Chinese Economist Criticized National Development and Reform Commission
On March 24th the annual meeting of
“China Development Forum 2013” was held in Beijing.
Zhang Weiying, Professor of Economics Department of Peking
University, continuously raised questions at the meeting.
Zhang questioned Zhu Zhixi, vice director,
National Development and Reform Commission (NDRC),
on why the current industrial policy didn’t make
enterprises run better. On the contrary,
it resulted in a series of problems, such as over capacity.
Zhang said: “in the last decade, NDRC only concentrated on
the development, but not the reform.”
Zhang said that recently the photovoltaic industry in China
was facing serious crisis.
The leading company “Suntech Power Holdings” started
In the last decade, the central and local governments provided
a large amount of money to this industry and related companies.
They also gave other support, under the name “industrial policy”.
Zhang believes that “industrial policy” became the leading
cause of corruption.
Feng Xingyuan, deputy director of Bejing Uni-rule Institute
of Economics made comments.
Feng said the current industrial policy strategy is to launch
selective projects, develop them first, later create subsidy projects.
Feng Xingyuan: “For industrial policy, the government
controls resources and gives investment guidelines.
Sometime the government makes investment,
sometimes supports other firms to invest.
The government controls many funds; we call it “rent-setting”.
In order to get the project, people will take rent-setting.
No matter it is an enterprise or a local government,
they are certainly creating a great source of corruption.”
Feng believes that the so-called “industry preferential
policies” are actually anti-competitive.
They resulted in negative impact on the market.
Feng Xingyuan: “Industrial policy” could become
a privilege for subsidy winners.
However, those who don’t win subsidies also won’t have
Privileges. Actually, it’s inequality of competition.
Also promoting the leading firms is in the government’s
favor, so leading companies will receive the most subsidies.
The leading enterprises enjoy the Tax Preference,
which is an anti-competitive behavior.”
Feng also said that the Chinese Communist Party (CCP)
recently reorganized the coal mining industry.
They forced coal mine bosses in Wenzhou to leave the coal
mine business from the coal industry in Jiangxi Province.
It means the state-owned coal business took Wenzhou’s
company over for itself.
Feng said that there is bound to be a lot of corruption.
Feng pointed out that economist Niskanen created the
It means bureaucrats like to have a large budget,
then control the money and spend it all.
Feng said the CCP always wants to control the resources,
invest in state-owned business, or control resources and spend it.
Especially NDRC controls many funds, this is selfish behavior.
Feng Xingyuan: “Promoting high-tec industries and
introducing private capital will be far better than CCP investment.
For example, for private equity funds, they are an expert team,
they can sense the right project and skills.
They are very capable, and are
far better than the government.”
Feng said that whether maintaining the existing economic
structure or promoting innovative industry,
the CCP’s industrial policies have many disadvantages,
with more failure than success.
E.g. the CCP provided compensation to those declining
industries which were underperforming.
However, due to the compensation, they survived.
Feng said that maintaining existing industrial policy,
is actually maintaining the existence of low productivity.
Feng believes that in the area of promoting innovative
industry, the CCP often blindly provides compensation.
Zhang Weiying said in his question that NDRC’s full name
is “Development and Reform Commission”.
However, over the past decade, NDRC only focused on
development, not concerned with the reform part.
In addition, NDRC has the most power.
Zhang asked NDRC how they plan to release the power.
How does NDRC itself reform?
Zhang also pointed out that in China,
Excess Capacity exist in many industries.
Zhang asked Zhu Zhixi: “Will you re-think industrial policy
to focus on how to create a fair better environment?
Rather than using fiscal money to subsidize some
declining industries and businesses?”
In response to the questions, Zhu tactfully denied saying NDRC
has made Excess Capacity, corruption and reform stagnation.
Zhu claimed that China has its own character and path.
Yet he also said they “need even more political courage
and wisdom” to face these problems.