Local officials main force behind China's growth, leading economist says

Local officials — mostly mayors of cities big and small — have been among the main forces driving China's economic growth over the past 40 years, said an economist trained in the United States and China.

Keyu Jin, an associate professor of economics at the London School of Economics and author of The New China Playbook: Beyond Socialism and Capitalism, presented her perspective on modern day China at a virtual discussion on Monday organized by the US Heartland China Association, Global Minnesota, and the China-US Exchange Foundation.

Jin said that in the past, local officials "were incentivized to help the good private entrepreneurs rather than stick with just the state enterprises" and "pick the more productive people so that it brings tax revenues, jobs, gets GDP and it helps them get promoted".

That works today but with a new focus, she said.

"Many local officials I've talked to have been highly ambitious about innovation and technology," Jin said. "One city would focus on electric vehicles, another would focus on batteries, and yet another on renewable energy."

The list also includes ship design, semiconductors and manufacturing, she added.

Even today, as China's economy meets its challenges, local officials are very much still extremely interactive with entrepreneurs of the region, Jin said.

China is also culturally different from Western countries. That culture leads Chinese people to always try to find a balance to exert one's free will and creativity, she said.

Such cultural complexity might be causing some of the misunderstandings or divergence in Westerners' eyes, she said.

Despite its thousands of years of history, China is a young nation in a modern economic sense, Jin said.

Because of that, Jin does not agree with views that China has peaked or is going to be like Japan, or that the demographics will mean a doom loop, or that there will be financial collapse.

Other factors

While GDP was the main barometer of success in the past in China, factors such as security, environmental protection, common prosperity, technology and innovation are also factors now for policy consideration. That explains China's current economic policy, Jin said.

Speaking of the economic relationship between the US and China, she said, "If you are talking about the looming financial crisis globally, how is it possible that the two central banks are not going to talk to each other, or that China is not going to come out and provide a global financial anchor alongside the US?"

The two countries need to rebuild trust, and they should do it by compartmentalizing their differences and normalizing certain amounts of trade and investment, she said.

"Let the universities be open, the scientists able to share research," Jin said, adding that it is "really very much a shame to close those doors".

Jin said she hopes that her perspective will help world leaders and people understand each other better, so that "we would come to be more cooperative and productive".