Chapter 2 preface

Why should you buy this book about the Chinese economy written by a foreigner who has only been in China for six years, speaks Chinese and has to twist his tongue, and works for a foreign bank with a bad reputation?How much can he know about the Chinese economy?We've seen a lot of this guy!Perhaps when you pick up this book and flip through it, these question marks will flash in your mind-in this preface, I hope to convince you that this is a book worth reading. The achievements of China's economy have attracted worldwide attention, but those of us "economists" who study China's economy have a surprisingly bad reputation.Many of us did not predict the financial crisis in the United States in 2008 and spread to China, nor did we predict that the Chinese economy would rebound quickly in 2009.We are too optimistic when we should be worried, and too pessimistic when we should trust China's ability to restart the engine.Some of us got slammed for advocating the privatization of state-owned enterprises in the 1990s, in many cases dismissing them as just a good name for mass layoffs and management theft of state assets.Economists are often questioned for their fame and reputation, regardless of the life and death of the people, and some of us are even considered commercial, the spokesperson of the companies that pay our salaries.

Perhaps you think the most useless are economists—foreign economists who study the Chinese economy are even more useless.How can a foreigner truly understand an economy as large and complex as China's? The language here is always so difficult to understand. The market economy is mixed with cultural and political flavors, so special, so "Chinese".If these economists spend their time in high-end office buildings and gorgeous hotels, how can he understand what is happening in steamer-like workshops, streetsides, and rural villages?There are no doors.Therefore, there is really no need for another foreign economist to point fingers and tell us how the RMB should be, and it is time to open the market to foreign countries. This week, the Chinese economy is in a cloud.There are so many such economists, you will say, especially foreign economists, a bit overflowing!

If that's what's on your mind right now, I hope you'll read on.I hope to convince you that economics, and the people who do it, are worth a second look; I hope to show you that there are many economists who genuinely want to help people.True economics aims to increase everyone's wealth, fight corruption, call for the rule of law, and care about all the things that matter to the most powerless and powerless in society.Economics should not be christening and icing on the cake for the powerful and rich, but should seek to protect and promote the welfare of everyone, especially the poor.You might think that these are the last things a bank economist is likely to care about.Well, I hope you will give me the chance and I will show you that this is happening.Moreover, I also hope to let you know that there are many foreign economists (some of them are so fluent in Chinese that I will never catch up) who have devoted their lives to studying the Chinese economy.Their opinions are worth listening to.I hope you will be amazed at how complicated and wonderful China's economy, politics and culture are in their eyes.China is unique, but she doesn't have to be mysterious, even if she has a big nose to us.

Simply put, in this book, I hope to discuss some of the most pressing problems facing the Chinese economy today, drawing on the latest research from the world's top and combining with the actual situation I have observed.To borrow a term from Marxism, it may be called the combination of theory and practice.The issues discussed in the book are all about ordinary people - mothers who care about their children's education, men who are eager to keep their jobs to support their families, business managers who are dedicated to developing overseas markets, and honest officials who are concerned about the suffering of the people.I have lived in Shanghai for the past five and a half years, and the organization I work for, Standard Chartered Bank, has given me many good opportunities to conduct in-depth research in various places.From this, I met cotton farmers in Xinjiang, automobile manufacturers in Chongqing, steel workers in Shenyang, medical insurance workers in Ningxia, directors of pharmaceutical companies in Shenzhen, statisticians in Dalian, air-conditioning manufacturers in Ningbo, and underground bank owners in Wenzhou. And many officials from central to local.This book is the product of the combination of the academic research on China that I have read and the living facts that I have seen and heard in my travels in China.I am honored to be here at such an important moment in China's economic development.

I wrote the book in English, and I'm afraid my Chinese is only so-so (the fluent Chinese you see is the excellent work of our translators).But when I was writing, I only had Chinese readers in mind.This book will not be published in English.The purpose of my writing is very simple. I think I am in a good position to combine the most in-depth academic research on the Chinese economy in the world with the actual situation I have seen in China and present it to readers.Think of this book as an introduction to the views of the world's leading economists on many aspects of the Chinese economy. The inspirations from international experience may find solutions to some of the biggest challenges we face today. The applicability of these recommendations is tested realistically.

Each chapter of this book deals with an important issue, and most chapters introduce research by one or two economists in this field or related research.Some chapters talk about what lessons we can draw from economists' analysis and how to apply these experiences to China's practice.Other chapters look at the careful research that economists have done on certain areas of China itself, and what their findings mean for the next steps for policy.There are also separate chapters on the big issues of the moment - the internationalization of the renminbi and the economic stimulus package, which will involve the thinking of us bank economists.

China's economy has achieved tremendous development in the past three decades, although at the same time we have also seen some new problems since the 1990s.But in general, the policies needed to develop the economy in the 1980s and 1990s were actually very simple: open markets, expand trade and investment, encourage private enterprise and innovation, and build the legal system.The general direction - market economy - has been established. Compared with the past, China will need to make more and more difficult choices about what kind of market economy it wants to develop in the next two decades.What role do we want the private sector to play in the economy outside of manufacturing?How can we provide a better healthcare system?How do we deal with trade disputes, if the other country supports companies much less than China?How should we complete the construction of a legal system based on the rule of law under the current political system?The economic theory behind all these questions is not simple, but complex.The devil is in the details, and the specific operation method will always be accompanied by different voices.The purpose of this book is to find the answers to these questions with unbiased, grounded research from the world's brightest minds.

It is my hope that this book will cover some of the greatest challenges facing China today and in the years to come.For example, how fast is China's growth rate today, and how fast will it be in the next ten or twenty years?How much has the living standard of the rural population improved in the past ten years, what else can we do next, and how to improve the efficiency of investment funds?What kind of globalization is best for China in the next decade?How to achieve a really good system?Can the renminbi one day join or even replace the US dollar as the global reserve currency - if this is a long-term goal, what do we need to do in the short term?What's the best strategy for revitalizing an economy that's just been hit by the worst global recession in decades?Do Chinese people really have high savings—where is the key to unleash consumption?

Some of the scholars mentioned in the book have won the Nobel Prize, and some are expected to win the laurels in the future.However, there are also some scholars whose research is very focused on certain areas of China, so you may not be familiar with their names.Don't worry - it's better this way.The problem with this is that most of today's really high-level economists stay away from the spotlight and concentrate on learning.A name you pop off the tongue, or a guy (like me) who is constantly on TV newspapers, usually doesn't make real people.The research work we bank economists do is very simple.Think of us as primary school teachers, and really good economists as college professors.They come from a variety of geographies, because research in their field is widely respected.Later we will explore American, British, French and of course Chinese masterpieces.

As for style, I have two goals.First, I hope to be able to write in a clear way that people who don't understand economics can understand.Many economics articles today are very academic and professional, and it is difficult for people without an economics background to understand the content of the articles (I am often confused too).That's not a problem in itself.You can't expect a book about rocketry to be written like a work of literature.Sometimes economics should be complicated and profound.But in this book, I use plain language. But on the other hand, in today's China, I find that many personal views are masquerading as economic discourses. These authors have not really done in-depth research on modern economic theory, and there are no charts in the writing, and often there is no data.The view seems strong, but lacks strong evidence.Sometimes it is eye-catching at first glance, but there does not seem to be enough practical analysis behind the point of view to support it.Why is this a problem, because science is first based on the careful observational study of evidence, and then a hypothesis can be formed, which can then be tested.The idea that everyone can say a few words is cheap.The best economists are always trying to do something more worthwhile—they come up with hypotheses that stand the test of time.These points are difficult to ignore or deny.Therefore, in the book I will list a large number of evidence to support my contention.These evidences are often presented in the form of diagrams.I hope you don't mind - but to be honest, I find diagrams very useful and extremely convincing.In my world, a chart is worth a thousand words.Every picture can tell you a very convincing story and express a certain "point of view".Economics isn't just about sharing interesting ideas, it's about testing assumptions, proving that some analyzes are wrong, some are right, and some are hard to test.

Ensuring that we do economic research based on data and other evidence can also help us avoid another problem: politicization.I think that's inevitable in some areas, and the RMB issue is obviously one of them.What would otherwise be good economics is overshadowed by politics, sometimes between rich and poor, sometimes international.Personally, if I believe policy choices are bad, I am willing to criticize, whether it is the US government, the Chinese government, or the UK government.I also speak up if I think a policy is unfair to vulnerable groups.This, I believe, is the litmus test of whether an economist is good or bad.It should not be the job of economists to cheer bad policy, no matter who makes it, wherever it is.So when I question a government policy, please remember that I am criticizing a policy, not "China".And please don't assume that I am doing this out of foreign habit.And, I beg you, don't quickly dismiss my point of view just because of the impression that "a foreigner can't understand China" or "he said that because he works for a foreign bank".This is not science.Consider the arguments, ponder the arguments, and see what went wrong. By the way, my humble self was born and raised in the suburbs of London in 1972.I spent my university years in Cambridge, England, and studied English literature (you see, you don't have to go through very advanced training to become an economist).After graduating from university, I worked as a volunteer in Africa for two years. The specific work was to provide development assistance in rural areas, and I was also a child king.As much as I enjoyed experiencing the language and culture, it was too dangerous to stay any longer (machetes and land mines), so I returned to London and continued my MA and PhD.For the past eleven years, I have studied Chinese, devoured Chinese economics at places like Fudan University, and, whenever possible, traveled to every corner of the country to see for myself what is really going on.