Economist's lessons still valid for Chinese reform

World-renowned British-American economist Ronald Harry Coase passed away on Sept 2 at the age of 102. But his theories are still pertinent to China's future reform, said an article in the Southern Metropolis Daily (excerpts below).

China's reform in the past 30 years actually proves the correctness of Coase's theories: reducing transaction costs and establishing property rights are key elements in any reform.

The future reform of China should continue on that path. However, obstacles remain.

State-owned enterprises, household registration and urbanization are dominated by vested interest groups, who benefit from high transaction costs and poor property rights.

For example, the transaction costs for many State-owned enterprises are much higher than for private enterprises. Were it not for the government's preferential policies and financial support many SOEs would not survive.

Farmers' property rights over their land are not fully protected by relevant laws. Otherwise, it would not have been so easy for governments to use controversial land transfers as a reliable revenue source.

Coase also believed in stimulating public creativity.

China realized fast growth by giving enterprises and rural dwellers their due freedoms and allowing them to earn their living.

Lifting controls will further this process and allow the economy to be more dynamic.