Economic Growth Remains Flat to Down, Adjustment and Transition Should Use the Opportunity to Force
---Chinese Macroeconomic Analysis Report for the 1st Quarter of the Year

News conference on “Chinese Macroeconomic Analysis Report for the 1st Quarter of the Year” was held by Unirule Institute of Economics on April 19th, 2013. During the conference, Prof. Zhang Shuguang made a detailed analysis of the first quarter of Chinese macroeconomic.

It is pointed out that in the first quarter, contrary to the expected, GDP grew by 9.5%, industrial added value increased by 9.5%, CPI rose by 2.4%, all of which were lower than those of the same period last year and last quarter. However, decline in economic growth provides a chance for economic adjustment and transition.

Zhang Shuguang
Chairman of Academic Committee, Unirule Institute of Economics

Highlights

Mao Yushi: Come Back to be “Benign, Upright, Courteous, Temperate, and Complaisant”

China is a state of ceremonies, having five thousand years of uninterrupted cultural tradition. It is unique in the world. One of the most important reasons for the Chinese nation to succeed in preserving its rich culture over 5000-years of history is the good relationship between people, which promotes a harmonious society and healthy development. People follow the principles of not hurting each other, mutual respect, modesty and politeness. If we had carried mutual struggles into every family, school and work, the Chinese nation would have already been destroyed. For thousands of years, the rule that the Chinese people followed is to be “Benign, Upright, Courteous, Temperate, and Complaisant”, which is precisely the best manner of getting along with each other. If people have all this five kinds of quality, we will live a life in peace and harmony. There will be no vexed disputes or security threats.

In fact, the manner of getting well along with each other exists in different kinds of civilization. For example, in the UK, people live a gentle life. The gentleman style is similar to being “Benign, Upright, Courteous, Temperate, and Complaisant”, however the difference between them is that the former emphasizes the outside form, whereas the latter highlights the inside quality. No matter how different they are, what they have in common are the harmonious interpersonal relationships, which ensure the stability and order of our life.

What’s the consequence if people don’t follow the principles of being “Benign, Upright, Courteous, Temperate, and Complaisant”? Let’s look at the painful lessons of the Cultural Revolution, in which violence replaced gentleness, guilt replaced kindness, scorn replaced respect, waste replaced thriftiness and fight replaced modesty. Ten years of Cultural Revolution cut off the Chinese nation’s thousands of years long cultural tradition, which is a national catastrophe and led to devastating social pain. After that, the Chinese people began to learn western etiquette, using phrases like “thank you”, “sorry” or “excuse me”. During the Cultural Revolution, no one would say “sorry” or even apologize. Although we turn to learn from the West, we are still far from pre-Cultural Revolution or pre-liberation standards of interpersonal relationships. We can often observe people quarreling in the streets, city inspectors scolding and beating somebody. Not to mention people driving and calling one names, robbing the bank, jumping the queue and keeping a straight face, leaving behind the quality of being “Benign, Upright, Courteous, Temperate, and Complaisant”. Now, we need to come back to be “Benign, Upright, Courteous, Temperate, and Complaisant”, and maintain the fine traditions, especially considering international relations.

It is a golden saying that be “Benign, Upright, Courteous, Temperate, and Complaisant”. But when dealing with international relations, we have never used this principle. Not to mention the use of apology in formal documents. On the contrary, we use bad language in fear of losing face to submit to the other side. North and South Korea is a typical example. The manner of China and Japan on Diaoyu Islands is not better. Is it good for the people of the two countries? Tragically, people imperceptibly consider toughness as a way to save face, never thinking if we should be “Benign, Upright, Courteous, Temperate, and Complaisant”. How are people in both countries beneficial on earth? Is the essence of human civilization only applicable to personal relationship and cannot be used for international relations?

Events about war and peace are the concern of people in the whole world. The lesson of two World Wars is profound and should be deeply remembered. We need to do a lot of things to abolish war. Governments should implement democratic politics. Democratic countries cannot go to war with each other. Several wars after the World War II occurred mostly in autocracies, or were related to political tyranny. North Korea is an example for that kind of country. Disarmament is an important method to avoid war. Then the proper diplomatic etiquette can prevent sparking a conflict accidentally. The final victims of war are the common people. But the common people are precisely the main force cheated to the battlefield. People’s consciousness is fundamental to eliminate war. Diplomats need to be supervised to follow the principle of being “Benign, Upright, Courteous, Temperate, and Complaisant”, and refrain from talking about war and peace as if they were jokes. ( first published in China-Review and FT )

Mao Yushi
Honorary President, Unirule Institute of Economics

Current Events

The Seminar on “Railways Reform: Questions, Expectations and Solutions”

The Seminar on “Railways Reform: Questions, Expectations and Solutions” was held jointly by Unirule Institute of Economics and Sina blog on April 1st, 2013. Experts of railway transportation management, economists, and experts of law, including Prof. Rong Chaohe, Prof. Zhao Jian, Prof. Zhan Zhongle, Mr. Zhi Zhenfeng, Prof. Zhang Shuguang, Prof. Sheng Hong, Prof. Feng Xingyuan, Prof. Zhao Nong and Mr. Yang Junfeng attended the seminar.

Experts talked about issues on reforming China 's railway system, breaking monopoly of ex-Ministry of Railways, constructing a reasonable developmental pattern, resolving residual problems of high debt as well as railways reform in international comparison and experience.

Expert Forum on “Framework of Principles of The Land Law System”

Expert forum on “Framework of Principles of The Land Law System” was held by Unirule Institute of Economics in Huang Yuan Hotel on April 20th, 2013. Many famous experts attended this forum. This forum was presided over by executive director of the project Yang Junfeng. The project manager Prof. Sheng Hong illustrated the “Framework of Principles of The Land Law System” as a whole. Then experts gave opinions and suggestions, and they discussed from the aspects of “state and land property rights”, “permanent tenancy problems” as well as “boundary of government intervention land issues and restriction on government”. Experts spoke highly of the meaning of the project and the preliminary results.

[Unirule Reading Circle]No.1:How China Became Capitalist(Chinese version)?

[Unirule Reading Circle] No. 1: How China Became Capitalist (Chinese version) was successfully held in Beijing Yintai Centre on April 3rd, 2013. It was co-hosted by Unirule, Citic Press Corporation and Sina Finance. This event was presided by Prof. Feng Xingyuan, Vice-Director of Unirule Institute of Economics. One of the authors of “How China Became Capitalist” (Chinese version), Assistant Professor at the Arizona State University Mr. Wang Ning, Professor at Beijing University Guanghua School of Management Mr. Zhang Weiying, Professor at National Development Research Institute of Peking University Mr. Zhou Qiren, and Director of the Unirule Institute of Economics Mr. Sheng Hong spoke their minds freely and interacted warmly with the audience. The four honored guests discussed history of China’s economic system reform and hope for the better future of China’s reform and development.

[Unirule Reading Circle] No.2: Where the Chinese Anxieties Come From

[Unirule Reading Circle] No. 2: Where the Chinese Anxieties Come From was successfully held by Unirule Institute of Economics and Jinhong International Travel Service in Beijing on May 14th. The author of the book Prof. Mao Yushi attended the meeting, talked about the story of writing this book, and explained the book’s main idea. Meanwhile, Mr. Zheng Yefu, a sociology professor in Peking University, and Prof. Yao Zhongqiu, President of Unirule, gave wonderful comments on this book. Topics about the origin of Chinese anxieties, reasons for Chinese people complaining and ways to resolve those problems had been deeply discussed on the scene. Faced with the audience’s questions, the three guest speakers answered from institutional, social and cultural aspects. The reading circle was hosted by Prof. Feng Xingyuan, vice Director of Unirule.

Summary of the First Class of “ Prof. Mao Yushi's Academic Thinking Training ”

The first class of “ Prof. Mao Yushi's Academic Thinking Training ” was held in Hubei Hotel on April 13th and 14th, 2013. The persons attending the opening ceremony were Honorary President of Unirule and the tutor of this training Prof. Mao Yushi, President of Unirule Prof. Yao Zhongqiu, Chairman of the Academic Committee of Unirule Prof. Zhang Shuguang, Director of Unirule Prof. Sheng Hong, Vice Director of Unirule Feng Xingyuan and Gao Yan, Member of Unirule Lu Yuegang and Zhao Nong. Student delegate He Hongjian and entrepreneur delegate Chen Jiaxing also delivered speeches. Prof. Mao explained the teaching aims, which are teaching economic thinking, exchanging ideas, creating knowledge and helping students to find life direction.

Summary of the Second Class of “ Prof. Mao Yushi's Academic Thinking Training ”

The second class of “ Prof. Mao Yushi's Academic Thinking Training ” was held in Chongqing on May 11th and 12th, 2013. The faculty of the second class of “Prof. Mao Yushi's Academic Thinking Training” included Present of Unirule Prof. Mao Yushi, academic member of Unirule Mr. Zhaonong and associate professor in China University of Political Science and Law Mr. Wang Jianxun. Furthermore, there were thirty-four students attending this training. The topic of the second class was “Principle of Optimal Allocation” by Prof. Mao. Furthermore, Prof. Wang gave a lecture on “Constitutionalism and Federalism”. Finally, Mr. Zhao discussed with students and answered their questions during an afternoon tea.

The Unirule Spring Outing 2013

The staff of Unirule went for a spring outing at West Water Valley in Huairou District on April 20th, 2013. Known for Water Great Wall, West Water Valley has a beautiful and natural landscape in spring. Everything about it is perfect, including awakening mountains, quietly flowing lakes and a valley-formed waterfall. Enjoying the beautiful scene, participants of Unirule were all in good mood. Finally, they went for a boat trip and wandered around the mountains. On the way home, participants also enjoyed strawberries in the suburbs. This spring outing activities ended in the strawberry festival.

News

Mr. Mao Yushi Gave a Public Speech on Sustainable Development of China and Chinese-Japanese Relations

Mr. Mao Yushi was invited to attend the seminar on “ China and Japan : Coexistence and Co-prosperity” held by Globle Centre for Asian and Regional Research, University of Shizuoka on April 4th, 2013. Mr. Mao gave a public speech on Sustainable Development of China and Chinese-Japanese Relations, about which Japan Shizuoka Newspaper and China-Japan Newspaper made reports.

Seminar on “Land System and Small Property Right”

Seminar on “Why Property Right is Important: on Land System and Small Property Right” was held by Unirule in Yanshan Hotel on May 15th, 2013. Guest speaker Prof. Mao and Prof. Feng lectured about the importance of property right, property right in China and small property right. The guests included former Director of the NPC Law Committee of Civil Law Department Mr. Wei Yaorong, former Deputy Director of the Bureau of Land Management Planning Division Mr. Zheng Zhenyuan, Director of the Rural Development Research Institute of Chinese Academy of Social Sciences Prof. Dang Guoying, Director of the Beijing Harmonious Community Development Center Prof. Chen Youhong, Capital University of Economics and Business Prof. Liu Yejin, Chinese People's Public Security University Prof. Yang Junfeng and project leader of CIPE, Ms. Anna Nadgrodkiewicz.

Prof. Yao Zhongqiu attended “Rixin Citizen Culture Forum”

Prof. Yao Zhongqiu, President of Unirule, was invited to attend “Rixin Citizen Culture Forum” held by the Culture Strategy Research Centre of China University of Political Science and Law. Prof. Yao and Mr. Ma Yong, another guest speaker, talked about “ Practicability of Confucian Constitutionalism”.

Unirule Twentieth Anniversary Celebration “Autograph Album” Information Collection

“Unirule Twentieth Anniversary Celebration” in July 2013 is arriving soon. We plan to edit an autograph album. Therefore, we will appreciate it if colleagues and friends of Unirule could provide some documents and photos or copied versions, and we will present a copy of autograph album to you.

Prof. Yu Jianrong Presented His Painting to Unirule As a Gift

To celebrate the twentieth anniversary of the establishment of Unirule Institute of Economics, famous scholar Prof. Yu Jianrong presented his painting to Unirule as a gift in his studio in Songzhuang, Beijing on May 19th, 2013. On behalf of Unirule, Prof. Yao Zhongqiu, President of Unirule, accepted this oil painting and expressed sincere gratitude. The famous black and white landscape painting will be auctioned on the “Unirule Twentieth Anniversary Celebration”.

Current Researches/Consultings

Research on the Fairness and Efficiency of the Allocation of Financial Resources 

The first-order problems about the fairness and efficiency of the allocation of financial resources are whether the overall tax burden level lies in the optimal range, and whether the tax type and tax system hurt the economic growth. The second-order problems are whether the expenditure structure, especially the transfer payments of financial resources, is in line with the principles of justice under the conditions at a given tax burden level, as well as the efficiency of fiscal spending, in particular the proportion of general administrative expenses.

The Unirule Institute of Economics will conduct a research on the fairness and efficiency of the allocation of financial resources, focusing on the above mentioned second-order problems. Allocating financial resources, as commonly used in the world, is a way to achieve fairness in a society. Two ways of intervention can be adopted: direct intervention and indirect intervention. Through direct intervention, financial resources are directly allocated to individuals in order to adjust personal income distribution, e.g. pensions and social assistance fees, rural relief fees and social insurance fund expenditures in China's fiscal expenditure projects. By indirect intervention, the government increases the expenditure in agriculture, infrastructure, culture, education, science and healthcare. This research focuses on the fairness of the allocation of financial resources. Moreover, the study will pay attention to the transfer payments of financial resources, and whether the transfer payments are in accord with Rawls's Second Principle of Justice, i.e. the transfer payments can be slightly leaned towards the poorest people when violating the First Principle of Justice. The allocation of financial resources also encounters efficiency problems. China's general administrative expenditures are above the world average. There are problems with loss and waste of public financial resources (about a trillion Renminbi a year). For the efficiency issues of the allocation of financial resources, this research will analyze the change of proportion of administrative costs (plus other related costs, such as public healthcare costs of government officials and housing subsidies costs) and fiscal revenue and expenditure. The reform of the fiscal system is one of the core issues in China. This research selects the fairness and efficiency of allocation of financial resources instead of a comprehensive study of the fiscal and taxation system, in order to make a preliminary assessment of the allocation of financial resources in China.

Research on Endogenous and Sustainable Urbanization: Reassessment and Correction of China's Urbanization

Urbanization is one of the most important economic and social policies of the new government. The key point of the policy is the urbanization of middle and small sized towns. In China there are thousands of towns with developed industry, however in terms of social governance quality, these towns lag far behind.

I) Lots of people are stuck between rural and urban areas and therefore are unable to accomplish their “urbanization”. Hundreds of millions of migrants are employed by modern industries in towns. These people will not migrate back to rural areas. However, without a “hukou” they can not enjoy equal rights like urban residents in education, housing, etc.

II ) In spite of their developed industrial sector, these towns still fall far behind in terms ofsocial governance. In the Chinese administrative system, local governments are divided into different levels, and different administrative levels mean different access to resources, like administrative power, budget, staff, etc. A town's government, at bottom level (lower than county) in the Chinese administrative system, is unable to get adequate resources for providing necessary infrastructure and public services to its big population. Instead, it has to hiretemporary staff and informal power (sometimes illegal power) to govern the society.

III ) China's urbanization is disordered as mega cities' expansion is pushed forward by administrative power, while those self-evoluted towns are not “allowed” to be promoted to “city status”.

IV ) “Half-urbanization” blocks industrial upgrade and damages sustainable growth in those developed industrial townThe key to industrial upgrade is upgrade of personnel. For sustainable development, enterprises must be able to attract and retain highly qualified staff and investors, who require high quality living, which is not provided in “towns”. Meanwhile, “half-urbanization” also dramatically restricts the development of service industries, especially high-level service industries. The restriction of those developed industrial towns, which account for a significant part in China's economy, restricts the upgrade of China's economic structure.

The purpose of Unirule Institute of Economics planning to launch a research on China's endogenous urbanization is improving social governance in developed industrial towns, in particular, promoting urbanization of millions of rural migrant workers, advancing the route of urbanization and finally achieving a democratic and autonomous governance.

Research on Public Governance of Chinese Provincial Capital Cities

During the year of 2007, rights movements were raging like storms. These movements are symbols of resistance against the power and unequal position. It is the powerful people, who violate others' fundamental rights. The main reason for the gap between the wealthy and the poor lies in the inequality of rights and status. At present, the most powerful side is obviously the government, which also stems from lacking of effective supervision by the common people.

Based on this, Unirule Institute of Economics conducted a research on public governance of Chinese provincial capital cities from 2008, performing surveys on the performance of provincial capital cities and giving quantitative evaluation. The method of research is face-to-face conversation, more than 3000 valid responses were obtained in 2007 and more than 6000 in 2008. Compared to the past, there was a significant improvement in the the sampling method in 2008. The third investigation was conducted in 2010, sampling more than 6000 valid responses. Furthermore, Unirule conducted the forth investigation at the end of 2012, focusing on reasons for changes in the ranking and the fairness of financial payment.

Research on Improving Transparency in Local Governments

With the development of the reform and opening up policy, space for reform is shrinking, vertical flow of population structure is solidifying and conflict of interest is expanding. In order to cope with the effects of unstable factors, a stability system is formed by establishing a system of politics and law, supported by public security, legal courts, petitions, urban management and other institutions as well as responsibility at the grass-roots government level. The expenditures for maintaining such a stability system have caused a lot of controversy. The maintenance of the stability system is unsustainable and transparency in governments is the most efficient way to address this problem. Public governance is meant to guide people to understand but not to guard against the common people, among which communication and full information are the most crucial ones. Without transparency in the government, no fair and open supervision system can be achieved.

Based on this, Unirule Institute of Economics conducted a research on transparency in local governments starting from 2011. The research touched Regulation on Open Government Information in China and evaluated the implementation effect of Regulation on Open Government Information in some cities. Then, the research drew lessons from law on open government information from developed countries, putting forward seven goals, namely: cadre information transparency, fiscal transparency, decision-making mechanism transparency, administrative transparency, public service transparency, local government enterprise transparency and rights protection transparency.

Upcoming Events

Unirule Twentieth Anniversary Celebration

Unirule Twentieth Anniversary Celebration will be held in Beijing on July 26th, 2013. When the time comes, national well-known scholars and business leaders as well as politicians will be invited to participate in the anniversary celebration. As the most influential independent think tank, Unirule upholds its spirits of supporting and promoting high quality research and studies on economic theory as well as analyzing social and economic problems. Unirule always stands at the forefront of reform, speaks out, and seeks solutions for system innovation.

Notice of Soliciting Papers for China Institutional Economics Annual Conference 2013

The 13th China Institutional Economics Annual Conference will be held in Southwest University of Political Science and Law on 16th and 17th November 2013, jointly organized by the organizing committee of China Institutional Economics Annual Conference and the School of Economics of Southwest University of Political Science and Law. Unirule now solicits papers both at home and abroad. Authors of selected papers will be invited to attend the seminar as representatives.

Deadline: Oct. 20th, 2013
Tel.: 15223378931 (Prof. Lei Guoxiong) 13508383975 (Prof. Chen Yili)
E-mail: cimonlei@163.com ； mailto:yilibest@yahoo.com.cn

2013 Unirule Education Forum

Unirule Education Forum of 2013 will be held on November, aiming at improving the quality of tertiary education in China . We will explore the reasons in system condition and humanistic spirit atmosphere for the quality problems of tertiary education. Furthermore, a series of problems about running, financing, managing and evaluating the quality of tertiary education will be discussed.

Unirule Biweekly Symposiums
Unirule’s Biweekly Symposiums are known in China and throughout the world for their long history of open and in-depth discussions and exchanges of ideas in economics and other social sciences. Over 470 sessions have been held and over 15,000 scholars, policy makers, and students, as well as countless readers on the web, have directly and indirectly, and participated in the Biweekly Symposium for close to 20 years.

Biweekly Symposiums begin at 2 p.m. every other Friday and are free and open to the public.

Schedule
Biweekly Symposium No. 477: May 24th, 2013
Biweekly Symposium No. 478: June 07th, 2013

Previous Biweekly Symposiums

Biweekly Symposium No. 473

Time: April 12th, 2013
Topic: What is a Firm? And Why We Should Not Ignore the Question
Lecturer: Geoff Hodgson
Commentators: Chen Ping, Deng Feng, Liu Xiaoxuan, Zhong Jiyin, Liu Yejin, Sheng Hong

Prof. Hodgson summed up the definitions of firm in the economics profession and criticized these explanations. Furthermore, he stated that cooperate power should be given by law and that there exists no market within enterprises. He emphasized the significance of the boundary of enterprise. Moreover, Prof. Hodgson mentioned that it is highly important for China nowadays to promote independence of the judiciary and fight against corruption.

Mr. Liu Xiaoxuan stated that property right s must be protected by law and during the reform of state-owned enterprises, firms should have a legal orientation . But he did not agree that the nature of firm was an independent legal entity. The condition that the government decide s the boundary of firms should be changed; cut off contact to interest groups ; and relationships between legal entities should be re defined. Mr. Deng Feng agreed Prof. Hodgson 's standpoint that firm s should be recognized as responsible unit s , but in his view, Prof. Hodgson had overestimated the power of law, and he did not think that the nature of firm was an independent legal entity. Mr. Chen Ping analyzed Prof. Hodgson's theory and gave suggest ions for further improvenment . According to him, Prof. Hodgson expanded the view of modern economics and succeeded by expand ing his analysis from specific questions to more basic questions. Prof. Zhong Jiyin agreed with the view of recognizing firms as legal entities , stated that in China the awareness of independent legal entity was very weak and supported the standpoint that firms should be viewed as a set of contracts, and that it was very critical to combine them. Prof. Liu Yejin mentioned that Prof. Hodgson just changed the black box's position , but did not succeed in solv ing questions . T he solution to open the black box is to make economic systems function orderly and he regarded the core of enterprises is computing—cooperation unite. Finally, Prof. Sheng Hong stated that it was advantageous to explain firm in law, that Hodgson's theory should be understood considering the Anglo-American law system background , and that the core of enterprises was to assume limited responsibility.

Biweekly Symposium No. 474

Time: April 26th, 2013
Topic: the Third Kind of Intellectuals in Russian History and Social Practice
Lecturer: Prof. Jin Yan
Commentators: Zheng Yefu, Zhai Zhiyong, Zhao Nong, Sheng Hong

Prof. Jin Yan lectured about the history of “the third kind of intellectuals”, “little things' theory” and the democratic struggle process . She said their reform made society achieve initial success.

Municipal bureau s had done a lot of practical work, thus to a certain extent, replacing the power of government, so they did not avoid offending the government. And the revolution collaborators were convicted because of democracy, ending in tragic fate .

Prof. Zheng Yefu said the third intellectuals should not be preached. Though they had practical charm, they failed. Folk religion, health care and non-government founded education all have a influence on social development. New society can grow from the soil of the old one. Prof. Zhai Zhiyong spoke highly of the meaning of the research, meanwhile, he questioned three points, and he found that the drawbacks of the third intellectuals' theory led to the final failure, which likely existed in our modern society. Prof. Sheng Hong stated that violence should be used with caution, and the core question was the praise of revolution. He had a negative attitude toward revolution and thought some theories should be reflected and corrected. Furthermore, he analyzed the reason why the revolution had failed and then put forward the current tasks. Prof. Zhao Nong mentioned that violence was needed in the revolution under the old system, but it could not go to extreme and the responsibility should be cleared. He criticized the view that it could change the autocratic society without causalities and human suffering. Prof. Zhang Shuguang expressed that there were no successes on the third intellectuals' road, and the one to end the autocratic system was new autocrats. Research on the third way in Russia and some other countries is a crucial one, which is worth thinking and researching.

Editor: Wang Sheng
Lead Editor: Liu Qian
Revisor: Hannah Luftensteiner