Professor Leslie Young - 1
Professor Leslie Young - 1
by Team A (Keith, Lucy, Juan, Alexi)
China's economic and political system needs to be understood in its historical context. This context makes China's situation unique.
Beginning in 1952, land ownership moved from private hands to state ownership. Economic and political power is therefore interlinked and concentrated in the Communist Party.
China's great flexibility to manage economic and political affairs means the usual rules of Western economic theory did not apply when the global financial crisis (GFC) hit.
The collapse in US demand could be managed by the extremely flexible system of levers available to the government.
Professor Leslie Young talks about three unique 'balance sheets'
- Financial balance sheets
- 'Inter-personal balance sheets' -- the complex network of familial ties arising from the legacy of Confucianism
- Communist party balance sheet
Professor Young believes the Chinese economic system can be self- sustaining in theory.
Some of the characteristics supporting this conclusion are the long term view enabled by the one party state, total control of economic and political life giving the ability to self-regulate and the massive weight of assets supporting the economy.
China can also undercut everyone else through cheap finance and compliance costs. Also, large Chinese state owned enterprises do not have to price dividends into their activities. The increased profits from this virtuous cycle can be reinvested in further activity.