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New structural economics: how it comes into being and recent progress: celebrating the 30th Teaching Anniversary of Professor Justin Yifu Lin

ZHAO Qiuyun1 WANG Yong1

(1.Institute of New Structural Economics at Peking University, Beijing, China 100871)

【Abstract】In the past 40 years of reform and opening up, Chinese economy has achieved miraculous economic development with an annual GDP growth rate close to 10% on average. This remarkable achievement is unprecedented in the entire human history. At a meeting with leading Chinese experts in the fields of philosophy and social sciences on May 17, 2016, China’s General Secretary Xi Jinping pointed out that an era of tremendous social changes must be also an era of great development in philosophy and social sciences. He expressed the hope that philosophy and social sciences in China could flourish with important innovations in theory. New structural economics is such an attempt to develop an innovative and independent theory. Based on development experience and lessons from China and other developing countries, new structural economics, guided by Marxist historical materialism, adopts the modern research approach of neoclassical economics and highlights the crucial importance of “economic structures.” New structural economics has gradually become the third international ideological trend in development economics. This paper aims to systematically review the history how new structural economics, advocated by Justin Yifu Lin and his collaborators, has come into being, and also to provide an overview of the recent progress of new structural economics in both theory and practice. This paper is divided into six parts. The first part is the introduction. The second part is to divide the development of new structural economics into five stages: early germination, preliminary formation, systematic interpretation, deepening and promotion, and expansion and application. The progress in each stage is carefully reviewed and assessed. In the third part, we discuss how new structural economics emerges as the third ideological trend in development economics, how it differs from the previous two trends, and several academic debates on new structural economics. In the fourth part, we illustrate by specific examples how new structural economics provides different theoretical perspectives and analytical angles from the currently dominant theories. In the fifth part, we explain the core philosophy of new structural economics—“integrating knowledge and achievement and validating knowledge by achievement,” and show how this philosophy is hardwired in the new framework and new ideas in policy practice of new structural economics. The sixth part is a summary. Researchers of new structural economics should cherish a “Changwu” mentality, adhering to the principle of openness and the concept of “integrating knowledge and achievement.” Researchers of new structural economics should never stop exploring new economic phenomena, new situations, and new problems and should keep improving, deepening and enriching both theory and practice of new structural economics.

【Keywords】 comparative advantage; viability; new structural economics; integrating knowledge and achievement;


【Funds】 National Social Science Fund of China (18BJL120) The 63rd Batch of China Postdoctoral Science Foundation

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    [1]. ① After returning to China, Professor Justin Yifu Lin served as deputy director of the Development Research Institute of the Rural Development Research Center of the State Council. He continued to engage in academic research in agricultural economics, development economics, and China’s economic development and reform. On the other hand, he served concurrently in the School of Economics of Peking University as associate professor, beginning to work on China’s modern economics education and cultivate economics talents. [^Back]

    [2]. ② This has been the first institution integrating modern economics teaching, theoretical research and policy research in Chinese mainland with all of its faculty members graduating from overseas prestigious universities since the founding of the People’s Republic of China. [^Back]

    [3]. ③ At the same time, Professor Justin Yifu Lin has 18 concurrent posts at home and abroad (including the counselor of the State Council, vice chairman of All China Federation of Industry and Commerce, member of the Standing Committee of the 13th National Committee of the Chinese People’s Political Consultative Conference, deputy director of the economic committee of the 10th, 12th and 13th National Committee of the Chinese People’s Political Consultative Conference, advisor of World Bank, etc.). [^Back]

    [4]. ④ Professor Justin Yifu Lin is awarded an honorary doctorate degree by 10 universities including Université d’Auvergne, London School of Economics and Political Science in the UK, University of Nottingham in the UK, Fordham University in the U.S., The Hong Kong University of Science and Technology, KU Leuven in Belgium, and The University of British Columbia in Canada. He is also selected as foreign academician of the British Academy and academician of the World Academy of Sciences (formerly the Third World Academy of Sciences). [^Back]

    [5]. ⑤ This paper was first finished in 2017. [^Back]

    [6]. ① In 2000, it received the ISI Citation Classic Award, and was awarded the 1993 Best Policy Paper Award (one per year) by the Center for International Food and Agricultural Policy at the University of Minnesota; this paper has also become one of the most cited papers, so that it is further awarded the “Classic Paper Award” by Institute of Scientific Information which publish SCI and SSCI. [^Back]

    [7]. ② It was awarded the 1992 Sun Yefang Economic Science Award. [^Back]

    [8]. ③ It was awarded the first prize of the 5th Beijing Scientific Research Works Award in 1996. [^Back]

    [9]. ④ It was awarded the 1999 Best Paper Award of Australian Journal of Agricultural and Resource Economics, and the Sir John Crawford Award of the Australian Agricultural and Resource Economics Society (only one of the global agricultural economists is chosen to be awarded the prize every two years). [^Back]

    [10]. ⑤ It was awarded the first prize of the 4th Beijing Philosophy and Social Sciences Award for Scientific Research Works in 1996. [^Back]

    [11]. ⑥ It was awarded the second prize of the 5th Beijing Philosophy and Social Sciences Award for Scientific Research Works in 1998. [^Back]

    [12]. ⑦ In 2012, it was awarded the Pushan World Economics Excellent Paper Award of China Society of World Economics and the National Book Award in 2014. [^Back]

    [13]. ① This article is Justin Yifu Lin’s speech draft at the “Annual D. Gale Johnson Lecture” at the University of Chicago on May 14, 2001. [^Back]

    [14]. ② On October 31 and November 1, 2007, Professor Justin Yifu Lin was invited to give a lecture in 2007–2008 Annual “Marshall Lecture” at the University of Cambridge, the UK. The article is finished on the basis of the lecture. [^Back]

    [15]. ① Quoted from Lin, Y. China Economic Quarterly (经济学(季刊)), (2) (2018). [^Back]

    [16]. ② See Lin, Y. Journal of Financial Research (金融研究), (11) (1984). [^Back]

    [17]. ③ See Fu, C. Research of Institutional Economics (制度经济学研究), (4) (2015). [^Back]

    [18]. ④ According to Chen Xin (2015), Justin Yifu Lin introduced his research work in 1991. At that time, he was devoted to the study of China’s development strategy and economic reform. It can be seen that at this stage, Justin Yifu Lin’s research focus has shifted from China’s agricultural development to China’s development strategy and economic reform. [^Back]

    [19]. ① See Chen, X. 读书, (1) (2015). [^Back]

    [20]. ② The book won the first prize of the 3rd Excellent Achievements in Humanities and Social Sciences of the Chinese Universities of Ministry of Education, the first prize of the Best Works of Philosophy and Social Sciences in Beijing in 2000, and the first prize of the Best Works of Philosophy and Social Sciences of the Ministry of Education in 2002. [^Back]

    [21]. ③ See Lin, Y. Reform (改革), (3) (1988); Lin, Y. Comparative Economic & Social Systems (经济社会体制比较), (4) (1988). [^Back]

    [22]. ④ Professor Justin Yifu Lin’s research on institutional economics began when he pursued a doctoral degree. The University of Chicago has a tradition of encouraging foreign students to write doctoral thesis about issues in their home country. In view of the great success of China’s rural reform, Justin Yifu Lin’s doctoral thesis was titled The Household Responsibility System in China’s Agricultural Reform: A Study of the Causes and Effects of An Institutional Change. [^Back]

    [23]. ⑤ See Lin, Y. in 财产权利与制度变迁:产权学派与新制度经济学派译文集. Shanghai: Shanghai People’s Publishing House, (1994). [^Back]

    [24]. ① Usually only economists who are considered to be successful in a field or topic will be invited to write a special chapter for the Handbook, which is a high honor for Justin Yifu Lin who just got his Ph.D. [^Back]

    [25]. ② The article about the interpretation of the “Needham Puzzle” may be the one taking the longest time in all of Justin Yifu Lin’s articles. When he was in junior high school, he was interested in Chinese history and development, and he has been always thinking about such a puzzle: Why is China’s science and technology far ahead of the world in ancient times, but has become so backward in modern times? Later, Professor Justin Yifu Lin knew that this problem is the famous “Needham Puzzle.” [^Back]

    [26]. ③ See [Germany] Max Weber. in [Germany] Max Weber. 韦伯文集: 文明的历史脚步. Huang, X. & Zhang, X. (trans.) Shanghai: SDX Joint Publishing Company, (1997). [^Back]

    [27]. ④ Although the paper was published in 1995, the main viewpoint of this paper was formed when Justin Yifu Lin pursued a doctoral degree at the University of Chicago. At a party before he got Ph.D., when Professor Theodore W. Schultz asked Justin Yifu Lin about this puzzle, Justin Yifu Lin replied casually that it was due to different ways of technological innovation. Professor Schultz felt that this point of view was very innovative. Later, Justin Yifu Lin talked about this point of view many times. However, it was not until the fall of 1993 that Justin Yifu Lin compiled the above ideas into an article when he taught the course “China Economic Development” at the University of California, Los Angeles. [^Back]

    [28]. ① The seminar was held at the invitation of Professor Maddison to attend his 80th birthday party. For Professor Justin Yifu Lin, this was a great opportunity to explain the “Needham Puzzle” to the world. [^Back]

    [29]. ② The Chinese manuscript of the article was published in the fourth issue of Volume 44 of Journal of Peking University (Philosophy and Social Sciences) in July 2007, and the English manuscript was published in the first issue of Volume 1 of China Economic Journal in (2008). [^Back]

    [30]. ③ As a capitalist country, India has no less planned economy than China, and India also has a planning commission, and its nature and working methods are similar to those of China’s planning commission. [^Back]

    [31]. ① Quoted from Lin, Y., Cai, F. & Li, Z. China’s Miracle: Development Strategy and Economic Reform (中国的奇迹: 发展战略与经济改革). Shanghai: Shanghai People’s Publishing House, 55 (1994). Among them, the “trinity” means that in the agricultural economy with scarce capital, once the priority strategy for heavy industry development is selected, a corresponding macroeconomic policy environment with price distortion, a resource allocation system with plans as the basic means, and a micro-management system without autonomy will be formed. These three constitute the “trinity” traditional economic system. [^Back]

    [32]. ② In 1988, China had experienced the most serious inflation since the founding of the People’s Republic of China. Senior government officials and economists discussed the causes, formation mechanism and governance countermeasures of inflation. Justin Yifu Lin, with Cai Fang and Li Zhou, participated in the research of the project “How can China’s economy get out of the predicament,” trying to explain the logic of the formation of China’s traditional planning system, the “regulation of chaos” cycle and the long-lasting difficult problems in the reform, and proposing reform path and strategy to solve these problems. [^Back]

    [33]. ③ In 1994, SDX Joint Publishing Company and Shanghai People’s Publishing House published the book China’s Miracle: Development Strategy and Economic Reform. The book gained certain recognition in the academic circle after its publication. Professor Zhang Shuguang wrote a highly appreciated book review. In addition to the English version published by the Chinese University Press, publishers in Japan, Russia, France, South Korea, Vietnam, and the Arab region have also translated and published versions of the corresponding languages, and this book has become the textbook of Chinese economic course for many overseas universities. [^Back]

    [34]. ④ It is the first time in the economics field to explore the endogeneity of economic system from the perspective of economics. [^Back]

    [35]. ① Quoted from Lin, Y. el al. China’s Miracle: Development Strategy and Economic Reform (中国的奇迹: 发展战略与经济改革). . Shanghai: Gezhi Press, SDX Joint Publishing Company & Shanghai People’s Publishing House, (2014). However, when the book was published in 1994, it aroused more doubts, which not only believed that it was too early to mention the “China’s miracle” and the economic forecast was too optimistic, but also denied the gradual dual-track reform path, believing that distorted system would affect the development of Chinese economy. This was evident in the controversy of economists at the two-day publication symposium held for the book that year. However, Professor Justin Yifu Lin is proud that Chinese economy has basically followed the growth trajectory predicted by the book in the 20 years since the publication of this book. Then, Professor Justin Yifu Lin says that their predictions are accurate because they are based on the analysis of the competitiveness and growth nature of the economy and the late-developing advantages of developing countries in industrial upgrading and technological innovation. They are very happy to see that China’s reforms over the past 30 years have basically followed the path analyzed in the book, and the performance of growth is as expected in the book. [^Back]

    [36]. ② In the class on every Friday night, there are always no empty seats in the classroom with more than 500 seats, even the classroom aisles and balcony are filled with students. It can be seen that Professor Justin Yifu Lin’s “Topics on Chinese Economy” is very popular among students. [^Back]

    [37]. ③ The book Topics on Chinese Economy (中国经济专题) is a summary of Professor Justin Yifu Lin’s teaching curriculum at Peking University, as he says in the preface that he hopes that the publication of this book can help review the course with the students who have already taken this course. He also hopes to carry out theoretical exchanges with the students who fail to take this course through the book. Although he is busy, Professor Justin Yifu Lin never skimps on the time he spends with his students. Professor Yao Yang says that Mr. Lin especially likes to lecture and he can talk for four hours without stopping. If it is not because the students are hungry, he can talk from afternoon to the evening. What Professor Justin Yifu Lin teaches is not only his knowledge, but also his ideals. Professor Justin Yifu Lin hopes that students will have lofty aspirations. Professor Justin Yifu Lin says that in the exchanges with students, he can see the hope of national rejuvenation. Therefore, in the book, there is such a sentence that it is great fun to teach the talents of the world. [^Back]

    [38]. ① In 2012, Cambridge University Press translated and published the English version of the book and renamed it Demystifying Chinese Economy (解读中国经济), which was well received abroad. [^Back]

    [39]. ② James J. Heckman says, “The book succeeds at many levels. It presents a broad historical perspective over two millennia of the rise, fall, and the dramatic resurgence of Chinese economic power. It presents an analytically informative study of the sources of Chinese economic growth and the prospects of growth for the future. Lin formalizes the successful pragmatic Chinese approach to economic development using his insightful notion of ‘Comparative Advantage Following (CAF)’ strategies. The book challenges many tenets of conventional neoclassical theory and shows how naive application of many of its principles had catastrophic consequences for many transition economies.” Roger B. Myerson says, “This book considers fundamental questions about the great transformation of China from a poor underdeveloped country to a global leader in modern economic growth. These are among the most important questions of our time, and Justin Lin has the best credentials to help us understand them. In this book, he offers a new and important perspective on the conditions for modern economic development in China and the world.” Edmund S. Phelps says, “This clear and insightful study of the origins of China’s failures and, finally, its extraordinary success will be must-reading for anyone who wants to understand Chinese development. An important book and much overdue.” [^Back]

    [40]. ③ Lin, Y. Economic Research Journal (经济研究), (10) (1995). [^Back]

    [41]. ④ See Lin, Y. Economic Research Journal (经济研究), (4) (2001). This paper systematically explains Professor Justin Yifu Lin’s views on how to use the normative modern economics method to study China’s economic problems and then its contributions to the development of modern economics. [^Back]

    [42]. ① Professor Justin Yifu Lin often quotes the sentence that “swift apprehension is (only) a flower of the Dao, and is the beginning of stupidity” in Laozi (老子) to warn the students that they must adhere to “Changwu” mentality when learning existing theories. [^Back]

    [43]. ② Later, the lecture was published in the second issue of Volume 51 of Economic Development and Cultural Change in 2003. The Chinese version was published in the second issue of Volume 1 of China Economic Quarterly in 2002. [^Back]

    [44]. ③ The concept of soft budget constraint is proposed by the Hungarian economist János Kornai (1986). He believes that the soft budget constraint of state-owned enterprises in the socialist planned economy is determined by the nature of state-owned property rights. While new structural economics believes that state-owned enterprises bear the policy burden of the national catch-up strategy, or the social policy burden of providing employment leads to soft budget constraint, and believes that privatization of state-owned enterprises will intensify rather than reduce soft budget constraint if the policy burden is not eliminated. Therefore, the success of state-owned enterprise reform should be based on the elimination of social and strategic policy burdens. A large number of empirical studies on Russia, the Soviet Union and Eastern European countries have also confirmed the analysis of the reasons for soft budget constraint and prediction of privatization effects by new structural economics. [^Back]

    [45]. ④ James Heckman’s review was originally published on Chicago Maroon, newspaper of the University of Chicago, on the second day after the lecture. The new development theory is the “endogenous growth theory” that is very popular in the 1980s and 1990s. This is one of the major contributions of Professor Robert E. Lucas, Jr., for winning the Nobel Prize in Economics in 1995. [^Back]

    [46]. ① In essence, it is a mathematical model based on the theoretical framework that the economic system is born inside the development strategy proposed in China’s Miracle: Development Strategy and Economic Reform, and the various inferences of the theoretical model are empirically tested by the empirical data of developing countries since the Second World War. [^Back]

    [47]. ② Gary S. Becker says, “Lin's point of view is controversial, but highly stimulating.” Robert W. Fogel says, “He has not only influenced the thinking of government and business leaders in China, but also of economic analysts in the United States and Western Europe.” Douglass C. North points out, “Justin Lin’s Marshall lectures provide an unrivaled opportunity to both understand the spectacular rise of Asian economics over the past several decades and to cast a jaundiced eye on standard explanations of development by economists.” A. Michael Spence says, “This is an important book in many ways. . . . It has its roots in trade theory and comparative advantage. But turning that into a body of dynamic analysis of growth strategy and policy is a major achievement.” Joseph E. Stiglitz praises, “This is a brilliant and revolutionary book explaining why some developing countries have succeeded and others failed.” [^Back]

    [48]. ① See Lin, Y. 企业家日报), (2014-9-28). [^Back]

    [49]. ② The Great Depression of the 20th century gave birth to Keynesian macroeconomics that emphasized the shortage of “effective demand,” which raised sharp questions and challenges to traditional market theory. [^Back]

    [50]. ④ In the early 1990s, Professor Justin Yifu Lin and his collaborators, Cai Fang and Li Zhou, wrote the book China’s Miracle: Development Strategy and Economic Reform based on Chinese experience, explaining the miracle of China’s growth and laying the theoretical prototype of new structural economics. The key concept of new structural economics, “viability,” presented at the 2001 Annual D. Gale Johnson Lecture, further summarized the theory. On this basis, at the 2007 Marshall Lecture, Professor Justin Yifu Lin further modeled his theory in his book Economic Development and Transition: Thought, Strategy and Viability based on international experience. [^Back]

    [51]. ① This was an internal seminar on the first anniversary of Professor Justin Yifu Lin’s appointment as Senior Vice President and Chief Economist of the World Bank. [^Back]

    [52]. ② Michael A. Spence says, “New Structural Economics is a truly important and ambitious book. . . . This book will become an essential reference for scholars and for policy makers not only in developing countries, but also, increasingly, in developed countries.” Joseph E. Stiglitz says, ““The World Bank has long been committed to the goal of achieving a world without poverty. In this brilliant volume, its Chief Economist, Justin Yifu Lin, lays out an economic agenda for how to make this dream a reality. . . . Justin Lin’s ideas have already stirred discussion and debate. This book will ensure that they will continue to be central in the reexamination of developmental policy.” [^Back]

    [53]. ③ George A. Akerlof says, “In this masterpiece, Justin Yifu Lin weaves together 250 years of economic thought with his own wisdom acquired during China’s economic rise. He dares to envision the end of world poverty and spells out—thoughtfully, sensibly, and pragmatically—how this can be accomplished. It is impossible for an economist to write a better, or a more important, book.” Robert W. Fogel says, “The Quest for Prosperity is an important book. Written with verve and clarity, it reflects a deep understanding of global economic issues, and proposes practical solutions that anyone concerned with the plight of the world’s poor would be wise to read.” Thomas C .Schelling says, “This is a truly exciting book. . . . Justin Yifu Lin proposes a new approach to development economics that makes great sense.” [^Back]

    [54]. ① See Wang, Y. Journal of Translation from Foreign Literature of Economics (经济资料译丛), (2) (2016). [^Back]

    [55]. ① See Lin, Y. China Economic Quarterly (经济学(季刊)), (2) (2018); Lin, Y. http://www.chinareform.org.cn/Economy/Macro/Practice/201608/t20160820_254161.htm, 2016-08-19. [^Back]

    [56]. ② This forum is a flagship platform for national high-end think tanks that integrates investigation and diagnosis, theoretical research, case studies, database construction, policy consultation, policy training, policy discussions, personnel training, and promotion of trans-national and cross-regional exchanges and cooperation. [^Back]

    [57]. ③ So far, a series of think-tank reports including Jilin Province Economic Structure Transformation and Upgrading Research Report (Exposure Draft), Zhongshan City Transformation and Upgrading Case Study, Tibet Characteristic Industry Development Survey Report (Exposure Draft) and Hejian Case that have been released have a certain influence. [^Back]

    [58]. ④ At present, Tsinghua University, Tibet University, Zhongnan University of Economics and Law, Yunnan University of Finance and Economics, Jilin University, and University of Nottingham Ningbo China have established branch centers of new structural economics. In addition, nearly ten universities are actively preparing for the establishment of new branch centers of new structural economics. [^Back]

    [59]. ① Yang Xiaokai’s so-called “late-developing disadvantage” does not refer to the backwardness or distortion of the institutions owned by developing countries. It means that developing countries do not learn advanced systems first, but first use the “late-developing advantage” of technological gaps with developed countries to develop the economy and delay institutional learning. He called this situation “late-developing disadvantage,” because he believes that without institutional reform, it will lead to state opportunism, and the collapse of economy will be inevitable eventually. [^Back]

    [60]. ② Wang Yong (2015) constructed a dynamic growth model of endogenous institutional reform to describe the conditions of “shock therapy” and gradual reform, and for the first time rigorously modeled the reverse coercion mechanism of China’s gradual reform. [^Back]

    [61]. ③ In this regard, Sachs et al. (2003) argued that the British-American republican constitution is the best system. They believed that the financial crisis in Japan in the 1990s was the consequence of not firstly conducting republican constitutional reform. However, the United States also experienced a financial crisis in 2008. At the same time, many countries in the world do not implement a British-American constitutional system, but they are equally excellent in terms of development level, social equity, and government cleanliness. Moreover, in the An Inquiry into the Nature and Causes of the Wealth of Nations, Smith recorded the shocking corruption of the UK in the 18th century. The research by Glaeser and Saks (2006) of Harvard University also found that the corruption in the United States in the late 19th and early 20th centuries was not lower than that of today’s China. These facts proved that Yang Xiaokai’s view that the British-American republican constitutionalism is the optimal institutional arrangement is idealized, and untenable in reality. [^Back]

    [62]. ① In China’s Miracle: Development Strategy and Economic Reform and Demystifying Chinese Economy, Professor Justin Yifu Lin analyzes and predicts that because China has implemented a dual-track gradual reform to give protection and subsidies to those large capital-intensive state-owned enterprises that violate comparative advantages and do not have viability by lowering the price of various factors or market monopoly, which will lead to institutional rents, corruption and deterioration of income distribution. These problems are caused by the reform of the dual-track system. The fundamental solution to the problem is to deepen market reforms and eliminate distortions of various factors under right conditions. Although the Soviet Union and Eastern European countries carry out the reform of “republican constitutionalism” and adopt “shock therapy,” in order to avoid the massive unemployment and social political instability caused by bankruptcy of large enterprises after privatization, or because these enterprises are needed for national defense security and national modernization, the country is not willing to let them go bankrupt, after previous subsidies are eliminated through the “shock therapy,” new and more subtle subsidies are introduced. As a result, the phenomena of rent-seeking, corruption and uneven income distribution are even more serious than those in China. Therefore, the problem of corruption and deteriorating income distribution does not lie in whether there is republican constitutional reform, but whether there is institutional rent formed by protection subsidies. [^Back]

    [63]. ② Lin, Y. http://www.rmlt.com.cn/2014/1022/332723.shtml, 2014-10-22. [^Back]

    [64]. ③ On June 6, 1995, at the CCER, Justin Yifu Lin and Zhang Weiying launched a heated debate on the reform of state-owned enterprises, which was called the “fight” at Peking University. [^Back]

    [65]. ④ Professor Justin Yifu Lin advocates that for the reform of large state-owned enterprises, creating a level playing field is more important than simple privatization, but this is not to advocate the nationalization of all large enterprises. In practice, China follows the idea of “managing large enterprises well while relaxing control over small ones.” Small and medium-sized state-owned enterprises have basically been privatized. Large state-owned enterprises have not undergone large-scale privatization, but conducted reform following the idea of modern corporate governance, and established the board of directors, the board of supervisors, and many have become listed companies. Moreover, due to the rapid development of more than 30 years, capital has been accumulated rapidly. Many large-scale equipment and automobile industries have already met the comparative advantages in China and have a competitive advantage in the domestic and foreign markets. [^Back]

    [66]. ⑤ From the perspective of “vertical structure,” Wang (2017) pointed out that the current state-owned enterprises in China are mainly concentrated in the upstream industry and monopolized, while the downstream industries are dominated by private enterprises and are close to perfect competition. If the upstream state-owned enterprises are simply privatized without changing their administrative monopoly, the overall economy and performance improvement cannot be substantially promoted. Therefore, it is more important to reduce market access barriers in upstream industries and introduce more market competition. See Wang, Y. International Economic Review (国际经济评论), (5) (2017). [^Back]

    [67]. ① The practice of the Soviet Union and Eastern European countries was the same as that advocated by Zhang Weiying. Apart from a few countries such as Poland, Belarus, Slovenia and Uzbekistan, others basically privatized their state-owned enterprises according to the policy recommendations of modern enterprise theory. However, the results were exactly the opposite of what the reform was expected to achieve. It was found according to empirical studies by the World Bank, the European Bank for Reconstruction and Development, and many other foreign scholars that in addition to the fact that many low-priced state-owned assets in the privatization process caused uneven distribution and oligopoly, the situation of large enterprises was as that predicted by Professor Justin Yifu Lin (in the debate with Zhang Weiying) more than 20 years ago: they received more subsidies from the country than during the state-owned period, and the efficiency was lower rather than higher. Moreover, in terms of overall economic performance, Poland and Slovenia, which performed best among Eastern European countries, and Belarus and Uzbekistan, which performed best among the Commonwealth of Independent States countries, had not implemented large-scale privatization. [^Back]

    [68]. ② On August 19, 2016, Zhang Weiying delivered a keynote speech on “Entrepreneurship and the Transformation of China’s Economic Growth Mode” during the 13th China Automotive Marketing Summit, and put forward the idea of “abolishing any form of industrial policy.” See Zhang W. http://news.hexun.com/2016-08-20/185621729.html [^Back]

    [69]. ③ See Feng, B. & Zhou, C. http://finance.ifeng.com/a/20161111/15000141_0.shtml, 2016-11-11. [^Back]

    [70]. ① For details of related discussions, please refer to Lin, Y. et al. Industrial Policy: Summary, Reflection and Prospect (产业政策: 总结, 反思与展望). Beijing: Peking University Press, (2018). [^Back]

    [71]. ② Later, Wang Yong and Hua Xiuping published an article in Economic Review in 2017, which gave detailed clarification and systematic explanation about it. See Wang, Y. & Hua, X. Economic Review (经济评论), (3) (2017). [^Back]

    [72]. ③ See Lin, Y. 新湘评论, (11) (2016). [^Back]

    [73]. ④ Some scholars in China often use Western mainstream economics theory as a frame of reference to understand various social and economic phenomena that appear in China, and even attribute all problems in social economy since the reform and opening up to failure to follow the mainstream Western economic theories. [^Back]

    [74]. ① The same is true for development issues. After the Second World War, developing countries generally promoted import substitution strategies. A few economically successful economies (such as Japan and some East Asian economies) pursued export-oriented strategies, which was considered wrong at that time. [^Back]

    [75]. ② See Lin, Y. et al. What Is New About New Structural Economics: The First New Structural Economics Winter Camp Brainstorming Session (新结构经济学新在何处:第一届新结构经济学冬令营头脑风暴集). Beijing: Peking University Press, (2016). [^Back]

    [76]. ③ The theory of optimal financial structure is a natural extension of Professor Justin Yifu Lin’s thinking on comparative advantage, viability and economic development strategy. Appropriate economic development strategies need to promote the development of industries with comparative advantages and the growth of companies with viability, while the financial system and its operation have an extremely important impact on the path and efficiency of resource allocation. [^Back]

    [77]. ④ For example, supporting investment and consumption. [^Back]

    [78]. ① For example, the International Monetary Fund pointed out in the 2014 World Economic Outlook that the economic downturn is the best time for infrastructure construction. [^Back]

    [79]. ② This is the case after the global financial crisis in 2008. [^Back]

    [80]. ① See Zhu, F. The Journal of Humanities (人文杂志), (7) (2017). [^Back]

    [81]. ① Of more than 200 developing economies after the Second World War, only Chinese Taiwan and South Korea have turned from low-income to high-income economies so far, and Chinese mainland may become the third one by 2025. Of the 101 middle-income economies in 1960, only 13 had become high-income economies by 2008, 8 of which were European countries or oil-producing countries around Western Europe whose original gaps were not large, and the remaining five were Japan and the “Four Asian Tigers.” [^Back]

    [82]. ① Professor Justin Yifu Lin has a strong desire to serve the nation and the country as early as in middle school. Later, the aim of his engagement in economic research is also to explore the path of China’s prosperity. Professor Justin Yifu Lin has said many times that as long as China persists in reform and opening up, it is entirely possible to become the most powerful country again in the world in the near future. In this case, China “will become the only big country in the world that has gone from prosperity to decline and then to prosperity again,” from which we can see clearly his attachment and devotion to the motherland. In fact, careful people can feel his consistent patriotic passion from a series of his books and speeches. [^Back]


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This Article


CN: 31-1012/F

Vol 44, No. 09, Pages 4-40

September 2018


Article Outline


  • 1 Introduction
  • 2 Theoretical trace of new structural economics
  • 3 Ideological trend of new structural economics and academic debates
  • 4 Independent theoretical innovation of new structural economics
  • 5 New structural economics: from theory to practice
  • 6 Conclusion
  • Footnote