The Inaugural Conference on Challenges and Opportunities for Research on Macroeconomics and Finance in China Held
December 16, 2019
On December 14, 2019, the Macro Finance Research Program at the University of Chicago’s Becker Friedman Institute for Economics and Tsinghua University School of Economics and Management (Tsinghua SEM) co-hosted a two-day academic conference to explore the interplay between finance and macroeconomics in China, an area ripe for research. The conference ignited an important conversation on the inner workings of the Chinese economy, the key players in economic policy and challenges for future research related to the Chinese financial market. The conference was funded by the Harvest Fund Management Co. Ltd. Over 300 elite scholars, researchers, think tanks and non-governmental organizations attended the conference.
As the second largest economy in the world, China has seen immense growth over the last 40 years, a result of more open markets and an innovative approach to advancing financial technologies. During the conference, sessions dug deeper into the history of China’s financial markets, Chinese state-owned enterprise reform, and the productive role of finance in supporting economic growth in the future.
In his opening remarks, Lars Peter Hansen, David Rockefeller Distinguished Service Professor in Economics, University of Chicago, stressed why this was an ideal time to host this conference in China, “Given the economic interconnections around the world and the increasing importance of China in the world economy, it incumbent for academic economists understand better what is unique about the Chinese economy and its challenges in future and what lessons can learned from the experiences of other economies on their paths towards economic advancement. By bringing together top scholars with particular knowledge and expertise about finance and the macroeconomy in China, we hope to nurture future research in area.”
Mansfield Freeman Chair Professor BAI Chong-En, Dean of Tsinghua SEM echoed this sentiment: “After launching the Tsinghua University-Chicago University Joint Research Center for Economics and Finance in last September, 2018, this conference is the first joint event organized by two institutions. The Joint Research Center aims to encourage the research on the Chinese economy and just sent out the call for proposals to people who is doing the study on the economy and research. This conference will feature several experts study findings and share the insights of economic development from different perspectives.
Speakers also explored the challenges of for sustained growth in China during a panel event on the afternoon of December 12, which featured Nobel Prize recipient and professor at the University of Chicago, Lars Peter Hansen; Nobel Prize recipient and professor of economics at New York University, Thomas Sargent; former chairman of the China Securities Regulatory Commission, XIAO Gang; professor of economics at Cheung Kong Graduate School of Business, XU Chenggang; and chairman of Harvest Fund Management Co. Ltd., Henry Zhao.
While moderating the conference, Hansen said that as a scholar, he hopes to hear more from the outside of the academic community and conduct multi-level and comprehensive exchanges with professionals from the government, private sector and other fields, so to better frame future research on the economy of China and to extract insights pertinent to economics more generally.
At the conference, Henry Zhao compared the differences between the Chinese and American markets. He said that since the Chinese markets are in an early stage of development the impact of information on their behaviour is different than in the more mature markets in the US and Europe. He noted the financial markets in China are opening up to worldwide participants, although those market investors are continuing changing, the policy framework and the rules of the game are still in flux.
XIAO Gang agreed with Henry Zhao and said that Chinese regulatory authorities need to further clarify the boundary of supervision and avoid taking too many unnecessary responsibilities. The goal of regulatory should focus on maintaining the openness, fairness and justice of the market, instead of intervening with the activities in the main market entities. Therefore, the role of the government is to formulate rules according to the law. In particular, it is necessary to severely punish illegal behaviours in order to strengthen the fairness and transparency of the market, as well as to protect the interests of investors in the market.
Sargent talked about the situation in the US with interesting comparisons and contrasts. While economist embrace competitive markets, many industries in the US have become more concentrated with a corresponding increase in profits. They have also experienced, however, a decline in investment including in R&D (Research and Development). He suggests reading “The Great Reversal: How America Gave Up on Free Markets” by Thomas Philippon, which not only presents some of the important supporting evidence but also explores this evidence is connected, triggering important considerations for macroeconomic growth.
XU Chenggang emphasized three points. First he conjectured that growth in China would reach a stumbling block unless the Chinese economy became more consumer oriented. He also warned that “soft budget constraints” on firms and institutions with government backstops has an adverse impact on their productivity. Relatedly, he mentioned that to achieve an economic growth in China, it is essential to establish a business environment protecting fair competition, which is the foundation to promote development of cutting-edge technologies.
With the last question about the potential impact in the future of wealth inequality, the conference reached to a successful ending. The challenges and opportunities explored by the five expert’s present new areas of exploration for new research from BFI-China and Tsinghua University, and from other academics around the world.
Forum on “Challenges in Finance and the Macroeconomy in China”
About Macro Finance Research Program of the Becker Friedman Institute
The Macro Finance Research Program explores the interconnections between financial markets and the macroeocnomy to uncover how best to enhance economic performance in the future. In particular, the MFR-China project, headed by HE Zhiguo, studies financial market evolution, banking reform, debt, and reform of state-owned enterprises. Researchers investigate the many questions facing China’s increasingly dynamic financial markets—from privacy issues to credit worthiness and systemic risk—including the emerging challenges facing China’s regulators. This research project provides important insight for Chinese policymakers, as well as build resources for future research. For more visit: mfr.uchicago.cn.