Chapter 13 Chapter 12 Chinese Market: Learning from the West and Reflecting on the West

Is the problem in the market due to insufficient "private ownership"?China's 30-year economic development has undoubtedly benefited from reform and opening up, and from marketization. Although some people say that the international financial crisis has slapped the free market economy, the problems and crises are probably more at the application level. rather than the market economy itself.For China, many problems exposed may not be the problem of market failure, but more of the problem of insufficient market. Liu Wei: It is possible.I think the crisis may challenge the market today.In this regard, I wrote an article specifically and listed five aspects. In fact, it shows that the purer private ownership may not be able to solve the problem.When economic liberalization was popular some time ago, it was believed that the problems in the market were due to the lack of pure private ownership and unclear property rights, so there were market transaction costs.Many theories support this view, that is, clear property rights can solve the problem of market failure.But now it seems that under the highly autonomous market system in the West, there are indeed contradictions between private ownership and socialized production, and blind spontaneity is inevitable.This tells people that pure marketization in China may not be able to build a healthy market, so China's marketization reform should not follow the path of pure privatization.

However, the direction of marketization cannot be denied from this, because no social civilization of human beings has been formed outside the market.This is a big problem.That is to say, problems can also arise when there is a high degree of liberalization. After the introduction of the "Financial Services Modernization Act" in 1999, in the face of international financial chaos, Stiglitz warned in his book "The Noisy 90s" in 2002: If the international economic and financial circles do not make changes, the future A bigger crisis is hard to avoid, and it can be said that it is a prophecy!Stiglitz also advocated economic freedom, but he emphasized that freedom must be subject to strict institutional constraints.He said at the time that if the constraints are abandoned, this freedom will have no margin, and so-called subprime mortgages and bad debts will appear.

Therefore, from the first aspect, the huge impact of the crisis has made people have a clearer understanding of the myth of privatization, but you cannot shake marketization by this.The crisis also shows that the excessive spontaneity of competition will definitely lead to a crisis, it will not self-converge, and it will not spontaneously and dispersedly converge into a harmonious and balanced state like the "invisible hand".You can fight against excessive spontaneity, but you cannot fight against competition. The problem is not competition, but excessive dispersion.In the second aspect, China's decentralized situation also exists, such as the unsatisfactory industrial organization.Of course, China's competition is not excessive but insufficient, which is different from the West.

The government allocates too many resources.Mr. Mao, the current unexpected economic crisis has swept the world in a blink of an eye. Based on your observation and thinking, where is the problem? Mao Yushi: It should be said that different countries have different problems and reasons. The situation in China has external and internal reasons.The external reason is that domestic orders have decreased due to the recession in developed countries; the internal reason is that the economic model with low labor and low environmental costs needs to be adjusted urgently, which belongs to the underestimation of prices.This is the general reason.The specific reasons must be micro-analyzed to individual behavior.Nothing is perfect in the world, and there are many problems in the market economy, which need to be solved according to practical problems.There are differences between Chinese and foreign issues. China is more concerned with the problem of "insufficient market", while Europe and the United States are concerned with the problem of "market failure".The reason why China's market is not enough is because the market allocates too few resources or the government allocates too many resources. Like the current monopoly state-owned enterprises, the government allocates resources. This is the result of long-term accumulation.

After 30 years of reform, the remnants of the planned economic system are still there.The macroeconomy is the aggregate economy, and the microeconomy is the individual economy.Macroeconomic theory originated from Keynes, and there was no theory of macroeconomics in the period of Adam Smith and Marshall. This is a major contribution of Keynes.Macroscopic laws are not exactly the same as microscopic laws.The macro is the total amount, and the micro is to achieve supply balance through price adjustments.Aggregate demand and aggregate supply cannot be balanced, which creates various macro problems.

The best state of microcosm is: the price is free, and any kind of commodity can balance supply and demand.However, the supply and demand of each micro-commodity are balanced, but the total supply and total demand cannot be balanced. There is also the problem of converting savings into investment.Another example is the issue of environmental protection, which is originally a micro-level issue, but reflected in the macro-level, it will affect the overall environment. The current crisis exists on both the micro and macro levels.First of all, there is a problem with prices. The state can intervene in the prices of public transportation and electricity, but it must not intervene in the prices of meat and grain. This is against the laws of the market economy, and price controls must be liberalized.In the current thinking of the government, the government relies on the market on the one hand and intervenes in the market on the other hand.Wealth can only be produced by relying on the market, and wealth cannot be produced without the market; only by intervening in the market can power be used when the market fails.So both are needed.The intervention of power should be based on the premise of respecting the market.Some time ago, Mr. Wu Jinglian also expressed his opinion, to the effect that some officials think that they can do anything and everything with power, and even ignore the laws of the market and the laws of nature and try to "control" the market.This kind of thinking is not formed in a day. Although there is a difference between "control" and "intervention", it may be just such a problem that is worrying for China in the current crisis.Most of the government's "4 trillion yuan" investment plan is invested in infrastructure rather than healthcare, education, housing and other areas of people's livelihood. Naturally, there is also a lack of understanding of the market.

The approach of the United States seems to be "more socialist than socialism".Mr. Jiang, you have been researching and promoting the legal regulation of the market. Under the current situation where the economy has been greatly impacted, how can the law reasonably play its due role? Jiang Ping: This question is "the benevolent sees benevolence, and the wise sees wisdom".For example, is the "Labor Contract Law" that is currently under discussion appropriate to be promulgated at this period?As far as I know, there are now two very different views.Some economists are negative, thinking that it is out of date under China's current situation and has hindered economic development.However, my opinion is that the law should still have a basic criterion. With the development of the economy, the level of labor protection in China must be improved, and it cannot stay at the original level.Some people say that the conditions for labor protection are too high.It is true that there may be some places that do not reflect the regulations, but if you think it is too advanced in the context of the times and not suitable for China's national conditions, I disagree.Because, there is always a basic judgment: whether to strengthen the protection of workers, and what level of protection is more appropriate.In general, this "Labor Contract Law" is a typical case of the mutual promotion of law and economy.Some people think that the current "Labor Contract Law" has caused a large number of business closures and increased unemployment; but from the analysis of international and domestic economic factors, it may be difficult to say that the "Labor Contract Law" is the main reason.

The "Labor Contract Law" served as an important signal of the progress of the rule of law in China, but for some enterprises, it became "the last straw that broke the camel's back."For example, is the Anti-Monopoly Law ahead of its time?This is also a problem.The order of international competition requires an "Anti-Monopoly Law" as an "economic constitution" to protect the economic interests of the country, which is beyond reproach.However, there are some places where the regulations are rather vague and not very specific, which is possible.Legislation itself has conflicts of interests among multiple parties, and it is necessary to balance various interests.The spread of the international financial crisis has caused Western countries to use macro-control methods to manage their economies. Therefore, some people now say that the US approach seems to be "more socialist than socialism."This question is also a test for those of us who practice law. The first and second half of 2008 saw a marked shift, or a fundamental shift, in perceptions and practices about the economy.Under such circumstances, some people think that the current national macro-control is quite strong, and the successive executive meetings of the State Council have made specific arrangements for the top ten industries.The state imposes great restrictions on industries, and the policies that used to be flexible are now very rigid. For example, in the shipbuilding industry, those below a certain number of tons cannot be built or approved.

This indeed raises a question for legal practitioners: how should we understand "public rights" and "private rights"?Are the laws of the market economy we talked about outdated?This actually reflects two laws, that is, to save the economy, there are only two options: macro-control and market mechanisms, or the use of the state and the market.Now there are more elements that need to strengthen macro-control, and the rational use of public power is important; after a while, there will be no need for so much regulation, and more elements need to play the role of market mechanisms, and it will become important to emphasize the protection of private rights.The market economy should still be the mainstream. If there is no market mechanism and all resources are allocated by the state, it will have counterproductive effects.The combination of the two can correctly reflect the fundamental problem of the entire market economy law: the market mechanism should still be the basis, and the autonomy of market economy entities in the development must first be guaranteed.In the process of realizing autonomy, the emphases of each period must be different, but both are important means for the country to govern the economy.For example, last year, some people thought that the predictability of the economy in the first half of the year might be a little less predictable, so in the second half of the year, the state's efforts in regulation and control were significantly increased.

Which is the priority between macro-control and market economic entities?In the early years, when you talked with Professor Wu Jinglian, he believed that the authority of macro-control should be legally determined, stipulating what should be controlled by macro-control and which power should be returned to the market; you also pointed out at that time that macro-control represents Public rights and market economic subjects represent private rights, and private rights are the rights and purposes of the market economy, so the priority rights of market economic subjects must be recognized.What is the order of private and public rights?

Jiang Ping: First of all, we need to determine a principle, that is, what kind of approval principles should the state master in the field of operation.In law, it is mainly manifested in the "Administrative Licensing Law".The director of the Legislative Affairs Office of the State Council made a special point of view in his report, that is: when the market economy can solve this problem by itself, there is no need for the state to stipulate it, only the contract between the parties is required.When there are difficulties in the agreement between the parties, an intermediary organization can solve the problem by a third party.Only when neither can be resolved can the state be asked to intervene.This establishes a very important "syllogism" principle: what cannot be resolved by private rights, shall be resolved by social power; what cannot be resolved by social power, shall be resolved by public power.Public power comes last.The category of social power is now the weakest link in our law.Social power comes from social groups and organizations, but many of our current social groups are public power in disguise, and in fact become an extension of public power. Western countries have great social power, especially in groups involving public interests such as environmental protection and health.We are not doing enough now, we need to continue to expand.This is also the goal we are striving for, and we should do it towards the goal.Public power should be exercised last. At the juncture of the international financial crisis, countries finally couldn't hold back and stepped up government intervention one after another.There is a problem here. In addition to clarifying the authority and operating procedures of macro-control in legal form, should corresponding compensation be made for corporate losses caused by macro-related reasons? Jiang Ping: In the case of economic crisis, macro-control has caused difficulties and losses to private enterprises, some of which need compensation, and some do not, and a boundary must be drawn.The State Council has the right to formulate regulations, as long as they appear in the form of regulations, such as certain investment quotas with clear standards, they must be implemented in accordance with these regulations.There are no laws and regulations, so there is no way to catch up with macro-control.In the past, it was a general regulation. You can apply to the local government for how many tons of ships you want to build, but now they are all rejected. What should I do about this problem?Should the state bear the responsibility for compensation?It's hard to say, because it's one of the means of state regulation. Another category is the abuse of local government power. One day a project is approved, but the next day it is rejected. Such examples emerge in endlessly.I came across a case where the original stadium in a certain city was demolished to build an Olympic stadium. After the construction was approved, a leader came to inspect and thought the gate was too narrow, the parking lot was too small, and lacked style, so he ordered the demolition.This is troublesome. It is a shopping street with many shops, causing the merchants to lose hundreds of millions of yuan.Previously, there was only a verbal notice to demolish it within a time limit, but later it was not demolished due to protests. It took more than a year of tossing.How should merchant losses be calculated?I brought it up to the government, and the government thought it was necessary for the Olympic Games.If demolition and construction are left to individual leaders like this, if there is no legal basis, compensation should be given to private business owners.In addition, don't take what happened at a certain stage of history as the general law of law.It is still necessary to distinguish between different stages and different periods. For example, when the international financial crisis is happening now, the country needs to urgently control the situation and allocate 4 trillion yuan to rescue the market. This is an emergency measure and should be.However, it cannot be used as a basis to formulate long-term legal norms. Therefore, I don't think that policies made under special circumstances can be regarded as general laws.The rules of the market itself will be flexible and changed at this time. Some people ask, after the economy recovers, will the market return to its original state? Jiang Ping: These are actually two issues: the freedom and order of the market economy.From the perspective of legislation, the two most basic points are that the market must be both free and orderly.Without freedom, the market economy has no foundation, let alone vitality, and without order there will be chaos.We must find the difference between us and Western countries in terms of freedom and order.From the very beginning, Western countries have been known for their free economy. For example, the Westward Movement in the United States encouraged private development and gave them a great degree of freedom.What was lacking at that time was order—some time ago, I read "Memoirs of Rockefeller" (David Rockefeller, chairman of Chase Bank), which was recommended by many people.At that time, the United States had only freedom and no market order. After the economic crisis in 1929, the market order was gradually regulated, and various laws were promulgated (more than 150 laws were promulgated in one year, including more than 30 financial laws), so the market order in the United States is now very perfect. So, what about China's current laws governing market order?According to Li Zibin, president of the China Association of Small and Medium Enterprises, according to the recently published materials, it ranks more than 120 in the world.This shows that China's economic development is one of the best, but the market order is very backward, and the problems of product quality are endless.The Sanlu incident has attracted the attention of the central government, including the revision of the "Product Quality Law" and the introduction of the "Anti-Monopoly Law". These competition rules are blank in many places.Therefore, we need to fill in legislation and improve law enforcement.China has transformed from a planned economy. The market economy was neither lawful nor orderly at the beginning. After the market was opened up, there was less freedom. Therefore, the legislation began to focus more on market freedom.For example, the "Intellectual Property Law", "Administrative Licensing Law", "Property Law", "Obligation Law" and so on have been promulgated to give market participants more freedom and to truly reflect and enjoy the rights of market players.But now it is not open enough, such as monopoly industries have not been released.Therefore, to ask how much room for reform there is, I think there are still two issues: market freedom and better order.It is easier to achieve more freedom for the subjects of market competition, but it is relatively difficult to strengthen the supervision and management of order.From this perspective, we still have a lot of room to improve.