.Roach advised that Chinese policymakers who have recently focused their efforts on the supply side of the economy, should not neglect the demand side. Roach noted that the growth of consumption in China has been a powerful story, but it remains incomplete because its share of the overall economy remains far too low. “It’s barely 40% of the GDP,” he said.

(By Caixin reporter Michael Bellart)

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