The 16th “China and the World Economy” annual meeting cohosted by the National Bureau of Economic Research (NBER), the National School of Development (NSD) of Peking University and the China Center for Economic Research (CCER) was held in Wanzhong building of NSD from June the 26th to the June 28th , 2014.
The meeting consisted of eight sessions including “financial markets”, “intergenerational transfer”, “international trade”, “international finance I”, “international finance II”, “the market and policies”, “retirement” and “higher education”. Several experts and scholars from the NBER attended the meeting, including Professor Pol Antras, Nathaniel Hendren and Bridget T. Long from Harvard University; Professor Alan L. Gustman from Dartmouth college; Professor Shang-jin Wei from Columbia University; Professor Pierre-Olivier Gourinchas from the University of California, Berkley; Professor Susan Dynarski from the University of Michigan; Professor Menzie Chinn from the University of Wisconsin; Professor Rene Stulz from Ohio State University and Professor Joshua Aizenma from the University of Southern California. Chinese experts included Professor Weifang Min, former secretary of the party committee of PKU, Professor Yao Yang, Dean of NSD, Professor Yiping Huang and Yaohui Zhao, Assistant Deans of NSD and Professor. Chong-en Bai, Dean of the Economics Department of the School of Economics and Management, Tsinghua University.
On behalf of NSD, Professor Yang Yao expressed warm welcome to all the guests presented in the morning of June, 26th. The NBER-CCER annual meeting, which has been held for sixteen years, is a great academic tradition, Professor Yao said, it is also important for the exchanges between Chinese and US economists. Therefore, both sides should make full use of this platform to strengthen academic exchanges and mutual understanding. On behalf of NBER, Professor Shang-jin Wei expressed his gratitude to NSD for such a great platform. It is the common desire for scholars from the two countries to increase exchanges, said Professor Wei, because it not only facilitates the development of economics and can also reduce, to some extent, the frictions between China and the US in terms of policy making.
There were three speakers in the “financial market” session. Professor Rene Stulz from Ohio State University evaluated the performance in the financial crisis of the major banks with assets of more than 50 billion dollars in 31 countries. It turned out that the performance was not directly related to the regulation of the governments, which means that current regulation can not help banks to fend off global financial risks. Professor Joshua Aizenman from University of Southern California came with a new method to assess the value of the property market in an open economy. He believed that the current account and credit growth can have a huge impact on the value of real estate market, and the previous price fluctuation is likely to drive the market price to the same direction. It is pointed out by Professor Yiping Huang from NSD that financial repression has damaged real economy tremendously and financial reform is urgently needed in China. After the financial liberalization, the opening of capital account will result in capital outflow. While with China’s market economy getting mature, more and more capital will flow in. Therefore, there will not be large-scale capital outflow.
The second session was “intergenerational transfer” with three speakers. Professor Nathaniel Hendren from Harvard University found out that there are differences between the transfers in different regions in the US. Therefore, the US is not necessarily “a land of opportunity” for the poor. According to the study of Professor Chih Ming Tan from the University of North Dakota, health conditions of the previous generation can exert important influence on the health and cognition of the next, and gene may not play the major role. After analyzing the CHARLS statistics, Associate Professor Xiaoyan Lei Lei from NSD pointed out that education level of parents will also affect that of their children. Promoting compulsory education can help to alleviate this effect, while promoting higher education will do the opposite.
The first session on the afternoon of the 26th was “international trade” and there were three speakers. Professor Pol Antras from Harvard University pointed out that with multinational trade becoming more and more common, it is crucial to have secured and effective multinational contracts. The WTO framework of agreements can hardly regulate various forms of trade. In addition, a country will not necessarily benefit if it increases the enforcement of contracts unilaterally. Professor Shang-jin Wei from University of Columbia challenged the traditional idea that export-oriented enterprises are more likely to fail. He believed that even considering the spillover effect and learning effect, these enterprises will not necessarily lose competitiveness, especially if they have the first mover advantage and loyal customers. Professor Miaojie Yu from the NSD found that lower tariffs will increase the varieties of goods for enterprises with good performance, but it will be the opposite for enterprises with bad performance. Considering that most of the export-oriented companies in China do not perform well, it applies to the second case.
The second session on the afternoon of the 26th was about “international finance” with three speakers. Professor Menzie Chinn from University of Wisconsin found that the traditional “impossible triangle” theory was inconsistent with the facts if a large sample of countries was analyzed. The theory believes that free capital flow, exchange rate stability and the independence of monetary policy are not compatible. In fact, international reserves have made the triangle possible in some developing countries. Professor Yang Yao from the NSD gave a new explanation of the “capital allocation puzzle”. It is traditionally believed that capital should flow from developed countries to developing countries where capital marginal returns are higher, but in fact it is the opposite and we have seen that a large capital flow from China to the US. Professor Yao believes it is because that countries with faster economic growth typically have lower current account deficits and therefore have enough capital for lending. Associate Professor Jianguo Xu from NSD expressed his opinions about the two key factors which decide the ROI of China’s A share market. He believes that, unlike the mature stock markets in countries like the US, the ROI of China’s stock market is reflected less by fundamental factors and more by speculation.
The first session in the morning of the 27th was “international finance” and there were two speakers. Professor Pierre-Olivier Gourinchas from University of California, Berkley believed that more and more people want “riskless assets” due to the financial crisis. Now the US is the largest supplier of such assets while China is the largest demand side. If China wants to become a supplier, the Chinese government needs to have financial strength and various monetary policies. Professor Jiandong Ju from Tsinghua SEM pointed out that the large scale migration of labor force in China can explain why the real exchange rate in China is different from the figure predicted by the Balassa-Samuelson model. After the rural labor force has moved into cities, there is abundant or even surplus labor force in urban areas. Therefore, the wages of low-skilled workers are decreased, triggering a chain reaction of consequences, including large manufacturing exports and the surplus of the current account.
The second session was about “market and policies” with three speakers. It was pointed out by Professor Bruce Weinberg from Ohio State University that adopting policies to attract talent does not necessarily stimulate academic development. Rather, policies encouraging competition is a better option. According to Professor Jin Li from the University of Oxford, local officials have motives to prevent the media from covering negative news about the state-owned enterprises, since their promotion is closely related to the performance of these enterprises. Professor Chong-en Bai from Tsinghua SEM believed that investment in Chin’s infrastructure is already very high and is still growing. This growth is based on low lending rates and low salaries. Interest rate distortion can stimulate economic growth if there is abundant labor force. If the supply of labor force decreases, however, its crowding-out effect on the loans of private sector will reduce the social welfare.
The first session in the morning of the 28th was about “retirement” with three speakers. Professor Alan L. Gustman from Dartmouth College pointed out that the government does not take into account who will benefit most from the pension scheme. Since wealthy people lead a healthier and longer life, they can receive a larger pension than the poor. After analyzing the statistics of CHARLS, Professor Yaohui Zhao from the NSD came to the conclusion that China will soon be facing a serious issue of an aging population and it will be difficult for the government to address this issue by increasing the retirement age. Therefore, stopping the provision of pensions after a certain age threshold may be an option. Professor Bo Zhao from NSD believed that “house for pensions” scheme will be a more practical way. In addition, the pressure of retirement, change of pension policy and the fluctuation are highly endogenous.
The second session in the morning of the 28th was on “higher education” with three speakers. Professor Bridget T. Long analyzed the pros and cons of several policies adopted by the US aimed at helping poor students with their higher education. It turns out that since families will adjust their savings accordingly, the policies will not necessarily help those who really need help. Professor Susan Dynarski from University of Michigan gave us a big picture of the education loan in the US and she found that students receiving the loans are getting younger and younger, and the total amount of education loans keeps increasing. Associate Professor Binzhen Wu from Tsinghua SEM studied how the family background of university students can affect their career choice. She believed that what they major in and their academic performance are not directly related to the students’ choice of working in governments. Rather, the key factors are the political connections of their family members and their financial status.