Lawrence Lau’s talk

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Summary of Lawrence Lau’s talk

Just several interesting points he made:

1. China’s high saving rate helps its growth. No foreign capital
actually is needed, which is different from many South American
countries. Current foreign debt is largely due to RMB appreciation
speculation. Technology and experiences are what need to be imported.
2. China’s inflation is not wage-pushed, and in general well under
control.
3. There is an unbalance. 40% labor generate only 10% GDP, which
regarded by Lau, has room to improve.
4. He, agreed by Krugman, thinks China’s current growth is mainly
based on capital accumulation instead of creativity.
5. Quoting Schumpeter’s creative destruction, he thinks China avoids
switching and upgrade costs by a late reform.
6. Free market is not effective everywhere, anytime. He shows two
examples. First is the dual track price mechanism on which he,
together with Yingyi Qian and Gerard Roland have written a paper. Such
mechanism, not only results a smooth transition, but doesn’t lose
efficiency as well. Second example is future market. He thinks futures
like poultry, corn, cattle would be helpful for price stability. He
even proposes a government managed inventory system. On the other
side, crude oil futures are dismissed, which he thinks only encourages
speculation with little help to real supply demand relationship.
7. Corruption may be eliminated by a more transparent and competitive
market mechanism.