JIANG Shixue：The Global Financial Crisis in Chinese Perspective
“The financial crisis is not yet over..., but our work so far indicates that our measures are effective. People across the country should be proud of it," Wen Jiabao, Chinese Premier, Interview with Xinhua News Agency, December 27, 2009.Many Chinese scholars believe that the current global financial crisis, triggered by the
This paper will first look at the impact of the crisis on
I. What Is the Impact of the Crisis on
Three decades of reform and opening to the outside world has made
The most immediate impact was on
When exports fell, factories in the coastal areas and other parts of
Entering 2009, although some economic indicators improved, the whole situation did not get better. In his government report to the annual session of the Chinese legislature in March 2009, Premier Wen Jiabao said that the global financial crisis continued to spread and got worse because demand kept on shrinking on international markets and trade protectionism was resurging. “The external economic environment has become more serious, and uncertainties have increased significantly…Continuous drop in economic growth rate due to the impact of the global financial crisis has become a major problem affecting the overall situation. This has resulted in excess production capacity in some industries, caused some enterprises to experience operating difficulties and exerted severe pressure on employment,” said Premier Wen Jiabao. 
In an interview with the Xinhua News Agency on December 27, 2009, the Premier gave a vivid account of
Due to weak external and domestic demand,
In addition to exports and slowed GDP growth, there are some other damages. For instance,
On the whole, however, the Chinese banks were not badly affected. According to Liu Mingkang, Chairman of the China Banking Regulatory Commission, the country's banking regulator, the global economic crisis had not taken a big toll on China's banking industry as the after-tax profits reached RMB583 billion (US$85.23 billion) in 2008, a growth rate of 30.6 percent over the previous year. The return on equity (ROE) in the banking sector was 17.1 percent in 2008, 0.4 percentage points higher than in 2007 and 2 percentage points higher than in 2006. This figure was significantly higher than the average ROE of the global banking industry. “For 2009, I believe Chinese banks will grow faster than the country's economy,” said Liu Mingkang.
The reason why the Chinese banks can weather the storm is two-fold. On the one hand,
It is interesting to note that, many Chinese, including scholars and netizens, believe that the global financial crisis is also a rare opportunity for
II. What Are the Anti-crisis Measures?
The most impressive anti-crisis measure in
At this meeting the State Council also decided to adopt “active” fiscal and “moderately active” monetary policies and implement more forceful measures to expand domestic demand, speed up the construction of public facilities and improve living standards of the poor. 
The 2008 central economic work conference on December 8-10, 2008, reaffirmed the government’s anti-crisis policies and pledged to strive for continued economic growth in 2009 through domestic demand expansion and economic restructuring. It was agreed that proactive fiscal policy and moderately easy monetary policies would be pursued in 2009. It was also accepted that the anti-crisis measures should be implemented towards 1) maintaining growth; 2) expanding domestic demand; 3) adjusting economic structures; and 4) improving the living standards of the people.
Soon after the 2008 economic work conference, the National Development and Reform Commission, the most important governmental body in China to design and implement economic policies, announced that eight specific and concrete lines of policy would be carried out in 2009: 1) to stimulate domestic demand and expand investment scale; 2) to promote agricultural development by supporting grain production and raising farmers’ income; 3) to upgrade economic structures; 4) to eliminate barriers in the economic system; 5) to export more high-tech intensive and labor intensive products and at the same time import advanced technology and raw materials; 6) to reduce carbon emission and protect the environment; 7) to improve social welfare; and 8) to strengthen institutional building.
In his government work report to the annual session of the People’s Congress in early March 2009, Premier Wen Jiabao set out the economic growth target of 8 percent in 2009. “As long as we adopt the right policies and appropriate measures and implement them effectively, we will be able to achieve this target,” Wen Jiabao said at the Second Session of the 11th National People's Congress.
The international press spoke very highly of
The purpose of maintaining the target of 8 percent growth is to control the unemployment rate. For most Chinese, employment is the only way to make a living. If unemployment rises, social tensions will worsen, thus jeopardizing the efforts to build a harmonious society. It is calculated that one percentage point of GDP growth rate can generate one million employment opportunities. Only 8 percent of GDP can absorb the increase of migrant workers and university graduates entering the job market.
According to the 2010 blue book of
During his third official visit to
Indeed, over the last three decades,
Not a few Chinese scholars are concerned that the global crisis might have a negative impact on the nation’s structural adjustment. According to Zhang Min, sub-chief of the Division for International Finance at the
It is encouraging to see that the 2009 central economic work conference, held in early December 2009, vowed to continue efforts in 2010 to boost domestic demand and control investment growth.
III. What do the Chinese Scholars Say?
Predicting a crisis in the making is not an easy job. During a visit to the London School of Economics, the British Queen asked why no one had predicted that the “credit crunch” was about to happen. Then, a group of eminent British economists wrote to her explaining why no one foresaw the timing, extent and severity of the recession.
But a few Chinese scholars succeeded in foreseeing that the
Li Shengmin expressed similar views in his speech to the second international conference on economic globalization and development, held in
In this speech, Li Shengmin shortened the prediction of the
According to Wang Liqiang, researchers affiliated with RCWS made two important observations in 2007. 1) Economic globalization and high-tech revolution might be able to make it possible for the
In the yearly-published yellow book on the world economy at the end of 2003, Yu Yongding, then the Director of the Institute of World Economics and Politics, CASS, said, “In the past several years, in the United States and Europe, housing prices have been rising steadily, offsetting the negative effect of a sudden drop in the stock market on consumer demand. To a large extent, the real estate boom was the result of the U.S. Federal Reserve’s low interest rate policy. We cannot exclude this possibility: with the recovery of the global economy, interest rates might climb due to some unexpected reasons, causing a crash in the housing market and exerting great damages to the economy.” At that time Yu Yongding was among the very few Chinese economists who noticed the danger of a bubble bursting in the
Regarding the root causes of the
Wang Weiguang, Executive Vice President of CASS, proposed that, in the face of the global financial crisis, it is imperative to read Karl Marx’s Das Kapital and Vladimir Lenin’s Imperialism: the Highest Stage of Capitalism once again. He says, “In order to understand the nature and causes of the crisis, we must make use of the Marxist position, viewpoints and methodology.” According to Wang Weiguang, also a well-known professor, the best way to understand the nature and causes of the crisis is to borrow the scientific methodology of Marxism in understanding the dual contradictions of commodity. He said, “Without further understanding of the nature and deep roots of the crisis, China would not be able to design effective measures to protect its national economy; nor could it guard against such crisis in the future…A combination of market economy with socialist system is the best way to avoid such a crisis for China.”
Ru Xin, former Vice President of CASS, said that the global financial crisis is both a good thing and a bad thing. “It’s a bad thing because the crisis has dealt a heavy blow to the world economy and also to
Ru Xin declared that it is highly necessary to study Marx’s Das Kapital and Lenin’s Imperialism: the Highest Stage of Capitalism once more. He said, “Some years ago we often heard some people argue that Das Kapital was about capitalism in the nineteenth century and Lenin’s Imperialism: the Highest Stage of Capitalism was about capitalism before the World War I. These people argue that the two books have been outdated because contemporary capitalism has corrected all its past mistakes and revived its youthfulness and vigor. According to these people, capitalism has become a paradise. But the current global financial crisis has crashed their dreams.”
Ru Xin warned that “Never take capitalism as panacea. Never believe in the ‘invisible hand’ in a blind way. Otherwise, we shall suffer a great deal. Planning and market are only instruments. Never take these instruments as the objective.”
Some Chinese scholars blame the root cause of the global financial crisis on greed and selfishness inherent in capitalism. As Zhang Jianyun, Associate Professor from the
Some Chinese scholars also consider neoliberalism as the cause of the crisis. Xu Haiyan, an assistant researcher from the Institute of Political Sciences, CASS, said, “The U.S. financial crisis is the inevitable end of the neo-liberal policies pursued by the U.S. government over the past three decades.” According to Xu Haiyan, the major western nations saw their market system and capitalist economic institutions as a “hero” defeating socialism in the
Zhao Lei, a professor from the Southwestern University of Finance and Economics, tried to play down some scholars’ attempt to blame the crisis simply on lack of regulation and supervision, policy mistakes, underestimation of the financial risks, etc. According to Marx’s theory, he argued, the crisis was brought forward by surplus production. “Marx’s framework of analyzing the contradictions of capitalism is not outdated,” said Zhao Lei.
Many Chinese scholars are not for the ideological analysis. They would like to dig out the root cause in the light of policy mistakes on a technical level. Wang Guogang, a professor from the Institute of Finance and banking, CASS, asked the following questions before offering his explanation about the origin of the crisis: Why could only US$1.3 trillion of subprime debt, or 12 percent of total mortgage debt, cause a crisis of enormous magnitude? Why did nobody pay any attention to the long-term drop of the housing price in the
According to Wang Guogang, shortcomings in the mechanism of asset securitization were magnified by the securitized derivatives, leading to a financial crisis. “This has nothing to do with market failure. This is simply the punitive result of going against market mechanism,” Wang Guogang argued.
Zhang Min believed that there are three major reasons that can explain why the
Yu Ze, a professor from the People’s
Some Chinese scholars would like to combine the above two categories of examination, i.e., a critique of capitalism from an ideological point of view and an analysis of the policy mistakes in technical dimension, into one. For instance, according to Pang Jinju, a professor from the Nankai University, the U.S. subprime crisis was caused by policy mistakes (low interest rate and fiscal deficit), deficiency of risk management by the financial companies, and a belief in neoliberal theory. However, he said, these factors were not the most important. The deepest root of the crisis was the disparity between excessive expansion of production and a lack of demand with purchasing capacity. “This is the fundamental contradiction of capitalist system where production is socialized but means of production is privatized,” Pang Jinju said.
IV. Concluding Remarks
As the Chinese economy has been increasingly integrated with the world, the
Chinese scholars have different views towards the causes and origins of the