Coase’s Congratulation on Unirule’s 20th Birthday

The Unirule Institute of Economics will celebrate its 20th anniversary in July, 2013. China has undergone ups and downs and faced severe challenges, and Unirule survived her most difficult periods of time. In twenty years, Unirule, as the most influential independent think tank in China, has always played the role of public talents to promote research on economic theories and social issues. Unirule ranked 14th among the best global think-tanks with an annual operating budget under five million US dollars in The 2012 Annual Global Think Tank Ranking Report released by Pennsylvania University.

Unirule has sincerely invited scholars, entrepreneurs and mass media, who are always being concerned about and supporting Unirule, for the 20th anniversary celebration and has received lots of wishes. Ronald Coase, the 1991 Nobel economics prize laureate and Professor from University of Chicago sent a letter of congratulation. He congratulated Unirule on reaching the 20th anniversary and highlighted the significant role of Unirule in smoothing the return of market economy in China. In the letter, he wrote: “As China moves forward and embraces an open market for ideas, the Unirule Institute will no doubt play an even bigger role in the year to come”. Unirule sincerely appreciates the consistent support received from all walks of life.


 

Highlights

Yao Zhongqiu: Stabilize the Reform Expectation of the Public

Where will China go? It has become a bewildering question. Authoritative media is constantly releasing mixed signals, with business and academic elites discussing it wildly. A few days ago, I attended a conference. During the event, a business analyst from an investment bank pointed out that the entrepreneurs had suffered psychological impact to a certain extent. People doubt that reform of marketization, legalization and democratization will go on.

For more than thirty years, China has been changing. The economy is growing rapidly, the government and the public wealth are increasing drastically and social autonomy is developing. Moreover, government behavior tends to be more rational, and most importantly, freedom of the common citizens is expanding, especially through the development of Internet which provides an open platform for discussing public affairs. The nature of reform is obvious, which is marketization, legalization and democratization.

Of course, during the last thirty years, reforms of all fields have shown reversal. This happened, due to ever-present political and social forces against reforms. For instance, in the past several decades, the government took advantage of land management monopoly and intervened in economic activity. And in part of economic structure, phenomena of “guo jin min tui” came about constantly, which means that “the state advances while the private sector retreats”. State-owned enterprises’ privileges escalated, and private enterprises’ living environment was deteriorated. To some extent, marketization is not advancing but retreating, which also appeared in the judicial area.

However, it is normal for the reform to show signs of reverse. Different from revolution, reform is much less violent and explosive. The nature of reform is complicated. Not only the victim but the vested interests can speak for themselves. These forces are likely to reverse the system in certain areas during the course of time.

Nevertheless, once good reform begins, it will continue to generate new powers for itself. Looking back at the thirty years of Chinese economic reform, it can be said that the reform produced that kind of effect. The past thirty years of marketization brought China the greatest change, which is the change of social structure. Specifically speaking, industrialization and urbanization generated an increasingly large scale of middle class, including entrepreneurs, white collars and professionals. They are the main resource owners besides the government. For instance, entrepreneurs own lots of social wealth.

These social changes are particularly evident concerning the creation of knowledge and formation of ideas. The middle class generally received good education, and was employed in professional industries. During the process of receiving education and running careers, these people learned and followed values and systems of dignity, liberty, market, democracy, rule of law, etc. Therefore, during the thirty past years, the change of social structure brought about the change of social value. The value of today’s middle class is dramatically different from their parents. Lots of emerging mainstream media aimed at them and spread these values into the public. The middle class formed a set of discourse system and a set of order system.

The most important is that the middle class formed a common expectation, which is a clear political expectation. Their success derives from market system brought by the reform, and they rely on the system to accumulate wealth and power. Naturally, they thought China should continue to reform, following the direction of marketization, legalization and democratization. They believe that this kind of reform enables them to improve their lives.

Nothing else than this expectation inspired the middle class to struggle and accept their own position. The legal, political and social living environment of the middle class is very poor, and their life and work pressure is quite large. However, the middle class can tolerate it. This is because the Chinese people have the traditional virtue of strong will and self-improvement. Furthermore, the Chinese people have hope, and they believe with deepening and expanding reform, their property rights can be protected by law, their children can receive better education, and the enterprises can have a better living environment. The common and strong expectation of the middle class made the Chinese society maintain order and stability for decades.

In other words, the stability in present China is fragile. The expectation of people to some extent offset the anxiety and controlled the potential social conflict. Valuing and stabilizing the reform expectation of the middle class is the most crucial thing in politics. Reform is sophisticated, especially touching some core redistribution problems of power, rights and interests. So, reform should be slowly promoted. Anyway, people having right to speak in their own fields should be highly cautious and concern people’s heart in the mainstream society. They should let the mainstream society believe that reform will continue to the direction of marketization, legalization and democratization, and that an increasing influent China will have a reasonable legal and political system. The middle class’s stabilizing reform expectation is the basic guarantee of the stability of China society and prosperity.     (The Economic OBserver)

Yao Zhongqiu
President, Unirule Institute of Economics

Current Events

Convince People Through Reasoning: Seminar on “Freedom of Speech and Debate Rules”

In a civilized society with freedom of speech, it is normal that different views coexist with each other. But in present society of China, personal assault, violent attack, cruel crime, which resemble crimes committed during the Cultural Revolution, attacking rivals by rogue means widely exist, reflecting the return of the Cultural Revolution. Based on this, the Unirule Institute of Economics and China-Review hosted a seminar on ‘Freedom of Speech and Debate Rules’ in Beijing on June 5th, 2013. A group of scholars from various research areas attended the seminar. The topic of the seminar focused on a social issue with regards to the expression of arguments. The historical and social background of social controversies happened recently was analyzed in the seminar. Scholars advocated freedom of speech and discussed appropriate ways to engage in debates.

Prof. Feng Xingyuan hosted the seminar, and stressed that scholars holding different opinions should have rational discussions. Just as what Don Vito Corleone told his son in the Godfather, “convince people with reasoning”. Prof. Liu Yang thought that divergence of conception had developed to language violence and physical violence, which existed in both the left and the right. The reasons for this phenomenon are complicated, including the bad effect that the mass media have to education, formation of bad order as well as not providing the same channels for expression of opinion to the left and the right. ,Prof. Zhang Shuguang emphasized the concept of “respect the freedom of speech, seeking harmony in diversity”. Prof. He Guanghu tried to seek the solution to reduce language violence and physical violence from aspects of citizen quality, institutional factors and the independence of judiciary. Prof. Yang Fan criticized the recent attacks on Prof. Mao and stressed that academic circles should be self-disciplined and engage in reasoning. Meanwhile, Prof. Wang Yan emphasized that people should respect reason and follow debate rules in the fields of academics, Internet and society. Prof. Mao Shoulong analyzed the logic of violent order, and thought that promoting social diversity can help dissolving violence problems. Finally, Prof. Yao Zhongqiu stated that intellectuals should shoulder the responsibility of rational speech.

Gradually Opening, Gradually Entering: Theoretical Research and Reforming Solution on Opening the Markets of Crude Oil and of Petroleum Products

Unirule Institute of Economics hosted a press conference on “Theoretical Research and Reforming Solution on Opening the Markets of Crude Oil and of Petroleum Products’”at Empark Grand Hotel in Beijing on June 7th, 2013. Except the research team (seeing directory in Appendix), many experts were present at the conference, including Mr. Song Xiaowu，President of China Society of Economic Reform, Mr. Shi Xiaomin, Vice-president of China Society of Economic Reform, Mr. Zhang Xinzhu, Director of Research Centre of Regulation and Competition in Chinese Academy of Social Sciences, Mr. Wang Xiaoye, fellowship of Institute of Law in Chinese Academy of Social Sciences, Mr. Zhang Shuguang, Chairman of Academic Committee of Unirule and Mr. Feng Xingyuan, Vice-director of Unirule. More than 30 media representatives were invited and attended the conference including Reuters, The English-language Global Times, Southern Daily, Sohu Finance and Economics, CAIJING, Twenty-first Century Economic Report and others.

The conference was hosted by Mr. Gao Yan, Vice-director of Unirule. He firstly invited Prof. Sheng Hong, the project leader, to make a presentation introducing their research project. The presentation mainly consisted of six parts: the economic nature and significance of oil and natural gas industry; the evolution of Chinese oil industry and its main character; oil monopoly in China; a framework of reforming oil industry and a proposal of opening crude oil and refined oil market. Mr. Zhao Nong, Vice-chairman of Academy Committee of Unirule, gave a short speech after the presentation. Exports attending the conference highly acknowledged the significance of the research and also gave detailed suggestions. In the final section of the conference, Prof. Sheng Hong and Mr. Zhao Nong interacted with journalists attending the conference, answering various questions from mass media.

The reform on opening the markets of crude oil and of petroleum products is a significant support of the whole petroleum industry reform. Unirule had completed “Theoretical Research and Reforming Solution on Opening the Markets of Crude Oil and of Petroleum Products”, and put forward establishing a market system, reaching the objective of fair competition and limited government. Also, Unirule suggests taking measures of abolishing monopoly powers of the oil monopoly enterprises, establishing neutral regulator for the energy industry and stopping the price regulation. For the strategy, Unirule suggests gradual opening, gradual entering and carrying out subsiding reform.

(Theoretical Research and Reforming Solution on Opening the Markets of Crude Oil and of Petroleum Products)

Good Government or Bad Government: Seminar on Quality of Government

Scholars from the Quality of Government Institute (QoG), which is under the Department of Political Science at the University of Gothenburg, visited Unirule on June 6th, 2013. QoG is dedicated to international comparative studies and evaluations with regards to qualities of governments, which is similar to Unirule’s Public Governance Research. Prof. Yao Zhongqiu, President of Unirule, and Prof. Feng Xingyuan, Vice Director of Unirule, greeted all the guests warmly, and hosted a seminar on Quality of Government.

The core researchers of the QoG Institute are S?ren Holmberg and Bo Rothstein, who are the authors of Good Government. In the seminar, the leader of QoG introduced the methodologies, progresses and significance of their main studies. They have received more than 30 thousands feedbacks of questionnaires in Europe so far, which involve public service of governments, government efficiency, corruption, etc. They quantitatively evaluate the qualities of governments based on their surveys.

Similarly, Unirule’s Public Governance Research has two main purposes. First, Unirule aims to create a competitive environment among provincial capital cities in the aspect of public governance. As an independent and impartial think tank, Unirule evaluates government’s public governance and provides an objective information platform showing how governments serve their people and comparing governments’ public governances among cities as well as provide this information to common citizens. The information platform invisibly boosts competitions among governments. Second, Unirule dedicates to provide a basis to evaluate government officials. The information collected within governments systems is often biased or even distorted owing to the collusion of various interest groups. Mr. Zhang Lin, a fellow from Unirule, introduced the research objectives, methodologies and progresses of Unirule’s Public Governance Research. Unirule and QoG are looking forward to further communication and cooperation in terms of data sharing and investigations in future.

Earning money is the market ethic: “No. 3 Prof. Mao Yushi's Academic Thinking Training”

The third class of “Prof. Mao Yushi's Academic Thinking Training” was held in Shanghai on June 15th and 16th, 2013. Lecturers are Prof. Mao Yushi, Honorary President of Unirule, Mr. Xu Dianqing, tenured Professor at Huron College of University of Western Ontario and Mr. Zhao Nong, Director of Culture and Development Research Centre of Unirule. In total thirty-four students participated in the classes. In this course, Prof, Mao Yushi lectured on Moral Problems of Market Economy, and Prof. Xu Dianqing gave a speech on real estate.

Prof. Mao lectured on concept of scientific thought, price realizing optimal resource allocation, ethics of enterprises, the notion of benefiting other people as well as oneself, human rights, ethics and market, matrix of interests of others and oneself, the reverse side of ethics and people-orientation. When mentioned the ethics of enterprises, Prof. Mao expressed that the basic of ethics is utilitarian and the ethic principle of market economy is benefiting oneself but not injuring other’s interests.

News

Mr. Rong Jian, Mr. Jia Baolan and Mr. Yu Jianrong Presented Personal Collections to Unirule

To celebrate the twentieth anniversary of the establishment of the Unirule Institute of Economics, famous scholar Mr. Rong Jian, Mr. Jia Baolan and Mr. Yu Jianrong presented their personal collections and paintings to Unirule as gifts, which will be auctioned on the “Unirule Twentieth Anniversary Celebration” to raise academic research funds. Unirule sincerely appreciates consistent support from Mr. Rong Jian, Mr. Jia Baolan and Mr. Yu Jianrong. Hopefully, in the future there will be even more friends to support Unirule and the auction.

Prof. Feng Xingyuan Attended “Cheju Forum”

The “Cheju Forum” was held on Cheju Island in South Korea from May 27th to 29th, 2013, the forum’s theme was “New Asia For Peace and Prosperity”. Prof. Feng Xingyuan was invited to attend the forum.

Dr. Wang Jun Attended “East Asia Development Network”

The “East Asia Development Network (EADN)” was held in Manila, the Philippines on June 17th and 18th, 2013. On behalf of Unirule, Dr. Wang Jun was invited to attend this meeting.

Fellow Qian Pu Attended Seminar on “Oil and Gas Industry Mechanism and System Reform”

Fellow Qian Pu was invited to attend the seminar on “Oil and Gas Industry Mechanism and System Reform” held by the School of Economics and Resource Administration in Beijing Normal University and the Development Research Centre in Southwest University of Finance and Economics. In this seminar, Ms. Qian gave a lecture on “Theoretical Research and Reforming Solution on Opening the Markets of Crude Oil and of Petroleum Products”.

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. 481: July 19th, 2013
Biweekly Symposium No. 482: August 02th, 2013

Previous Biweekly Symposiums

Biweekly Symposium No. 474

Time: April 12th, 2013
Topic: Fiscal Federalism and China
Lecturer: Feng Xingyuan
Commentators: Ma Jinhua, Zhang Deyong, Zheng Xinye

Prof. Feng Xingyuan, the lecturer of the seminar, redefined the concept of “Fiscal Federalism” using Ohlbrecht’s analytical framework, which means that there is existing competition on a wide range of internal and external government. Fiscal Federalism means that the government system is a hierarchical one, dividing different functions of government on different government levels and allocating financial tools to governments at all levels. So we need to understand what functions and tools should be concentrated and what should be scattered. The nature of fiscal federalism in China is the decentralized fiscal system under centralization. In other words, the centralized system is a big framework and there are several kinds of decentralized systems under it. However, the basic point of China’s system is not protecting individuals’ liberty and rights, which is contrary to the real fiscal federalism. Based on this, Prof. Feng Xingyuan analyzed the questions of the traditional fiscal federalism, and pointed out the eight principles of fiscal federalism and their correction. Finally, Prof. Feng Xingyuan stated that China is a country carrying out quasi-fiscal-federalism, which has many defects. Furthermore, China must follow the principles of legalization, liberalism and democratization.

Prof. Ma Jinhua introduced the background of the practice of fiscal federalism in China, and pointed out that principle of subsidiary and individuals’ liberty is critical from traditional fiscal federalism to perfect fiscal federalism. We need to establish a limited government and implement the rule of law. Prof. Zheng Xinye spoke highly of the research on fiscal system. Prof. Zhang Deyong analyzed the fiscal system reform in China from the reform and opening to present-day China in aspects of practice and policy. He pointed out that the fiscal system in China is centralized, the same as the international trend. The fiscal federalism theory after 1994 is a field of research, which deserves further research and greater attention from scholars. Finally, he looked into the reconstruction of the fiscal relationship between central and local governments.

Biweekly Symposium No. 475

Time: April 26th, 2013
Topic: Supply-Demand Relationship and Per Capita Living Space
Lecturer: Xu Dianqing
Commentators: Niu Ruifeng, Deng Yusong, Wang Hongxin, Zhangqingyong

Prof. Xu Dianqing, the lecturer of the seminar, indicated the basic law of housing price changes and questions of statistical data. He introduced the scheme, principle and conclusion of suboptimum, criticized the housing bubble theory and analyzed housing demand, imported inflation as well as serious consequences caused by increasing issues in the field of currency. Finally, he put forward an objective to regulate and control the housing price.

Prof. Niu Fengrui criticized that the current measures to regulate and control the housing price did not achieve its goal. He thought that the nature of housing price is the question of social redistribution. He did not approve of land privatization, but advocated reasonable compensation. Prof. Deng Yusong thought these two years are the residential construction peak. The most intense period for housing demand and supply has already passed. Overall, the housing price is generally in a normal phase. Prof. Wang Hongxin stated that government should adjust land system to alleviate housing price pressure. Prof. Sheng Hong put forward the policy goals to regulate and control real estate and compared the land finance and taxation.

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