Unirule Institute of Economics As a Private Think Tank

Director Sheng Hong gave an interview to China News Service, introduced what Unirule does, the fund-raising sources, Unirule’s impact, and other hot topics. When discussing about Unirule’s influences, Director Sheng answered:

Unirule exerted certain influences on the state’s decision-making, our influence is mostly in terms of people’s views. Claims of Unirule and key members of Unirule are publicized in articles and books, and known by common people, thus influencing their opinions. For example, Unirule advocates economic liberalism, marketization, privatization, small-sized government, and limited & effective regulations. Such claims did exert subtle influence on the consensus of society, including the government, throughout the years. That’s why we had witnessed the fundamental orientation of reform targeted at marketization, privatization, small-sized government, and limited & effective regulations, rather than the opposite way. This is one of the small contributions Unirule Institute ever made. As an organization with its distinct claim of economic liberalism, Unirule has done some work in making all these changes happen.
For more details to http://www.unirule.org.cn/english2/Third.asp?id=434

Sheng Hong
Director, Unirule Institute of Economics s

Highlights

Could We Learn Some Experiences from Personal Income Tax Reform in Russia?
By Prof. Mao Yushi
Russia dramatically eliminated its higher rates of progressive personal income tax (PIT) in 2001 replaced by a single flat rate tax at 12 percent plus one percent of social insurance In the right year of tax reform, real revenue from the PIT actually increased by 25 percent, while the GDP increased only 5%. In the following year revenue of PIT increased another 21%. This 'flat tax' experience has attracted much attention (and emulation) among policymakers, making it perhaps the most important tax reform in recent years. There are more than 20 countries that have followed such a tax reform with different level of success.

Progressive taxation and flat tax, which is better? In theory and from the practice of Russia, only the problems of tax levying and managing are solved, progressive taxation has advantages. Countries like China can learn the experiences in Russia.

Paying Rent Firstly, then Dividend, and with Tax Cut
Prof. Zhang Shuguang
Recently state-owned enterprises have been required to pay dividends to the State-owned Assets Supervision and Administration Commission (SASAC). This is a step in the right direction, but paying rent should precede paying dividends. Rent comes from resources such as land and mineral resources, which are possessed and utilized by state-owned enterprises, and should be paid to the owner of the resources, i.e. the government, rather than being paid together with dividend to SASAC.

Currently, state-owned enterprises pay rent to the government, but the rent is much below the equilibrium level. The rent paid to the government, if realized, will substantially expand the government's revenue, which has been increasing at a high rate for more than a decade. If the government has too much revenue, conservatism will be rampant, and reform will lose its impetus. Therefore, paying rent should be accompanied with tax cuts.

Give Villagers Their Due: Views on the Land Requisition System.
By Prof. Sheng Hong
Local governments are monopoly buyers in the first-level land market, and they gain because of the huge price gap between the two levels of the land market. So farmers' land use rights can be easily infringed upon on the pretext of public interest by local governments. There is a heated debate on "land privatization", but I think the most important thing is neither privatization nor the lack of it. The vital point is to return the land transaction rights to farmers.

At present, farmers get little compensation for losing their land, far lower than its true value in terms of urban or even rural use. If we give land transaction rights back to "rural collectives", farmers can deal directly with those who want land such as developers. Then they can sell the land at the market price.

Current Events

Release Conference: Macroeconomic Report - 2nd Quarter, 2009
Unirule Institute of Economics held a conference on July 23rd, 2009 to release the Macroeconomic Report for the 2nd Quarter of 2009. Over ten journalists from different news media and some economists were present.

The report points out that GDP in the 2nd Quarter of 2009 grew by 7.9%, pulling the economic growth of the first half year of 2009 up to over 7%. This indicates that Chinese government's policy aimed at maintaining stable growth is taking effect, and China 's economy has hit its bottom and is now bouncing back. The explosive growth of currency and bank loans precipitates asset price bubbles and brings about worries of coming inflation. Moreover, the growth of non-performing bank loans and the bank's acting the financial function also set back the clock of our financial reform. Therefore, the risks to our economy have increased.

The key to China 's reform and adjustment is the promotion of urbanization. The report also proposes a general approach and the operation framework for solving the problem of peasants and land. It is hoped that policy-makers will take these suggestions into consideration.

Conferences of “Status and Reform of Chinese Land Expropriation” and “The Status quo and Reform of Excising Rights of Stated-owned Land”
In August, two land conferences were held in Beijing.

"The Conference of Status and Reform of Chinese Land Expropriation," sponsored by Unirule Institute of Economics and Sino Farmer Foundation Limited, was held at the Beijing Huangyuan Hotel on August 6th, 2009. Prof. Zhang Shuguang, the chairman of Academic Committee of the Unirule Institute of Economics, Prof. Sheng Hong, the director of the Unirule Institute of Economics, and a number of scholars attended the conference. There were a few of land-expropriated farmers as well. The scholars discussed the conflict and compensation on land expropriation, the settlement of land-expropriated farmers, the reform of land expropriation and other topics.

On August 26th, "The Status Quo and Reform of Excising Rights of Stated-owned Land" was held, jointly organized by the Unirule Institute of Economics and Sino Farmer Foundation Limited. Prof. Sheng Hong, the director of Unirule, Prof. Qin Hui, from Tsinghua University, Jia Kang, Director of Institute of Fiscal Science, Dang Guoying, from Rural Development Institute of CASS, and other well known experts were present. Experts discussed topics such as excising rights of state-owned land, and the rent losses of state-owned land, etc. They also provided many useful suggestions on current Land Administration Law.

Current Researches/Programs

Institutional Strengthening for Public Utilities Investment, Operation, and Regulation in Qingdao National High-tech Industrial Development Zone
Qingdao national high-tech industrial development zone, is a newly constructed zone with 63 square kilometers and a target population is 350,000. The planned period is 5 to 12 years. The aim of this project is to provide an innovative and practical model of investment, operation, and regulation of public utilities in the area. This project was commissioned by the Administration Committee of Qingdao National High-tech Industrial Development Zone.

Improving Transparency and Capacity in the Management of China’s Local Government Budgets
Funded by the UK Strategic Programme Fund, the Unirule Institute of Economics and the Great Britain China Center and Research Institute for Fiscal Science, are conducting a project entitled “Improving Transparency and Capacity in the Management of China’s Local Government Budgets.” This project aims to explore and accumulate experience to improve the budget transparency and budget management capacity of local governments in China and to provide suggestions on improving local budget management reform.

The first phase of this project, research, has already been completed. During the second phase, the research team will provide support for financial reform in Jiaozuo and Nanhai. The project began in 2008 and is projected to be completed by early 2010.

Urban Wastewater and Solid Waste Management for Small Cities and Towns
This Asian Development Bank Technical Assistance (TA) Project is led by Sogreah, Unirule and ICEA. The intended impact of the TA is to improve urban wastewater management and solid waste management by developing national policy frameworks for wastewater and solid waste tariffs, including tariff calculation methodologies, focusing on small cities and towns. The goal of the TA is to achieve an increased rate of wastewater treatment and of sanitary disposal of solid waste for small cities and towns. This project will last 18 months.

Upcoming Events

Unirule By-weekly Symposium
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, 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.

Series Forums on Institutional Reform in Binhai Development Zone of Tianjin
Unirule and Binhai Development Zone Administrative Commission will hold a forum every month in the Binhai Development Zone of Tianjin, in an effort to discuss opportunities to promote political, social and cultural reform, economic liberalism and constitutionalism. These forums will be held every month in Tianjin.