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Dean Hai Wen Attends Premier Li's Symposium on Current Economic Situation
2015-04-22 16:55:48
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To maintain China’s manufacturing competitive advantage, Premier Li Keqiang advanced "Made in China 2025" in his Government Work Report to the top legislature this year. This plan focuses on innovative drive, intellectual property and green development. 



On April 14, in a meeting with entrepreneurs and economist in Beijing, Li once again mentioned the ambitious plans to upgrade China’s manufacturing power over the next 10 years. Hai Wen, dean of the Peking University HSBC Business School (PHBS), was invited to attend the meeting.



It was discussed that to compete with the world’s best, Chinese companies will have to create products of their own that have an impact similar to the iPad, for example. Hai Wen said that companies have entered a new period of development by annex and recombination. “The age of small and medium-sized enterprises (SMEs) is gone, and big business will succeed.” He added, “Without a large-scale, it will be difficult for Chinese companies to do R&D (research and development), and they can't optimize and upgrade their industrial structure.”

Premier Li Keqiang appeared worried when Hai said that Chinese big companies can benefit from economies of scale. “Overcapacity in some industries is a prominent issue undermining the growth of China's economy and will continue for quite a long time to come.” Li asked Hai, “Under this situation, large companies are generally more fragile than small companies. How are we to understand it ?”

Local governments' stimulus plans are likely to lead to even worse overcapacity in some industries, Hai said. China’s system encourages local governments to invest in trophy projects, such as gleaming new towns and administrative centers, because officials sometimes do not care if the project is barely used in five years’ time, as they will by then have moved to a different job.

According to Xinhua News Agency reports, in Hebei province, the country's largest steel producer, authorities announced a plan in 2010 to cut the province's steel manufacturing capacity to less than 95 million tons by 2015. But in 2012, the province produced more than 200 million tons of steel. “If the market plays a decisive role in allocating resources, such will never happen again,” Hai said . “Generally, private enterprises don't irrational pursue size.”

"In seeking steady economic growth, China should make full use of reform and innovation as the driving forces," Li noted. He said the country should step up implementation of these measures with the view to increase investment in lagging areas, improve policy combinations to promote entrepreneurship and innovation, and provide new impetus for securing steady growth and upgrading economic structure.

According to Li's argument, China must make intensified efforts to streamline administration and delegate power to lower levels, which will reduce administrative approvals and eliminate restraints on market vitality and development. Meanwhile, the government should push forward reforms in the fiscal, financial, pricing and financing sectors to realize cumulative effects and further unleash reform dividends.

By Jinpeng Tung