The Declining Economic Growth Corresponds to Reality
Two Crises of Euro Debts and Private Lending in Wenzhou

The Unirule Institute of Economics released its Macroeconomic Analysis Report for the 3rd Quarter of the year at a conference held on Oct. 21st, 2011. Prof. Zhuang Shuguang introduced the report.

According to the report, China's GDP rose by 9.4% year-on-year in the first three quarters of 2011, again exhibiting a declining trend quarter-by-quarter due to policy effects and the decline of growth potential. The government is worried about the increased risks of an economic slowdown, which is not conducive to domestic economic structural adjustment.

The expansion of private lending in Wenzhou reflects the deteriorating environment for small and medium-sized enterprises (SME) and threatens the safety of the banking system. The root cause lies in the current dual financial system dominated by state-owned banks. Since the private sector has funds and private enterprises have a demand for funds, society is only lacking the means to efficiently delver these funds to private firms. The Euro Crisis threatens the world economy and also affects China. Nevertheless, China can neither save the Euro nor stay completely uninvolved. Whether to save the Euro or not and the scale and method of rescue all should conform to China’s practical interests.

Zhang Shuguang
Head of Academic Committee, Unirule Institute of Economics

Current Events

The Unirule Education Reform Forum 2011

The Unirule Institute of Economics held the Education Reform Forum 2011 in Beijing on November 2nd, 2011. Prof. Mao Yushi, president of the Unirule, gave the opening speech. Centering on the theme of “investment and financing of privately-run education,” Prof. Sheng Hong, director of the Unirule, Prof. Feng Xingyuan, vice director of the Unirule, Prof. Gao Yan, vice director of the Unirule, Prof. Cheng Fangping of the Education School of Renmin University of China, Prof. Jiang Guohua of China National Institute for Education Research, Prof. Zeng Xiaodong of Beijing Normal University, Mr. Lei Junxiong, president assistant of Juren Education Group, all delivered keynote speeches and answered questions raised by reporters and the audience.

Prof. Mao Yushi emphasized two features of education: positive externality and fairness. He also introduced India’s experience in the promotion of privately-run compulsory education. Prof. Sheng Hong delivered a speech on unfairness in China’s current education system. Prof. Cheng Fangping touched on the reform of, and hope for China’s privately-run education and the issue of privately-run education financing. Prof. Jiang Guohua made a thorough presentation on the current situation of investment and financing in China’s educational field and pointed out that the biggest problem at present was how to prevent the abuse of governmental power and the unlimited expansionary impulse of governmental educational organizations. Prof. Feng Xingyuan gave his opinion on the nature and reallocation of educational products. Mr. Lei Junxiong shared his own experience in running schools and emphasized that Chinese people should have confidence in China's education.

News

EFN Asia Annual Conference 2011 Held in Kuala Lumpur
The 2011 Economic Freedom Network Asia (EFN) annual conference was held from 10th to 12th October in Kuala Lumpur, Malaysia. Prof. Sheng Hong, head of the Unirule Institute of Economics, Prof. Feng Xingyuan, vice director of Unirule, and Mr. Zhao Xu, Director of the Department of International Cooperation at Unirule, attended the conference. Prof. Sheng Hong was invited to give a keynote speech entitled "The Nature, Performance and Reform of Chinese State-owned Enterprises.”

The Economic Freedom of the World 2011 Annual Report was released and a resolution was adopted at the conference. According to the annual report, based on China's performance in 2009, China (mainland) reached 6.43 (out of 10) on the economic freedom index, ranking 92nd among 141 countries (regions). The EFN Asia Annual Conference concluded after the resolution was adopted. The resolution called for more competition in public services.
Resolution of EFN Asia Annual Conference 2011

Prof. Sheng Hong Attended Sohu Economist Forum
Prof. Sheng Hong, head of the Unirule Institute of Economics, attended the Sohu Economist Forum held in Jilin University on Sep. 27th, 2011, and gave a lecture entitled “Inflation and Strategic Choices.” He remarked, “Inflation is not a short-term problem but a strategic issue. That’s why we need to discuss the topic of inflation and strategic choices.” According to Prof. Sheng Hong, inflation is a very complicated problem, and it’s impossible to predict if CPI would fall in the 4th quarter as expected. However, short-term domestic inflationary pressures will be alleviated if the world economy heads into a second downturn.

Current Researches/Consultings

Research on Water Affairs Business Development Strategy for Shanxi International Electricity Group Co., Ltd.
As the only wholly-owned power industry group set up by Shanxi Provincial Government, Shanxi International Electricity Group Co., Ltd has strong comprehensive strength in funds, investment, and project operation and management. In order to expand its investment fields, the group has decided to seize the opportunity to enter the water market and has planned for long-term cooperation with the Shanxi provincial water resources department. However, due to its long history in the power industry, the group is lacking in deep understanding of the water industry. In addition, the water industry requires enormous prophase financing and sunk capital, and is weak in short-term return ability though it has consistent long-term returns. This lack of understanding makes it hard for the group to make long-term goals with regards to the water industry.

This research will conduct analysis and offer suggestions on the following issues:
1)The water affairs market prospects for the country and Shanxi province;
2)Feasibility of Shanxi International Electricity Group Co., Ltd entering the water affairs industry;
3) Development strategy for the water affairs business of Shanxi International Electricity Group Co., Ltd.

Research on China's Strategy of Breaking Administrative Monopoly
State-owned enterprises have been severely criticized in recent years for their tendency to gradually expand in an existing field rather than to retreat. State-owned enterprises not only solidly occupy the non-competitive fields, but also continue to exist in the field of private goods. China's state-owned enterprise reform has now reached a new turning point after thirty years. More importantly, the problem of administrative monopoly is rather severe in China and requires urgent reform. Until this problem is fixed, there can be no fair competition between state-owned enterprises and the private sector. Unfortunately, China's administrative monopoly reform still has a long way to go.

This research aims to provide a feasible plan for administrative monopoly reform and to help create a fair market environment with deepening economic reform. This research will last for roughly half a year.

Research on the Property Market in China
The Center for International Private Enterprise (CIPE) and the Unirule Institute of Economics will work together to evaluate barriers faced by small enterprises in China's property market. Unirule, with support from a WCC consultant, will gather information on the legal and regulatory barriers to strengthening property rights for small businesses in order to measure the implementation gap - the difference between regulations on paper and their implementation - and develop an advocacy platform to strengthen relevant institutions.

The goal of this project is to identify legal and implementation gaps regarding property markets as relevant to small enterprises, formulate reform recommendations, and develop advocacy plans.

Low-Income Housing System Research Project
The housing conditions of the Chinese people have improved significantly since the welfare-oriented public housing allocation was replaced by market allocation in 1994 and China's housing security system was gradually strengthened. However, considerable problems still exist in China's housing security system, such as the inability to ensure social fairness, resource allocation inefficiency, and an increase in rent-seeking and corruption. Based on full and accurate empirical research, this project aims to propose a feasible housing security system which balances equity and efficiency. This research project has already drawn to an end, and the report release conference was held on June 28th, 2011.
Research Report Abstract

Public Governance
Unirule's "China Public Governance Observation Research Project" was launched in March 2009, aiming at recording and assessing public governance status in different areas of China through the perspective of news reporting. The initial research achievement "China's Governance in Media Recording" was released in 2010. "2010 Report on Public Governance in China's Provincial Capital Cities" news release conference was held by the Unirule Institution of Economics in Beijing in the afternoon of July 31, 2011. "2010 Report on Public Governance in China's Provincial Capital Cities" summarizes all the research findings of the study of Public Governance by the Unirule Institute of Economics.

This research is entirely based on first-handed data, which came from the household surveys jointly conducted by Unirule Institute of Economics and Horizon Research Consultancy Group in 2007, 2008 and 2010. The sample size of 2010 survey is 6,449.

For more details:
http://english.unirule.org.cn/Html/Unirule-News/20110803205551702.html

The Nature, Performance and Reform of State-owned Enterprises: Research on Reform of State-owned Enterprises Under the "Guo Jin Min Tui" Background
The phenomenon of "Guo Jin Min Tui" (the expansion of state-owned enterprises at the expense of the private sector) has become a topic of wide debate recently, especially with in the steel and coal sectors. This phenomenon has sparked a heated debate in academic circles and throughout society. The purpose of this research is to clarify the normative nature of state-owned enterprises; secondly, to give a description of the performance of current state-owned enterprises through data and case studies, and to judge their impact on society and government. Finally, this research will offer suggestions on ways to reform existing state-owned enterprises. This research project was completed in March 2011, and the press release conference and academic seminar was successfully held in Beijing Jade Palace Hotel on Mar. 2nd, 2011.
Revised Research Report

Upcoming Events

Seminar on Classic Cases in the Fight for Property Rights
The case of coal mine fight for 1.9 billion tons of coal reserves in north Shaanxi reported by 21st Century Business Herald and some other relevant cases are typical cases in the concept and institution of property rights in contemporary China. Based on this case, the Unirule Institute of Economics has decided to hold a seminar on the protection of property rights and improvement of governmental credibility so as to further investigate the principle of justice which should be followed in similar cases as well as to offer concrete solutions.
Time and Venue
Time: 9:00-12:00, 13:30-16:30, Nov. 15th, 2011
Venue: Moscow Hall, Beijing Schonbrunn Hotel

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 pm every other Friday and are free and open to the public.

Schedule
Biweekly Symposium No. 441: Nov. 25th, 2011
Biweekly Symposium No. 442: Dec. 9th, 2011
Biweekly Symposium No. 443: Dec. 23rd, 2011

Previous Biweekly Symposiums

Biweekly Symposium No. 437
Time: Sep. 2nd, 2011
Topic: Trade Theories and Free Migration
Lecturer: Prof. Sheng Hong

Prof. Sheng Hong firstly introduced three levels of economic liberalism: free trade, free capital flows and free migration. Liberal economists at present are divided on the issue of free migration. Prof. Sheng Hong then presented the theoretical basis for free migration, including the traditional trade theories and the new trade theories. In addition, he further illustrated the political implications of the new trade theories.

Biweekly Symposium No. 438
Time: Sep. 16th, 2011
Topic: The Establishment of the Dual Urban and Rural Household Registration System
Lecturer: Prof. Wang Haiguang

Centering on the issue of the establishment of the dual urban and rural household registration system in China, Prof. Wang Haiguang introduced several stages of the development of China’s household registration system from the late Qing Dynasty to the present. In his opinion, China’s household registration system has transformed from political control to social control. He then explained the four factors influencing China’s household registration system, including revolution and military factors, two traditions of the Middle Ages, political beliefs and political campaigns.

Biweekly Symposium No. 439
Time: Oct. 14th, 2011
Topic: Contemporary Chinese Political Ideas
Lecturer: Prof. Gao Chaoqun

In accordance with his observation, Prof. Gao Chaoqun divided Chinese political ideas formed in the past thirty years of reform into four schools: the mainstream nationalist school, the free-market school, the marginal political democratic school, and the social revolutionary school. Prof. Gao Chaoqun gave a detailed introduction of the mild nationalist school, whose advocators were represented by the interest group of state monopolies. In culture, the nationalist school emphasizes national interests and despises individual value and market value, and hopes the rulers to maintain flesh-and-blood ties rather than a legal relationship with the masses. In the economy, the nationalist school emphasizes the role of the state-owned economy. In political and social policies, the nationalism school advocates more welfare for the lower social classes, yet opposes the growth of the underclass in strength. Prof. Gao Chaoqun also disclosed two major physiological motivations for the masses advocating mild nationalism and pointed out five problems with this mild nationalism.

Editor: Jiang Hong
Revisor: Jude Blanchette