Twofish's Blog

July 26, 2006

Figured out some mysteries about the Chinese economy

Filed under: academia, china, massachusetts institute of technology — twofish @ 2:59 pm

The reason I think I disagree with Huang Yasheng so much is that we have different models of what China should do right now.  So he things China is zigging and that is a bad thing.  I see it as a good thing.  But there are two things that we seem to agree on.  For example, I like his argument from data.  Because he has data available, the arguments can take place in the context of data.  The second reason I think we end up agreeing on policy is that we wildly disagree on what the major issues are now in the Chinese economy, I think we agree as to what the problem will be in 15 to 20 years.  Right now the Chinese economy can grow without major increases in efficiency because there is a pool of underproductive rural labor.  This isn’t going to be the case in 15 to 20 years.

The other thing that I figured out is why management types classify TVE’s as “private” whereas this classification annoys me to no end.  Managers are interested in management.  Bankers are interested in ownership.  A township-villiage enterprise is *managed* like a private firm where as an SOE has completely different management styles.  However, a banker doesn’t care at all how a firm is managed, he cares who owns the company so that he can collect on the debt.  So to a management person, a TVE is “basically private” whereas for a finance person a TVE isn’t.

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