Highlights

Cautious Words about “Original sin” of Entrepreneurs

FENG Xingyuan

In Christianity, the term “Original sin” means the wickedness that all human beings are born with, because the first human beings, Adam and Eve, disobeyed God, ate the forbidden fruits and were expelled from Paradise. It is inappropriate and frivolous to apply the doctrine of “Original sin” to enterprise restructuring. Unfortunately, numbers of people did show such inappropriate behavior.
The so-called problem of “Original sin” exists in the property rights security of those private enterprises derived from restructuring or merge and acquisition. The legality of the original transaction of property rights is commonly doubted. However, we should be clear that there will no common problem of “Original sin” if there exists no doubt about the legality of the original transcation of property rights in every restructed enterprise.
To some extent, it is reasonable for different sectors of the community to be skeptical about the legality of the original transaction of property rights in some derivative private enterprises.
Firstly, the lack of an open and transparent platform makes it hard to practice the privatization strategy during the restructuring process of the original state-owned or collectively-owned enterprises. Consequently, the actions taken by the local government and departments in the process of assets appraisal, price fixing, sale and remedial works etc. have remained a “black box”, lacking procedure transparency and legitimacy.
Secondly, press reports on numerous cases have exposed underhand secret dealings, unfair trade and only taking profits without responsibility. But those reports must be partial and disproportional, for the media report the horror but not the merits. As an old saying goes, “evil news rides fast, while good news baits later.” 
Thirdly, a portion of people failed to distinguish the concept of enterprise assets and real objects. They regard the enterprise they see as assets but ignore enterprise liabilities and net asset. Also, they find it hard to understand the “zero” displacement and “negative” displacement, i.e., giving away for free or subsidizing happened because many small-scale unprofitable enterprises experienced serious losses and no net asset provoked restructuring.
However, it must be wrong to consider the restructuring of all restructured enterprises as illegal. We see existing problems like power-for-money deals and the loss of enterprise assets during the process. But still, although those problems exist, the have also been cases where restructuring has achieved positive outcomes and a win-win situation has been created for state-owned or collectively owned enterprises as well as entrepreneurs of private enterprises (some being managers).
As not all the restructuring processes have the problem of legality, we can say that the derivative private enterprises,committed the “Original sin”. If some of these enterprises have such problem, we’d better not employ the term “Original sin” which is misleading and ambiguous. One must be convict of the crime he has committed. Moreover, it is certain that the original state-owned or collectively owned enterprises would have caused greater loss to our country and community for their low efficiency and corruption if they had not been restructured. At present, the exposed problem of corruption in China National Petroleum Corporation tremendously shocked the public. In 1996 according to the economic census conducted by National Bureau of Statistics, the state-owned enterprises possessed the lowest efficiency and the collectively-owned ones followed. Then, a large number of state-owned or collectively-owned enterprises have restructured. It seems the earlier restructuring is a valid behavior to cut losses.
It is vigilant that some people in the academic world magnify the doctrine of “Original sin”. It is said that in 2002, people like LANG Xianping defined “Original sin” of entrepreneurs as the improper means to make exorbitant profits, which magnified the domain of “Original sin” in a wrong way. By quoting FENG Lun, an entrepreneur’s words, they impose the “Present sin” on the “Original sin”.
However, challenges of “Original sin” to the restructuring of property rights are generally confused with the property rights restructured from legal or illegal merge and acquisition, which poses a threat to those property rights of private enterprises restructured in a legal way. Since there exists no “Original sin”, there will be few cautious words or no words about it and we even carefully use or give up such hegemonic discourse.
We can’t totally blame the entrepreneurs of private enterprises for the lack of legitimacy of the restructuring procedure established by the government. If there are problems in the restructuring procedure, the government officials should be punished. But it is the original legal system and framework that should be changed because those government officials carried out the restructuring test under the Party’s reform policy, i.e., they can’t be easily punished for the restructuring problems. Fundamentally, if there are no obvious power-for-money deals and the serious losses of state-owned or collectively owned assets, we can’t blame people for committing the “Original sin” and reject the former restructuring at will. The problems of entrepreneurs themselves depend on the existence of offering or taking a bribe during the restructuring process and the serious losses of state-owned or colletively owned assets have been caused by that.
For those, which have been restructured, the government should uphold the principle that the restructuring is completely legal as long as there is no clear evidence to prove severe power-for-money deals and the heavy losses of state-owned or collectively owned assets. If there is obvious evidence, we shall investigate, correct and punish according to law. In this way, public suspicions can be laid to rest.
According to the SOE reports 2011 conducted by the Unirule Institute of Economics, the stare-owned enterprises of industry have got margins of zero during 2001-2009. The enterprises got more resources and capital than those of the paper profit. In the long run, the state-owned enterprises should withdraw from the fields of competitiveness and profitability. We firmly require transparency and fairness in the future restructuring. A third party is also required to evaluate the state-owned or collectively-owned assets. Moreover, in order to prevent the loss of state-owned assets and protect citizens’ property interests as the owners, we’d better employ “privatizing vouchers” to guarantee citizens a per capita portion of land. And in China, we have no need to worry about the chaos in Russia caused by the implement of “privatizing vouchers”. Citizens can take their time to possess or transfer their “privatizing vouchers”. And transferring is considered to be normal. Substantial shareholders in a privatizing enterprise are good to the administration of the whole enterprise. 

Professor FENG Xingyuan
Deputy Director of the Unirule Institute of Economics

Current Events

The 2nd “MAO Yushi Academic Ideology Course”(3rd period) Started in Beijing

From March 8th to 9th in 2014, the 2nd “Unirule·MAO Yushi academic ideology course”(3rd period) started in Beijing. Professor MAO Yushi, the honorary chairman of the Unirule Institute of Economics, has given a course on the theme of “the Market Economy and Mroals”. Professor SHENG Hong, the Executive Director of the Unirule Institute of Economics, has given a lecture on the topic of “Metaphysical Dimensions of Constitutional Economics and Constitutionalism”.
Professor MAO explained the necessity of self-interest from the perspective of rational logic, and he pointed out the great significance of the market economy in the development of human history. Professor SHENG Hong introduced the definition of constitutionalism and its basic elements, the dilemma of unanimity rule and the defects in majority principle. (For more information)

The 4th Unirule Saloon for Chinese Entrepreneurs held in Chengdu

The 4th Unirule Saloon for Chinese Entrepreneurs, hosted gracefully by Sichuan Yudeng Investment Consulting Co., Ltd, was held at Ruiyuan Huanhuali Hotel in Chengdu on February 28th in 2014. The theme of this saloon was “Macroeconomic Trends and the Development of Private Enterprises". This event was proud to be joined by Professor ZHANG Shuguang, Chairman of the Unirule Academic Committee; Professor FENG Xingyuan, Deputy Director of the Unirule Institute of Economics, Director of China Entrepreneur Research Center of Unirule Institute of Economics, researcher of Chinese Academy of Social Sciences and also famous expert in private enterprises and private finance; and Professor Shengyi, Vice President of Sichuan Academy of Social Sciences. The three attendants respectively made a 30-40 minutes keynote speech, uniting the reality and explaining the terms in simple way. Their speeches impressed the audience. More than 100 people from all walks of life attended this meeting. (For more information)

The Seminar on “Ukraine: the Enlightenment of Democratic Transformation” Held in Beijing

On the afternoon of March 6th, the seminar entitled “Ukraine: the enlightenment of democratic transformation” was co-held by China-Review/Unirule Institute of Economics at the office of Unirule Institute of Economics in Beijing. Specialists in Eastern Europe, Central Asia and Middle East studies, scholars from areas of politics, law, and economy and the media joined the seminar. The attendees, in their own perspectives, analyzed and discussed heatedly about the cause and lessons learned from the transformation of the social democratization in Ukraine, Egypt and Thailand recently.
Stay tuned as we get more details on what’s on the seminar in the column “Weekly Topic” at China-Review.com.

Unirule Reading Club (the 3rd session) ---- A History of China Was Held in Beijing

In the afternoon of March 15th, Unirule Reading Club (the 3rd session) was held in the Unirule Institute of Economics in Beijing. The theme is “rewrite the history of China and find another road of China”. This club is proud to invite the author of the works Mr. QIU Feng, Professor in Beijing University of Aeronautics and Astronautics and President of Unirule; distinguished guests Professor GAO Quanxi, Dean in the Humanities and social science higher institutes of Beijing University of Aeronautics and Astronautics; and Mr.GAO Chaoqun, Researcher in the Institute of Population and Labor Economics. This event is honored to be hosted by MR.REN Feng, Vice-Professor in Renmin University of China( politics department) and Doctor in Hong Kong University of Science and Technology.

The 2nd Unirule Mentors’ Meet-greet of Western Classics Was Held in Beijing

On March 16th , the 2nd Unirule meet-greet of mentors was held by the Unirule western classical book club, which was hosted by the China Entrepreneur Research Center of Unirule Institute of Economics. This event was gracefully supported by the participation of Professor LIU Junning, famous independent political scientist and researcher from the Cultural Institute of Art Studies in the Ministry of Culture; CUPL Associate Professor WANG Jianxun and  Professor FENG Xingyuan, Deputy Director of the Unirule Institute of Economics. In terms of Government Theory, the members presented a variety of problems, such as “the ownerless territory and the establishment of a nation”, “the definition of freedom and the freedom under the law and order”, “views on single tax and progressive tax of property rights” and so on. Researchers and scholars had beneficial discussions with their mentors.(For more information)

News

Professor Zhang Shuguang Attended the Show “Views on China----NetEase’s Interview with Economists”

Professor ZHAO Nong Attended Luncheon Party on “the Danger and Opportunity of SOE Reform”

On March 3rd, Professor ZHAO Nong was invited to attend the Luncheon Party hosted by Phoenix Finance on the topic of “the Danger and Opportunity of SOE Reform”. He deemed that the administrative monopoly has to be broken in the SOE reform and private enterprises should be given access to the market with corporate identity rather than in a way of capital. The reason is that if the private capital can not play a dominant role, the private enterprises will be stuck in dilemma. And we all know capital is outweighed by power.

Current Researches/ Consulting

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

The present system of petroleum industry in China generally has 3 characteristics —— it focuses on state-owned business, price control and restricted access. Thus China’s petroleum industry has a highly administrative monopoly. A few enterprises have completely monopolized the supply lines from its exploration, mining, refining, wholesale and retail, even to its imports and exports. The research intends to break the administrative monopoly of petroleum industry, stating its objective for the reform and meanwhile figuring out feasibility reforming solution to further liberate the markets of crude oil and product oil.

Strategy of Developing Areas and Planning Studies on Urban Industrialization For Yangcheng County in Jincheng City of Shanxi Province

On the basis of rethinking the strategy of development, the transformation of urban functions and the adjustment to industrial structure for Yangcheng County, Unirule Institute of Economics has developed a unique space-institution mathematical economic model which can reunite three-dimensional space time of cities and regions, their industries and institutions, and their economic policy analysis. The Unirule Institute will put the strategy into practice. Meanwhile, such mathematical model will be used to simulate market mechanism, to predict the final size for the long-term developing balance of cities and regions, the space distribution of population density and other economic density, the development time and process of cities and regions, the industrial distribution and its development track, and to test the flexibility of economic systems and policies. Thus the model can be used for the spatial planning of urban and rural areas in Yangcheng County.

Fairness and Efficiency of Financial Resource Allocation

The first scale problem of the fairness and efficiency of financial resource allocation is whether the overall tax bearing standard falls within the optimal interval, whether the design of tax kinds and the mechanism will harm the development of the economy. The second scale problem is whether the expenditure structure of the existing financial resource allocation, especially transfer payment, obeys the principal of justice, and the efficiency of financial expenditure especially the general administrative costs.
Unirule Institute of Economics is going to undertake research on the fairness and efficiency of financial resource allocation with the emphasis on the second scale problem. In order to fulfill the ideal of justice in a society, the involvement of financial resource allocation is one of the methods, and a universal one. A state can promote justice by implying financial expenditure in two ways: the direct and the indirect way. When applying the direct way of implying financial expenditure measures to promote justice, financial expenditure is directly distributed to individuals to fill the gap of incomes between individuals. Among the financial expenditure items of China are pensions and relief funds for social welfare, rural relief funds as well as social insurance funds. The indirect way is by governments' increase in expenditure used for supporting agriculture and villagers, construction of infrastructure, education and medical treatments. This research is on the justice of financial resource allocation and it deals mainly with whether the transfer payment of financial resources obeys the second rule of Rawls's theory of justice, which states that when violation to the first rule has to be made, resource allocation can be towards the poorest group of people. Besides the justice issue, efficiency is also involved in the financial resource allocation. The administrative costs of China have long been above the average standard of other countries in the world, therefore, a big amount of public financial resources are wasted (trillions of RMB per year as estimated). In regard with the efficiency issue of the financial resource allocation, this research deals mainly with the change of ratio of administrative costs by government agencies (in addition to other costs, such as medical treatments of government officials covered by public budgets, and housing subsidies) of financial income. The reform of the fiscal and taxation system is one of the core issues in China's on-going reforms. This research aims not at a comprehensive examination of the fiscal and taxation system, but a specific aspect which is the "fairness and efficiency of financial resource allocation", and evaluating the status quo of China's financial resource allocation.

Research on China's Urbanization on the Local Level

Urbanization is one of the most essential economic and social policies of the new administration. The emphasis of this policy is posed on medium and small cities as well as townships. As noticed, there are thousands of industrialized townships in China with their social governance lagging far behind their economic development.
Firstly, a big population is located in between the urban and rural level, which can't transform into citizens. Hundreds of millions of people have left their villages and moved to commercialized and industrialized towns. They are in industrial and commercial occupations and it is highly unlikely that they would go back to their villages. However, they are not entitled to local Hukou registration, which further leads to the deprivation of various rights, for example, the right of education. Secondly, public governance in such industrialized and commercialized towns, in general, is at a rudimentary level. The number of officially budgeted posts is asymmetric with the population governed, which leads to the employment of a large number of unofficially budgeted staff and unjustified power to govern. There is a lack of financial resources for the local government to carry out infrastructure construction or to provide public goods sufficiently. Thirdly, the urbanization results in imbalanced development of the structure of society. Since the industrialized and commercialized townships are unable to complete urbanization, urbanization in China has basically become mega-urbanization which is dominated by administrative power. Local governments centralize periphery resources with administrative power and construct cities artificially, which impedes townships and villages from evolving into cities by spontaneous order. Fourthly, industry upgrading can't be undertaken in those industrialized and commercialized townships and the capacity for future economic development is greatly limited. The industry upgrading is, in essence, the upgrading of people. Enterprises ought to draw and maintain technicians, researchers, and investors, to meet their needs for living standards, which cannot be satisfied by townships. Similarly, the lagging urbanization reversely sets back the cultivation and development of the service industry, especially the medium and high-end services.
Unirule Institute of Economics is going to carry out research on urbanization of China on the local level, aiming at improving public governance of the industrialized townships, optimizing the urbanization methodologies, and improving the "citizenization" of migrant workers, therefore further pushing social governance towards self-governance and democracy.

Research on the Public Governance Index of Provincial Capitals

At the beginning of the year 2013, Unirule conducted field survey, including more than 10 thousands of households in 30 local capital cities. According to the field survey, the Public Governance Index was derived. The main conclusions of the PGI report as below:
Three statements summarize the status quo of public governance in provincial capitals. Firstly, public services have generally just gotten a pass. Secondly, protection to civil rights is disturbing. Finally, governance methodologies need improvements. These statements point out the solution: the structure of the society needs to be altered from that with a government monopoly to a civil society with diverse governance subjects. The ranking of provincial capitals in the public governance assessment from the top to the bottom is as follows: Hangzhou, Nanjing, Urumqi, Tianjin, Chengdu, Shanghai, Beijing, Nanchang, Xi'an, Xining, Shijiazhuang, Wuhan, Guangzhou, Yinchuan, Hohhot, Chongqing, Shenyang, Changsha, Jinan, Kunming, Nanning, Haikou, Fuzhou, Guiyang, Harbin, Hefei, Changchun, Zhengzhou, Taiyuan and Lanzhou. Generally speaking, all provincial capitals are graded comparatively low in the three public governance assessments from 2008 to 2012. Even those that ranked the highest in performance have just barely passed the bar of 60 points. Few provincial capitals with poor public governance got over 50 points.
There is a certain amount of correlation between the changes of ranking and improvements in public governance in provincial capitals. In the short term, should the capital cities be willing to raise their rankings, they can achieve this by increasing transparency in government information and civil servants selection, encouraging local non-governmental organizations, or promoting wider participation in local affairs. There is but a weak correlation between public governance and the local GDP level. However, a strong correlation exists between the rankings and the equity of local fiscal transfer payment. That is to say, a region gets a higher ranking in public governance if subsidies to local social security, medical care, education and housing are distributed more to the poorest residents in that region. On the contrary, a region's ranking falls if such resources are distributed with prejudice to the groups with high incomes. This phenomenon shows that equity is of significance in the assessment of the government by the people.
When residents are not satisfied with medical care, elderly support system, water supply and electricity supply, the situation can be improved when they complain to the government. But when similar situations take place in public transportation, environment greening, heating systems, and garbage management, whether by collective actions or filing complaints to government agencies, residents can hardly be satisfied with what the government does.
According to the three public governance assessments carried out from 2008 to2012, we discovered that the Gini coefficient of residents in provincial capitals was decreasing and the income fluidity was improving. From 2010 to 2012, citizens' comments on protection of civil rights are deteriorating, especially in terms of property and personal security. The request for freedom of speech is also increasing. For the moment, citizens in provincial capitals have a low evaluation on the cleanness and honesty of local governments.

Research on Disclosure of Government Information

Room for reforms is getting narrower as the opening-up and reforms deepen. It also leads to a more stabilized vertical mobilization of the demographic structure with the conflicts in the distribution of interests exacerbating. A collaborative system centering the political and law system and involving close cooperation between the police, courts, petition offices, and the city guards (Chengguan) is developed to deal with social unrest. This system is operated by local governments and finalized as a system of maintaining stability (Weiwen). There have been Internet spats over the amount of Weiwen funds. It is unsustainable to maintain such a Weiwen system, and the disclosure of government information is the most significant approach for this end. The essence of public governance is to dissolute conflicts instead of hiding and neglecting them. And one way to achieve this is by sufficient communication. Public and transparent appraisement and supervision cannot be achieved without transparent government information, otherwise the result will be the exclusion of citizens from public governance.
Unirule Institute of Economics has been undertaking research on the disclosure of government information since 2011. This research is carried out not only from the perspective of the regulations for the disclosure of government information which evaluates whether governments of various levels are obeying the regulations and their performances, but also by examining information disclosure laws in developed countries while looking at the status quo in China. There are seven aspects where government information disclosure can be improved, namely, information disclosure of government officials, transparency of finance, transparency in the decision-making mechanism, transparency in administration, transparency in public services, transparency of enterprises owned by local governments, and transparency in civil rights protection.

Upcoming Events

The Seminar on Interdisciplinary Interactions and Theoretical Innovation in Economics
Since the reform and opening up, the theoretical research in China’s Economics has gone a long way by introducing, learning, digesting, absorbing and innovating. On the one hand, the utility method training has been greatly improved. On the other hand, the theoretical paradigm has been transformed and the multiple paradigms have been formed and developed. More importantly, based on China’s economic practice, the essence of traditional culture and the researches conducted in the past, significant ideological breakthrough and theoretical innovation emerged, e.g. Economics of Transition, Macroeconomics of Public Ownership, Behavioral Economics, New Structural Economics, Humanist Economics and Economics of Mutual benefits, etc.
However, we should recognize that the tendency towards instrumentalization, technicalization and commercialism is jeopardizing the development of theoretical researches in China’s Economics. Besides, the theoretical breakthrough and innovation still have drawbacks and need to be improved which requires independent and free discussion as well as criticism.
To achieve that goal, Unirule Institute of Economics plans to host the Symposium on Interdisciplinary and Theoretical Innovation in China’s Economics. 50 scholars at home and abroad are going to be invited. The symposium also raises money for charity from those with love and appreciation for scholarship. The number of money is not restricted. You can donate through the following ways:
1. Unirule Alipay account:  emma520king@aliyun.com 
2. Bank account: Beijing China-Review IT Co. Ltd account:  86158196230001 (China Merchants Bank, Shuang Yushu branch)
People donating more RMB1500 can attend the Symposium.
Unirule provides two-day free accommodation and meeting materials.
3. Contact: LIU Xi   liuqian@unirule.org.cn   13811966842
(For more information)

Unirule·Journey of World Civilization (I) The Trip of Seeking Resources---Israel
Unirule Institute of Economics plans to host a 9-day trip to Israel to seek resources. We set up 6 topics for visiting and discussion including Judean Glamour, Faith Core, Jesus Footprint and Wisdom Business. We are going to visit the humanities and natural landscapes in Tel Aviv, Jerusalem and Galilee, etc. Besides, we will develop both formal and informal discussion to unlock the mystery in our minds. Only 30 people are designed to join us in this trip. Unirule·Journey of World Civilization combines visiting, learning and exchanging and disseminates the positive energy of civilization. Welcome to join us! For more information or signing up in advance, please contact:

Email for signing up: wmzl@unirule.org.cn
Contacts: LI Yunzhe 13718353757 ????ZHAO Huijuan 13661058464

PS.
1.Cost：Applicants must pay RMB1000 for application fee. After approval, the overall cost of the trip should be separately paid for RMB68,000.
2. Tips: Applicants sign up before the official enrollment i.e. the applicants in advance will enjoy 88% discount (cost of the trip RMB59,840 ). The application deadline is April 5, 2014.
3. Cost for family members: The family members of applicants signing up before April 5 can get 70%discount and those signing up after April 5 can also get 80%discount.
4. Gentle hint: For the sake of SAFETY, we don’t suggest that the kids under 10 years old join this trip.

2014 Unirule Education Forum
“2014 Unirule Education Forum” will be held in Beijing in the second half of 2014. This event will focus on the development of private education and social science of higher education.

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 380 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. 498: 11st April, 2014
Biweekly Symposium No. 499: 25th April, 2014

Previous Biweekly Symposiums

 Biweekly Symposium No. 496:
Time: March 14th , 2014
Topic: The Establishment of the Market Economy and the Reconstruction of the Criminal Law
Lecturer: Mr.CHEN Youxi
Host: Professor ZHANG Shuguang
Commentators: Professor XU Xin, Professor SHENG Hong, Professor FENG Xingyuan, Professor YANG Junfeng, Professor LI Shuran

Executive Editor: LIU Qian
Editor: LIAO Fenfang
Revisor: Hannah Luftensteiner