1. ECON 7540 –
Graduate Seminar on China’s Economy
Instructor: Dr. Chan Hing Lin
Question 1
(a) What aspects of problems does the macro-
economy of China encounter?
中國宏觀經濟正面對著那幾方面的問題？
(b)What measures should the PRC
Government adopt to resolve these
problems?
政府應採取甚麼措施來解決這些問題？
Name: LEE Kwun Leung Vincent (李冠良)
Major: Master of Social Science in China Studies
(History & Culture)
Student I.D Card Number: 09429670
Date: 18 November 2010
1

2. 1
(a) What aspects of problems does the macro-economy of China
encounter?
(b) What measures should the PRC Government adopt to resolve
these problems?
(a)
After the extremely communist reign of Mao Zedong, the macro-
economy of Modern China exposed to the trend of “opening-up” and
underwent a series of transformational problems from the structural changes
of its civil, political, career and demographic hierarchy.
When the right-minded PRC leaders, headed by Deng Xiaoping, re-
introduced lassie-faire policies in the provinces with a long history of
Communism-based economic system, the ideological struggles between
liberalism and national interventionism further emerged1
. Entrepreneurs, who
had aspirations to expand their individual realm of trade and manufacture,
found it difficult to obtain fully pledged acknowledgements from the
provincial strata. Ministers, who were in charge of the provincial commerce,
tended to put a greater emphasis on the so-called “collectivized interests”,
such as a constant management on the social structures of wealth, welfare and
property distributions. They were hardly adaptable to the contemporary
global norms, which emphasized an institutional responsibility to preserve
independent commercial privileges among diversified aspects of
entrepreneurial interests in a non-conflictive manner. Policies, which aimed at
adjusting the macro-economy of Post-Mao China, still reserved the
characteristics of “personnel-based” politics. The favorable economic policies
of PRC Government only enabled the prestigious nationalistic figures to
establish national enterprises. Middle-class people, with a medium range of
wealth accumulation, found it difficult to obtain grants and subsidies from
their provincial governments. Such a phenomenon of monopolization caused
a sharp distinction between the pro-establishment economic influences and
the proletariat labors. No stimulations were given to the middle-classed
people, who were without political acquaintances, for increasing economic
rewards from their private businesses.
1
Li Ping, Wu Jianqi, Yang Weiling and Du Qi, “Reflection & Innovation – A Research on the
Political & Economic Development of China in the Period of Transformation”, Beijing, Science
Economic Press, 1st
Edition of March 2006. [P.301: Market & Government – The Basic Economic
Problems]
2

3. The aforesaid problem implied the fact that, there has been an
immaturity in China’s marketing system. The surplus agricultural labors from
the internal provinces could not be either utilized by the predominant
national enterprises or increase their upward social mobility, nor to say
participating in the listing of stock market by exceeding their official
household restrictions. The absence of “Equal Competition Ordinance” in the
PRC National Law provided no confidence for the propertied individuals in
other internal provinces to list their new registered businesses in the stock
market, as the monopolization of shares by national enterprises discourages
investors to purchase private shares that revealed a sustainable prospect of
civic entrepreneurship. Moreover, many provincial governments have not yet
established subsidiary departments to supervise the monetary reports from
the listed companies. There was not yet a profound accounting system to
justify the orthodox channels of capital transactions. Thus, loopholes related
to either corruptions or misinterpreted transactions existed within the stock
market of Modern China, and this resulted in an “institutional inclination” to
the benefits of the shareholders with political and bureaucratic backgrounds
despite the growing prosperity of capitalistic economy. The marketing
system, in such sense, provided rare benefits to the minored bodies that had
genuine aspiration in expanding businesses with creative modules.
The wholesome development of macro-economy depends on a high
efficiency of productivity. However, up to now, the national enterprises are
still the predominant economic columns that support the manufacture of
major daily-life and strategic necessities. As the national enterprises are
directly authorized by the PRC bureaucratic strata, there are no specific
demands on the employees to fulfill particular kinds of production quotas.
The national enterprises are less alerted of the pressure from the fair and keen
competitions among their commercial peers. What they focus on is simply the
anticipation by the central economic direction, instead of a pursuit on
knowledge-based industrial advancements that encourages the adoption of
innovative ideas.
Although there is an emergence of capitalistic economy, the
manufacturing categories are strictly defined by the central directions of
economic planning, in which the investors have to be unquestionably
submissive with the political norm of product specialization (or industrial
3

4. diversification) among various provinces. Industrial allocations by the PRC
Government are predominant due to a prior consideration on the allocation of
income, demographic and strategic resources2
in accordance with the social
structures. Thus, many national enterprises remain with shortsighted visions
and simply focus on the profitable rewards of processing manufacture.
Despite the tremendous deposit of GNP in the national reserves of PRC
Government, China remains with a fame of global manufacturing state,
instead of a state with creditable potentials in tertiary industry. The
enterprises have less incentive to explore new original trademarks and inter-
disciplinary production lines. This resulted in a phenomenon that, European
or American investors are much easier to expand their industrial firms,
popularize their entrepreneurial trademarks, overwhelmingly compete with
the Chinese enterprises, employ intellectual talents and obtain foreseeable
profits from the courageous mode of speculation.
According to the analysis of Wu Zhuang ( 伍 裝 ) from the Shanghai
University of Finance, the Chinese people are being confused with the
loopholes of “New Property Ownership System”3
. As there are comparatively
greater advantages in “private property ownership” due to the higher
efficiency of resource allocation, the entrepreneurial operations of private
enterprises are institutionally protected and connived by the Government.
However, due to the imperfection of law system and the mishandling of PRC
Government, there is a lack of continuation in the transparency of
information. The government officials could obtain tremendous capital
resources from both its political power and its monopolization on market
operation, thus they are able to retire from bureaucracy and succeed as the
directors of private enterprises. This group of private entrepreneurs is hardly
supervised by the existing liberal market ordinances, as they might manifest
their fragmented political privileges to hinder the judicial authorities from
evaluating their listing procedures, monetary transactions and share
ownerships. In such sense, the contrast between private and national
entrepreneurship is vague. The private enterprises still depend on the norm of
“political legitimacy”, instead of “law of justice”, to persist with their social
positions. Even though the civic enterprises can enjoy administrative
autonomy, their creative philosophy does not undergo much breakthrough.
2
Li Ping, Wu Jianqi, Yang Weiling, Du Qi and so forth, “Reflection & Innovation – A Research on
the Political & Economic Development of China in the Period of Transformation”, Beijing, Science
Economic Press, 1st
Edition of March 2006. [P.318 – The problems of income distribution in China]
3
Wu Zhuang, “General Theory of Chinese Transitional Economy”, Shanghai, The Shanghai
University of Finance, 1st
Edition in May 2004.
4

5. They solely adopt the image and formats of established foreign product
inventions with a slight level of functional modifications based on the
pragmatic needs of Chinese consumers. They only focus on a pursuit of “mass
production” to satisfy the demand of nationwide consumers with low selling
costs. Thus, the private enterprises remain with a stable but stagnated level of
industrial rewards, which exclude the possibility for a speculative increase in
capital funds by a direct exploitation of new marketing opportunities.
Since the late 2008, the shock on global finance, caused by the crisis of
substandard products in the United States, imposed challenges on the
absolute stability of macro economy in China. This is because; there has been
an increase in the changeability of cross-boundary capital flows4
. Rewards
from the favorable surplus in Chinese trades and exports underwent an
obvious level of decline. The PRC Government is not yet too sophisticated to
adjust the internal changes in labor cost, as well as foreseeing the
consequences from the enhancement of costs in resource allocation and
environmental management. The Western countries have a strong demand on
the cheap exports from Chinese industries. However, the retailing markets in
these countries set the selling price of Chinese products as below the bottom
line of merchandizing cost. As the Chinese industries gain very rare from the
increase of trademark value in their export businesses, the PRC Government
tends to focus more on the settlement of internal consumption demands. To
our disappointment, the consumption trend in China lacks the invention of
neo-technological products as a supportive foundation to boost up the morale
of retailing industry. Most manufacturers are only adaptable to the
administration on secondary productivity, like the processing agricultural
foods and textiles. They do not consider the sustainability of capital
investment on businesses with a higher demand on knowledgeable qualities,
which are undoubtedly another source of productivity to increase the
diversity of commercial profits for the consolidation of GNP.
The “Three Rural Issues” reflect the incapability of PRC Government in
settling the surplus agricultural labors with appropriate institutional supports
in the provision of commercial or industrial employments. Not only does
China find it difficult to maintain the livelihood of the established agricultural
population for the sake of guaranteeing stable food resources, the rural-to-
4
The Research Center of China Remin University, “An Analysis & Anticipation on the Macro-
Economy of China: 2008-2009 – A Deep Level of Decline in China’s Economy”, Beijing, China
Remin Publishing Company Limited, 1st
Edition in March 2009.
5

6. urban migrants are not efficiently absorbed by the enterprises to conduct
industrial inventions. The agricultural provinces undergo a trend of
contraction in scale and a decline in harvest quality. The PRC Government
provides no room for these post-farmers to establish civic enterprises with
sufficient grants and assistances. Thus, people in agricultural provinces are
encountering the state of dilemma. The distribution of income remains
unequal and unbalanced.
According to the analysis by the scholarly publication “Reflection &
Innovation – A Research on the Political & Economic Development of China in the
Period of Transformation” by Economic Science Press, the agricultural
productivity of China fails to cope with the demand of mass food processing
based on the mode of plantation farming. This is attributed to the insufficient
capital support from either the banking institutions or the provincial
government to finance the mechanization of sowing, cultivation and
harvesting techniques. Principally speaking, the maintenance of agriculture
helps maintain the wholesome industrial development of urban cities in
China. The contraction of agricultural scales reduces the possibility of urban
enterprises in getting rewards from the exchange of food products with
foreign traders. A greater sum of cost is spent on the purchase of raw food
harvest for the operation of food-processing businesses. The insufficiency of
agricultural harvests, to a large extent, causes a great pressure on the
expenditure of bourgeoisie class of China, which reduces their incentives in
persisting with consuming habits. Industrial workers in the late-developed
provinces are the direct group of people to suffer from the contraction of
national agriculture, as their labor wages are minimized to balance with the
increased expenditure on raw materials.
Both civic and private enterprises are not easily assigned with foreign
direct investments, as most of them are lack of personnel network in the
political field. The entrepreneurs strictly depend on the decisions by the
Central Minister of Commerce to fulfill the tasks of foreign trades. Even
though the PRC Government gives favor to the foreign entrepreneurs with
keen interests in establishing industries in internal provinces, a great majority
of Chinese citizens only survive beyond the laboring strata of operation and
production. They are not yet given any opportunities to climb upon the social
ladder and occupy a comparatively greater portion of tertiary demography
with managerial, incorporative or entrepreneurial talents as majority.
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7. Sometimes, due to their long-term deficit in trade, collapse or disintegration
of civic and private enterprises occasionally happened. This results in the
emergence of “bad debts” in the rural banking system. Even though the
capital flow, operation and supervision of banks in coastal provinces are
mature, we cannot neglect the negative impact from the immaturity of grant-
and-loan mechanism in the rural banks. The inability of internal provinces in
stimulating internal consumption demands for the entire China is much
attributed to the confusion and stagnation of these self-motivated businesses
in upholding dynamic interactions among various social sectors.
Concerning the monetary issue, the banks in rural provinces have very
little autonomy to decide the targets of loan provision. The evaluation
procedures are much mixed with the elements of economic considerations by
the provincial bureaucrats, as the industrial category for each province is in
accordance with the appointment of tasks by the Central Government. The
provincial banks, despite of a categorization based on agricultural, industrial
and commercial purposes, are very weak in modifying the flow of capital
resources. They dare not to experience a speculation by providing favorable
grants to the civic entrepreneurs for an expansion of their self-motivated
category of avant-garde productions. Sometimes, the rural banks are forced to
provide loans for the national enterprises to settle their trade deficits. They
are reluctant to provide such kind of un-guaranteed assistances, despite their
greater preferences on those rural capitalists or well-to-do landlords to
facilitate the dynamical order of currency, loan, grant and mortgage
transactions. Competitions related to the fluctuation of currency rate among
different banks in China are strictly supervised by the Central Government,
thus their autonomy in coordinating with the deposit and utilization of
foreign direct investment is very low. The rural provinces remain with a very
autocratic and feudalistic economic status because banks hardly obtain
exceptional wealth from the mechanism of interest rates, and not so many
rural Chinese could make profitable breakthroughs with limited capital
reserves that stimulate the increase in provincial GDP.
By observing the fundamental sociological structure of Modern China,
the political privileges exploit the economic development in a periodical
manner. According to the perspective of Wu Zhuang, the economic
development aims to serve the stability and eternity of Communist
governance upon China with proletariats as the major population. The
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8. decision-makers on economic planning pay less attention on the matter of
efficiency and the welfare of people. They mobilize the capital flows mainly
according to the demand of national enterprises in the aspect of production.
Also, the decisions related to subsidies for bourgeoisie entrepreneurs are
highly oriented to the favor of bureaucrats, whereas they consider of settling a
chain of correlated benefits – from national enterprises to national banking
institutions, national stock market, national technological advancements and
national exploitation of mineral reserves. The macro-economy of China
reserves the feudalistic characteristics because investors’ freedom of choice,
freedom of fair exchanges, freedom of participation and freedom of
withdrawal are restricted by their established social privileges. The definition
between public and private ownership is still vague in some of the
developmental categories, and people from the middle class can’t share the
obligation of capitalistic contributions with the prestigious entrepreneurs in
the state level. Yet, despite the solid capacity of capital reserves in PRC
Government, the Chinese people are restricted by the conservative
philosophy of monetary usage, which is the “petty agricultural concept”.
Entrepreneurs are still not courageous enough to uphold a speculative mode
of investment as a kind of anticipation for sustainable rewards. Products from
Western countries still reserve their superiority in terms of a prestigious value
due to the preservation of their trademark attractions. Chinese exports rarely
care about the matter of trademark, as the traders enable themselves to be
simply benefited from the rewards of quantity. They never think about
exceeding the bottom line of price standardization with an upward pursuit.
In fact, the tariff restrictions cause the existence of obstacles on the free
mobilization of investment funds. The national stock market of China still
requests a strict system of evaluation upon the source of capital flow, together
with a cautious observation on the identity of listed investors. Thus, the
macro-economy of China remains with a semi-opened status, whereas there’s
not yet a profound marketing constitution to preserve the justice of
corresponding listing and exchange activities. Cross-provincial
entrepreneurship is still difficultly established due to the sharp institutional
gap between coastal urban cities and internal rural provinces. China puts the
greatest emphasis on the strategic manufacture, such as mineral oil, for the
consolidation of national defense. Less emphasis is put onto the
entrepreneurship of either micro-technology or ecological inventions, as they
can be operated according to the mode of light industry to widen the range of
8

9. profit making. The heavy taxation, imposed by provincial governments,
intensifies the pressure of middle-ranged enterprises in encountering with the
deficit in wholesale and retail. It exploits the civic entrepreneurs from
attempting a keen competition with the national enterprises, which causes a
sharp wealth distinction among prestigious entrepreneurial monopolists,
middle class and common people.
Moreover, the PRC Government does not alert of the importance of
manipulating the contradictions among different interest groups with
political privileges to stimulate their mutual competitions. There is not yet a
profound “law of competition” to ensure the uppermost national enterprises
to be obedient with their mission in terms of providing a quality allocation of
production forces. The evolution of marketing progress is still hindered by the
authoritative gesture of PRC governance, and it is not yet favorable for the
macro economy of China to develop itself with diversified industrial
categories.
The ageing population is also a main issue that affects the upward social
mobility and productive ability of Modern China. Up to the 2000s, the PRC
Government does not abandon the “one-child policy”. It leads to the
insufficiency of adolescent generation in pushing forward the development of
new industrial categories. In the internal rural provinces, the adolescents
occupy only a small portion of demography. They either hardly contribute
efforts to the maintenance of food agriculture, or hardly enforce the
industrialization and commercialization in suburban regions. The sharp
poverty gap between urban and rural provinces still exists, and the internal
rural provinces undergo a trend of socio-economic contraction. Due to the
dominance of provincial bureaucrats, the adolescent generation can hardly
apply for institutional assistances to facilitate their adventurous mean of
private entrepreneurship. Their attempts in borrowing loans from banks are
also hindered as they are prevented from a direct accessibility to the source of
foreign direct investments (FDI), which are highly oriented to the distribution
policy by the Central Government. For the issue of FDI, the foreign
entrepreneurs have to strictly follow the selective economic planning of PRC
government. Thus, their capitals are mostly allocated to the coastal provinces
to assist the strategic manufacture initiated by the prestigious national
enterprises. Without the allowance of PRC Government, the foreign investors
cannot simply explore potential talents and resources from the rural region to
9

10. help them with an establishment and expansion of enterprises with foreign
products as their major sale. Yet, the adolescents are not able to obtain loans
from foreign banks. They haven’t got much freedom to shift their monetary
deposits from national banks to the private banks with a higher degree of self-
autonomy in administering the loan distribution.
The current economic direction of China, which is “Socialist Economy
with Chinese Characteristics”, is still with loopholes. During this period of
adaptation, the PRC Government is not yet sophisticated with their
irresistible duty in terms of surrendering a greater portion of its controlling
power to the competent individuals with exceptional talents in developing
capitalistic economy. The Communist philosophy of “collectivization” still
disorders their mind of forbearance, in which they reserve a suspicious mind
to those self-motivated businesses with an influential fame that overwhelm
the authority of either the Central Government or the national
entrepreneurships. Once these inferior economic concepts remain unchanged,
the macro economy of Modern China remains with an uneven distribution of
economic privileges.
(b)
To resolve the aforesaid problems that negatively affect the national
macro-economic conditions, the PRC Government is foreseen of enhancing
the liberalistic qualities of the brewing capitalism in China. According to the
analysis of Ma Zihui (馬茲輝), it is a must for China to reserve its independent
monetary system despite the emerging trend of linkage in currency rate
among the United States and other well-established capitalistic nations. China
should endeavour to safeguard her authority in re-modifying the macro-
viewed rate of currency exchange, as well as strengthening her capacity in
maintaining wholesome relations with the late-developed capitalistic nations
for a better collaboration in monetary communications. China should
subjectively stimulate the initiatives of entrepreneurs in African, Middle East
or Southeast Asian countries to import the RMB banknotes as a sort of deposit
for sustainable profit making. For sure, this strategy helps strengthen the
capacity of China’s economic allies in encountering with the deflation caused
by the depreciation of American banknotes.
With reference to the aggressive mode of the United States, China should
facilitate a wholesome penetration and expansion of infrastructures in the
10

11. late-developed countries. It is China’s inevitable responsibility to establish
technological facilities in either African Continent or the Middle East regions
as a strategic dependence on their raw materials and mine reserves for
developing pragmatic manufactures under a “mutually beneficial” basis,
which are foreseen of helping citizens of both sides to improve the qualities of
their livelihood. Yet, China can depend on the aforesaid countries to consume
the Chinese-made light products, such as textile, clothes, processing food,
aluminium, construction-based materials and electronic appliances. The late-
developed countries prefer to pay less attention on the matter of
“trademarks”, as what they focus on is more like a drastic improvement of
socio-economic and ecological circumstances for the entire nation.
The PRC Government should increase the rate of labour mobility in
particular inland regions. Some rural provinces with a brewing level of
suburban development, such as Wenzhou, still reserve a system of restriction
upon the household accounts of citizens. The Chinese entrepreneurs in coastal
regions are not only interested in the rural labours to engage in the mass
manufacturing work, but are also interested in leading those highly-educated
adolescents from these late-developed provinces to assist their firms with
managerial affairs due to their demand for a comparatively lower degree of
salary rewards. Yet, if the household responsibility system on the inland
provinces is alternatively loosened, the aforesaid group of adolescents; who
might have received profound university education, be well trained with
business administration skills and obtained commercial qualifications in their
local institutes; can have their personal competencies be equally compared
with talents from the coastal commercial provinces. They can compete for
better intellectual contributions to the consuming, trade, currency and stock
market in China by getting an easier channel of career development from the
coastal incorporations. Prospectively speaking, not only does this measure
increase the general bourgeoisie population of China, the increase in upward
mobility can stimulate the growth of GDP due to the increase in taxation
income from this particular group of industrious intellectuals. This group of
adolescents can play a dominant role in pushing forward the liberation of
intra-provincial marketing development if the restriction of household
responsibility system is diminished. Yet, the diminishment can lead to the
emerging prosperity of stock-market economy in suburban regions, as many
rural activities can be expansively and profitably operated under listing
procedures. Of course, there should be an appropriate judiciary system to
11

12. accommodate the ambitious suburban intellectuals with a smoothing process
of investment and speculation.
The PRC Government should further release privileges of autonomy to
the younger entrepreneurial generation, or to search for collaboration
between national and private enterprises for promoting an eventual
commercialisation of inland economy. There is no doubt that, the private
enterprises are of a greater flexibility in absorbing foreign direct investments
from numerous parts of the world. Yet, talents from foreign countries bring
their capitals, skills and technological assets to both the inland and the coastal
Chinese provinces. This helps stimulate the incentives of Chinese retail
businesses in accommodating the foreign entrepreneurs who have aspirations
in prospering their manufacturing and wholesale scales. To accommodate this
FDI-based policy, the PRC Government is foreseen of granting “The Most
Favourable Treatments” to the foreign investors that strictly require them to
employ Chinese talents for a participation in the planning of commercial
strategies within the senior executive strata. Grants can be institutionally
given to those foreign investors who could finance the Chinese private
enterprises by giving them advanced technologies and skills.
According to the opinion of Li Qing (李青)5
, the PRC Government should
encourage either the national or the private enterprises to establish joint
ventures with foreign entrepreneurs, so that they can collaborate to explore
mining resources from the seabeds of the nearby oceanic regions. The
resources are either for an exploitation of ecological manufactures or an
improvement of socio-economic circumstances in inland rural provinces. Yet,
both the national banks and the foreign banks can jointly provide loans for
these collaborative projects to be developed without institutional pressure
from the PRC government to follow up with a settlement of corresponding
debts due to the required strategic expenditures. Li Qing introduced a
concept of mixing capital called “B.O.T”, which advised the PRC Government
to attract FDI participation in the projects related to Chinese infrastructures in
inland provinces, such as the construction of highways, the extension of
railways, the operation of electrical industries, the distilment of sewage, the
recycle of abandoned materials and the generation of ecological resources. For
5
Li Qing, “Chinese Communist Party: Comprehension and political measures on capitalism and
anti-communization economy”, Beijing, CCP Party History Publishing Company Limited, 1st
Edition
in October 2004. [P.334: Chapter 33 – FDI economy of the new era and the corresponding theoretical
politics of the Party]
12

13. sure, these institutional projects related to the enhancement of Chinese
infrastructures can be made of attracting minor shareholders from the foreign
bourgeoisie to embark their capital investments as a checkmate on the
corresponding developmental processes.
The PRC Government should consider of depending on Western Tibetan
Regions to develop sustainable plantation agriculture, whereas the role of
inland provinces in maintaining food supplies with traditional agriculture
should be further substituted by suburban harvest-processing manufacture.
Drought-resistant farming techniques with topography-free capacity are
foreseen of being promoted and supervised by the Western entrepreneurs.
The consequential harvests from this sort of newly emerged Tibetan
agriculture can be adopted to benefit the food market of both China and the
West. Once the plantation agriculture is prospered, the corresponding
industrial categories, such as ecological power generations, grazing and
advanced textile manufacture, can be operated in a mass-productive scale. For
sure, the surplus rural labours in Western Tibetan Regions can be given with
opportunities in free education and be employed by foreign investors to
administer the wholesale and retail businesses in suburban regions. The PRC
leaders often proclaim the need of integrating national commerce with the
prosperity of scientific and technological education. Subsidies should be
given to the Tibetan intellectuals for an investigation on the potential of
Western mountainous regions for being developed as a coexisting industrial
region – agricultural, manufacturing and retail economies. More institutional
support should be given to those with aspirations in improving the geological
structures of Western mountainous regions, specifically in the aspect of
increasing the fertility and sustainability of soil for agriculture. For some of
the scientific enterprises, shares can be distributed to the internal provinces
and part of their projects can be transformed as private managerial status.
They can exchange natural resources with the neighbouring states of Middle
East Regions according to the quota of export quantities anticipated by the
PRC Government. The profits from such an exchange attempt can be partly
transferred the national banking deposits with governmental initiation for a
sustainable accumulation of interest rates, which are foreseen another major
source of exceptional income that provide more funds for the precision of
developmental techniques.
The PRC Government can consider of employing talents from Europe to
13

14. instruct Chinese entrepreneurs with an aggressive development of
international trademarks for their established productions. The European
instructors focus on training a group of young Chinese intellectuals who can
invent advanced products based on unique creativity and skilfully boost up
the retail values despite the restrictions of Communist-based social hierarchy.
Chen Zhang (陳璋)6
commented that, by obtaining the participation of foreign
entrepreneurs, balance and symmetry of productivity could be attained from
the national demography because each industrial category comprises a
sufficient number of intellectuals to maintain the basic regularities for a
normal economic circulation in China.
To maintain a source of stable income in the suburban provinces, the PRC
Government should provide loans to the coastal entrepreneurs to assist with
the development of “uppermost technological products” there. According to
the analysis of Chen Zhang, due to the influence of techniques, the organic
capital structures in uppermost sectors and the demand for labour cost are
often higher than those in lower sectors7
. Thus, the capital rewards and the
rate of labour productivity will be made higher than the steady expectations
by the PRC bureaucrats with administrative authority in national enterprises.
The manufacture of uppermost technological products requests somebody
with aspirations to persist with experiments and innovations, thus it is
advised that a particular budget of foreign direct investment can be
transferred to such aspect of talent cultivation. Li Qing suggested the
government to establish a consistent policy for a better coordination of
national currency. This provides a clear standard for the import businesses to
pursue legitimate transactions of FDI funds that suits the international norms
of commercial trade. For sure, a wholesome level of communication should be
made between PRC Minister of Commerce and the financial institutions from
other parts of the world because it helps ensure no inappropriate
competitions being made in the process of China’s overseas trade. The
Government should reserve room for some traditional enterprises to obtain
markets by judging from their application of solid techniques.
The PRC Government has an ultimate responsibility to prevent the prices
of housing properties in both coastal and inland provinces from an
6
Chen Zhang and so forth, “A research on the theories, methodologies and issues of macro-economy
in China”, Beijing, Chinese Remin University Press, 1st
Edition in May 2006 [P.326-327: The
characteristics of investment under a composition of imbalanced productivity]
7
(Same as above) [P.342: An experimental research on the basic factors of national deflation in the
recent years]
14

15. uncontrollable rise. Some properties should be reserved with steady prices,
thus the medium-ranged incorporators can have exceptional funds to hire
them for sustainable commercial development. Also, the properties, which are
lent to the foreign enterprises, should comprise a certain kind of favorable
grants. This helps the foreign entrepreneurs reserve more exceptional funds
to employ competent intellectuals and invest more on the large-scaled
developmental projects. The PRC Government should prohibit the Hong
Kong, Macanese and Taiwanese merchants from an over-speculation of
housing prices. Not only does this measure ensure the occupational
adolescents in China to pursue an eventual mode of housing ownership, it
prevents from either a bubbling economic effect or a severe drop of housing
prices, which lead to a chain effect of closure, collapse and unemployment.
There should be a strategic differentiation between government-initiated and
market-oriented properties, so that the privileged entrepreneurs would be
requested to devote a greater sum of rental fee to obtain the spaces according
to their ideals.
For the matter of custom, the PRC Government is committed to request
the United States and other Western countries for an equal condition in
defining the rate of tariffs. The exporters can be confident with China’s ability
in defending a bottom line in terms of maintaining appropriate income from
the corresponding product trades. The PRC Government should pay more
attention on what sorts of “racial industries” we should focus on, as it
requires a set of financial supplements to make these sustainable
opportunities a reality, such as bonds, shares, mortgages, security funds,
future goods and so forth.
The PRC Government should release the control upon people’s
accessibility to the civil affairs related to currency exchange. For sure, a
transparent ordinance should be found to define the standards of either
national or private banking institutions in terms of granting loans to the
entrepreneurial applicants, thus it helps prevent from unnecessary bad debts
and ensure a good prospect of rewards from the loan settlements of the ever-
expanding enterprises.
Liu Yuanchun (劉元春) and Yan Xian (閻衍) made several suggestions in
their publication called “An Analysis & Anticipation on the Macro-Economy of
15

16. China 2006 – 2007”8
. They suggest that, the monopolists, whose national
enterprises dominate most kinds of capital rewards, should surrender their
over-exceeding amount of profits during their stage of entrepreneurial
expansion. Liu Yuanchun and Yan Xian indicated that, such a transferal of
expenditure is an advantageous measure to change the overwhelming
amount of savings in part of the monopolistic enterprises, as well as re-
modifying the phenomenon that the rate of increase in residents’ income is
lower than the pace of GDP growth. Liu and Yan urge for a breakthrough on
the administrative monopolization in diversified industrial categories. This
encourages a greater sum of civic enterprises to penetrate their influences into
these categories under the guidance of marketing orientation. For sure, an
elimination of monopolization by national enterprises can further enhance the
overall quality of Chinese investment. It is an inevitable trend to introduce
national enterprises with the concept of “wealth equalitarianism”. The
national entrepreneurship is requested to survive with the global marketing
principles, thus they have to compete for overseas development and
popularize their trademarks. Yet, the national enterprises ought to encounter
the challenges from the normal capital flow among various listing sectors in
the global marketing scene, specifically in the aspect of investment
reallocation according to the macro-viewed coordination of currency cycle.
The PRC Government has to invest more capital on the improvement of
infrastructures in rural provinces. Farmers’ income standard should be
upgraded to an appropriate level by providing them with subsidies to operate
tourism-based retail businesses. The extra surplus from the established
national investments can be institutionally diverted to the implementation of
“agricultural consumption” policy, which encourage the late developed
countries in Southeast, Middle East or African countries to purchase raw
harvests from China in a mediate price level. Facilitated by such an
“agricultural consumption” policy, the flow of visitors from coastal provinces
or foreign countries would increase due to many countries’ eagerness for
getting less expensive food resources and establishing their business linkages
with the suburban capitalists. Moreover, the PRC Government should search
for a specification of industrial roles among various provinces, as well as
preventing the heavy and strategic manufacturing industry from an over-
inclination to the coastal commercial provinces. In fact, the Western Tibetan
8
The Economic Research Centre, Chinese Remin University, “An Analysis & Anticipation on the
Macro-Economy of China in 2006 - 2007”, Beijing, Chinese Remin University, 1st
Edition in March
2007. [P.24: Section 7 – Suggestions for the Macro-economic Policies in 2007]
16

17. Regions are of potentials in operating the production related to vehicles,
construction-used facilities and engines. Thus, with a perfect scientific and
technological education policy as substitutes, the PRC Government can
thoroughly utilize the rural and suburban intellectuals to increase the
attraction of late-developed inland provinces in becoming the industrial
villages. Yang Tianyu (楊天宇), another scholar from the Economic Research
Centre of Chinese Remin University, urges the need of the PRC Government
to eliminate the existing institutional evaluation system on income per citizen
in all sorts of provinces due to its low efficiency9
. By inserting no restraints for
attaching citizens’ income to the distribution of job hierarchy; well-to-do and
educated citizens in inland provinces, despite their household origins, could
search for an upward endeavor by increasing their social capitals. They
should be ensured with a great level of flexibility to initiate a self-motivated
level of adjustment on the mechanism of marketing operation in China.
According to the analysis of Yu Chunhai (于春海), the PRC Government
has to pay extra attention on the possible crisis of China’s “comparative
advantages” due to the increase in national import cost10
. Despite the
economic recession in the West, the American or European traders still
consider China as their easiest channel to either merchandize their unique
products or to promote a collaborative manufacture with more participation
from the Chinese community. By deducting the import restrictions and
offering favorable grants for China’s import partners, the foreign countries
will create a greater dependence on China to expand the tertiary economic
categories, specifically in the aspect of service and retail careers. Yet, the PRC
Government should not focus too much on the refund of export tax and the
provision of export allowance. It should realize that, an over-emphasis on the
creation of advantages for China’s export would, adversely speaking,
discourage potential Chinese enterprises from conducting local scientific or
technological inventions. Due to the great attraction from the criteria of
overseas development, the national knowledge and techniques might
undergo a brain drain because the corresponding talents prefer to shift their
businesses outwardly. The PRC Government should uphold a system of
acknowledging those civic entrepreneurs with aspirations to globally
9
The Economic Research Centre, Chinese Remin University, “An Analysis & Anticipation on the
Macro-Economy of China in 2006 - 2007”, Beijing, Chinese Remin University, 1st
Edition in March
2007. [P.119: Non-restrictive policy on citizens’ income and the low efficiency of positional duty in the
aspect of governmental income redistribution]
10
(Same as above) [P.147: Problems and suggested adjustments on the outward strategy of
industrialization based on the advantages of labor cost]
17

18. demonstrate the local advantages of China in the aspect of scientific and
technological inventions, as well as liberating the information that enables
enterprises from China and the West to communicate for improvements in the
efficiency of manufacture. Similar to what Yu Chunhai said, there should be
an eventual perfection on the political circumstances with a protection of
intellectual property rights11
. By such a civic respect to the concept of
originality, it helps strengthen the ability of capitalistic products to absorb a
higher degree of FDI-based technological elements. For sure, a promotion of
Sino-foreign multi-lateral communications helps China establish an image of
liberal trade, so that the civic enterprises can conveniently obtain skills,
technologies and techniques from foreign enterprises with institutional
coordination by the governmental level in trade conferences.
The PRC Government should consider a digitalization of FDI-related
economic activities, so that the civic enterprises from inland provinces can
thoroughly utilize the platform of computer network to transcend the
household restrictions, accumulate foreign personnel linkages and collect
funds from the foreign direct investments. In fact, the light products can
depend on the flexible flow of computer network to obtain profits from the
logistic processes, which saves much cost in terms of connection speed and
direct contacts. Network economy is an essential channel for China to
popularize the trademarks of national, civic and private enterprises; as the
promotion require comparatively less material-consuming methods, such as
expositional functions, to raise widespread awareness on particular products.
Also, the coverage of such information technology is extraordinarily broad, in
which the shareholders from numerous parts of the world can gather in the
virtual reality during the same occasion and bid for the corresponding
profitable listings. For sure, the rural enterprises can depend on this media to
make breakthrough upon the commercial monopolization of coastal
enterprises. This is because; the manifestation of computer network for an
increase in capital rewards does not proportionately correspond with how
many privileges he/she obtains within the PRC political strata. Marketing
gimmicks will be the only sort of decisive concept that helps particular
enterprises to subscribe boundless clients. For sure, the limited democratic
status of Mainland China obstructs enterprises from an absolutely free
connection with the Western world. However, to cope with the trend of
China’s WTO entry, the PRC Government should take into consideration on
11
(Same as above) [P.154]
18

19. exceptional cases, for its inevitable trust on the civic enterprises to strive for a
broader level of capital and investment flow all over the Chinese Continent
and the overseas countries.
The PRC Government should have a greater aspiration of pursuing
“capital-intensive” industry apart from its adaptability to the labor-intensive
module. Productivity is boosted up according to the principle of “cost
effectiveness”, thus manufacturers in Mainland China should pursue a liberal
route of searching for diversified sources of capital entry, instead of a rigid
and conservative persistence on the quantity of labor input with proportional
outcome. Under a profound judiciary system of supervision, the PRC
Government could grasp media platforms from neighboring provinces to
publicly encourage citizens to support civic enterprises with their listing
collection of capital funds. Once the information is freely accessed, the citizens
will not be that ignorant about their possibility to create wealth and climb up
the social ladder of entrepreneurship. “Capital-intensive” module is a very
effective mean of consolidating particular firms’ social and demographic
networking ability, as it is also a symbol to prove how progressive particular
enterprises are in terms of making a more unlimited scale of expansion. By
engaging in the “capital-intensive” operation, the national, civic, private and
Sino-foreign enterprises invisibly push forward the eventual liberalization of
marketing economy in the proletariat regions. This is because, rural citizens
can proceed to rural bank branches, make breakthrough upon the hierarchical
restrictions and apply for a listing asset with an equal identity. For sure, the
PRC Government has to keep refusing an increase in RMB values because it
prevents from a domino effect of bankruptcy among citizens, banks and
financial institutions.
To resolve the loopholes of China’s stock market in ensuring rewards
from a unconditional support to the prestigious national enterprises,
“recommendation guarantee-ship” should be introduced that enables a strict
evaluation of released information and stored / deposit data; in which the
guarantors from national enterprises can preserve their professional
reputation when categorizing and redistributing their created shares to the
wealth-holding community. To better promote an investment circumstance of
“mixing-capital national entrepreneurship” with smoother publicity of
information, the PRC Security Exchange Committee should be assigned with
authority to issue “Evaluation Agenda” and encourage thorough revisions on
19

20. the application procedures of share listing by national enterprises. At the
same time, a relaxing policy should be adopted to the similar cases initiated
by private and civic enterprises. Concerning a transparent marketing ideology
on fair competitiveness, the energy-supply enterprises in China have to be
carefully selected by the Central Government and thoroughly comprehended
by the intellectual citizens. Their share-listing procedures should depend on
applied quotas and loan issues as a mean of restraining the amount of
overdue and non-profitable supplies, whereas the greater portion of
rewarding rate should not be higher than the loan bonds.
The PRC Government should endeavour to control the total quantity of
over-speculating incorporations, as it is needed to prevent them from circling
and regulating an overwhelming sum of capital that might result in an
abnormal growth of share prices without concreted publicity. The standards
of evaluation should be in accordance with the concrete reflection of
advantages and loopholes as a mean of strengthening the creditability of
speculating incorporations on a coordination of profit-and-loss. For sure, to
better prevent the monopolization of a particular share, the effectiveness of
mobilized shares have to be strengthened, which help prevent the mobilized
shares from being controlled by personnel coherences. The PRC Commission
on Verification and Share Issue should be assigned with sufficient authority
to enable a publication of shareholder lists onto the Internet of China Security
Bond Supervision Council.
By coping with the tendency of macro-economic liberalization, there
should be a genuine political tolerance on the competition among different
institutional bodies. Conceptually speaking, the emphasis on private domain
needs to counterbalance with the absolute definition of public domain. It
means, even the PRC Government is aspired to enforce a particular economic
policy that covers all national and regional institutions, it should also
compromise with some piecemeal individuals if they’re found with potentials
of adding vividness to the progress of attracting foreign direct investments in
the stock-market popularization. A respect to the legitimacy of private capital
manifestation, with a great degree of autonomy, is an essential criteria that
strengthens the confidence of foreign capitalistic world, as all the judiciary
agreements and protections are implemented according to the institutional
norms. For sure, a strict system that prohibits corruptions between
bureaucracy and national entrepreneurship is foreseen to be in effective. This
20

21. helps minimize the risk of private-entrepreneurship applicants from being
unable to settle the debts that abnormally cause the bankruptcy of banking
institutions in the inland provinces. Scholars from the publication called
“Reflection & Innovation – A Research on the Political & Economic Development of
China in the Period of Transformation” suggested that, a mechanism of social
welfare protection should be established that covers the entire national
system12
. By issuing unemployment insurance, retirement insurance, medical
insurance and so forth, the PRC Government can re-adjust the difference of
income between rural and urban provinces, as well as guaranteeing owners
and labors from private enterprises to be compensated and given another
platform of survival once crises occur in their businesses.
All in all, the PRC Government should eliminate the irrational conditions
of monopolization for the sake of achieving a nearly perfect status of
equalitarianism. The wholesome and balanced operation of macro-economy
in Modern China depends on a just system of marketing reformations that
ensures adequate rights for people’s investments, with modern financial,
monetary, accounting, grant-and-loan, welfare, insurance, right-of-appeal and
FDI ordinances as institutional complementation.
(7105 words)
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12
Li Ping, Wu Jianqi, Yang Weiling, Du Qi and so forth, “Reflection & Innovation – A Research on
the Political & Economic Development of China in the Period of Transformation”, Beijing, Science
Economic Press, 1st
Edition of March 2006. [P.341: 16.4 Measures to adjust the differences of income]
21

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