Wu Jinglian: The Relationship Between Economic Growth and Employment is Not Linear

Aside from pointing out that employment and GDP growth are not linear, Wu Jinglian is not worried that home prices won't fall, he is worried they will collapse due to government policy designed to burst the bubble.

Below is the section on employment. I'm concerned that a significant slowdown in growth will cause a financial crisis in the short-term due to debt levels, but absent a major crisis, I do not believe that employment would suffer as long as GDP is positive. If you believe, for example, that China has been growing closer to 4% the past few quarters, then clearly the rate at which China can grow and still enjoy employment growth is far lower than believed by many economists and analysts.

I have to say that here there is a common misconception that economic growth and employment and people's incomes are linearly related. That is a certain growth rate would have to pay this price, only with such a fast growth rate to be able to have so many jobs to be able to make people's incomes have such a high growth. In fact, the relationship between this not so simple, economic growth is necessary, the problem is to look at how you grow, you rely on growth approach, which is called the problem of growth is that economic development issues.

A recent example, you can see the growth rate last year and fell several percentage points, the situation this year and a half jobs How? Employment situation is much better than the previous two years. That is to say, the relationship is not linear relationship between the two, not to say how many there are that many jobs growth.

"Ninth Five" program decided to transform the economic growth mode, "15" plan to do very well. In my book, "China's economic growth mode choice," which talked about the problem was discussed in the where, called institutional barriers. Major institutional obstacles that the government has the power is too allocation of resources, the government put GDP growth as the main indicator of performance. This is where the problem lies. So how do? Changes in the way. Core shift in approach is to increase efficiency, improve efficiency What way? Then talked about four ways: First, the rural surplus labor force of urban citizens; two manufacturing to emphasize the value chain extension, is to focus on R & D, design, service and other aspects, that is to develop the manufacturing sector Internal service components; Third, we must develop the service industry, independent development of services, especially producer services; fourth is using information technology to transform the entire national economy.

Why is the situation with the employment situation in this year's economic growth is in both directions? The main reason is the development of services industry is finally over, probably from the year before. Last year the proportion of tertiary industry in the national economy more than the second industry, which is the first time in history. Therefore, although the growth rate dropped a few percentage points, but employment did not fall.

But we now have a problem because the industrial structure in question, but rather the employment situation of university graduates is very bad. The reason is the high value-added, high-tech industry, the proportion is still too low. We certainly need to be further improved, but we must break that idea, saying it must maintain 8% or 10% growth rate in order to guarantee employment, it is not.

吴敬琏：不担心房价降不下去 更担心楼市崩盘

"I'm not worried about it not go down, I was worried it collapse. Year after the collapse of Japan has not up to now, so I do not think the macro authorities to take measures to take the initiative to pierce the bubble foam this thing the best Do not form after form is to find a way to make it slowly shrinking. "

Economic growth and employment is not a linear relationship

First Financial: We noticed Premier Li Keqiang said the "people of the expectations and the policy are to" in his government work report. You think after 30 years after China's reform and opening up, and now the expectations of the people of what?

Jinglian : Because we are now facing some very serious economic and social problems, I think the basic aspirations of the people is to be able to overcome these serious economic and social contradictions. Probably two aspects:

On the one hand is the issue of the so-called economic development model, driven by investment, consume a lot of resources to implement a model of economic development such growth can not be sustained. It caused a lot of problems, but is now becoming more and more serious. It is the destruction from the most microscopic waste of resources and the environment, to the extent now intolerable, I usually say the most basic conditions of human existence has been destroyed, air, water, land, and now the situation is very serious. Then turn to the more complex issues say it a lot, until the macro issues. Macro problem is because a lot of investment to stimulate growth by, it certainly will cause super-currency, and will result in improved inflationary pressures.

On the other hand is the issue of institutional. Institutional issues led some people to pursue the most basic - such as close to the people, officials honest, these are not.

First Financial: So what were the core of the conflict is?

Jinglian: the core of the conflict or institutional issues, the economic system, social cognition system. There are defects in the system, so it will cause corruption stretches, resulting in the transformation of economic development mode to turn to, turned ten years, and the problem accumulate more and more.

First Financial: So the policy are to do?

Jinglian: The policy is to first find out where the problem, and then find out how to solve this problem. And then use the power of government and the public together to solve these problems.

First Financial: As an economist, your Government's policy on how to specifically look? For example, rapid economic development, a number of high energy consumption, high pollution and backward areas of the project to create a lot of employment opportunities, but there is also a problem. How to solve the contradiction between the rapid development and the price paid for?

Jinglian: I have to say that here there is a common misconception that economic growth and employment and people's incomes are linearly related. That is a certain growth rate would have to pay this price, only with such a fast growth rate to be able to have so many jobs to be able to make people's incomes have such a high growth. In fact, the relationship between this not so simple, economic growth is necessary, the problem is to look at how you grow, you rely on growth approach, which is called the problem of growth is that economic development issues.

A recent example, you can see the growth rate last year and fell several percentage points, the situation this year and a half jobs How? Employment situation is much better than the previous two years. That is to say, the relationship is not linear relationship between the two, not to say how many there are that many jobs growth.

"Ninth Five" program decided to transform the economic growth mode, "15" plan to do very well. In my book, "China's economic growth mode choice," which talked about the problem was discussed in the where, called institutional barriers. Major institutional obstacles that the government has the power is too allocation of resources, the government put GDP growth as the main indicator of performance. This is where the problem lies. So how do? Changes in the way. Core shift in approach is to increase efficiency, improve efficiency What way? Then talked about four ways: First, the rural surplus labor force of urban citizens; two manufacturing to emphasize the value chain extension, is to focus on R & D, design, service and other aspects, that is to develop the manufacturing sector Internal service components; Third, we must develop the service industry, independent development of services, especially producer services; fourth is using information technology to transform the entire national economy.

Why is the situation with the employment situation in this year's economic growth is in both directions? The main reason is the development of services industry is finally over, probably from the year before. Last year the proportion of tertiary industry in the national economy more than the second industry, which is the first time in history. Therefore, although the growth rate dropped a few percentage points, but employment did not fall.

But we now have a problem because the industrial structure in question, but rather the employment situation of university graduates is very bad. The reason is the high value-added, high-tech industry, the proportion is still too low. We certainly need to be further improved, but we must break that idea, saying it must maintain 8% or 10% growth rate in order to guarantee employment, it is not.

About SOE reform

First Financial: We have noticed that the current reform of state-owned enterprise reform again as a priority for reform. We have also seen previously said to manage the business, and now will have to manage their capital. Such a change, what do you think is the deeper reason behind?

Jinglian: This is probably the most important issue of state-owned enterprises to absorb after the Third Plenum industry and economists to discuss a breakthrough. This is a directional change in the past, the government directly managed businesses, government officials, became the company's managers. This is not normal, it is they might of. So this is a very important change, the question now to see how to implement it.

First Financial: Speaking of SOE reform, how do you think last year's Shanghai launched the reform of SOEs 20?

Jinglian: Shanghai is particularly important, Shanghai is a particularly large proportion of state-owned enterprises city. It reforms the country is influential. All I know is the Shanghai of selling around the house before going to enrich the social security fund, I spoke highly of this matter. I think that now in order to prevent a systemic crisis, it must concentrate on doing. Since the Third Plenary Session which was about eighteen to be financed by the state-owned capital to augment the Social Security Fund, NSSF gap we are quite large. But have not yet seen action. This decision is not only related to the reform of state-owned economy, and balance sheets to prevent a high debt ratio, and effective way to prevent a systemic crisis.

"Man is both an angel and a devil."

First Financial: We all know that Food is, but there is a word called disease from the mouth. Everyone on food safety issues, and now has come to a scared state. Many parents in the choice of food for the kids quite a headache. How do you think the food safety?

Jinglian: This is a very complex issue. It needs to solve a system of food safety issues is difficult because of asymmetric information is difficult to know every consumer in the end of this food is safe or unsafe. Every consumer to consume thousands of products, he does not have this possibility to understand the manufacturing process of each product, content and so on. So there should be a whole system to ensure its safety.

So we must first solve the problem of asymmetric information, the information can only be mastered so that vulnerable information. Each of the above should indicate its food ingredients, what ingredients it will affect the health of the regulations. Government agencies use one hand to check is not truthfully disclose, on the other hand have some social institutions, including the legal system, consumer associations, consumer associations to help research a variety of foods is relatively weak side, in violation of the provisions of the legal system can not disclose the correct prosecution.

But now the problem is that we established very early, for example in the form of consumer associations. But first it seems there is a problem, because consumers tend to be industry association established strong side holds the information of this association.

Plus we have some larger institutional problem is that companies are often part of the local government, so it has been protected. Food quality problems often occurred after local law enforcement authorities to protect local businesses. So we need to sort out this problem after systematically addressed. For example, the Third Plenary Session will solve this kind of problem, the people rose belongings county courts at the provincial level to manage, this is the place to prevent the kind of judicial practice.

In addition, our system seems to hinder the old idea that we can do better in this regard. The old system I have already said, such as business related to local government is too closely related, so that it can not enforce the law.

First Financial: 30 years of reform and opening up, everyone's life has changed so much, why materialistic pursuit of money but is intensified up?

Jinglian: there is an assumption behind this, as if all of this is because people's desires caused. This assumption seems to be a little dangerous, it can lead to some very realistic conclusion or very pessimistic conclusion.

One kind of conclusion would be to find ways to eliminate self-interest, but this is certainly futile. Most people are present self-interest, so I still favor economics Adam Smith ancestral ways, that person is both an angel and a devil, you first assume that everyone is selfish, then you build a system that is invisible hand. Invisible hand makes each person to pursue their own interests, they must serve the community. Another aspect is to enhance people's sense of morality, promote human compassion, altruism of the heart. Hands to do so.

"Did not understand the purchase solve any problem. "

First Financial: We talked about food, we turn now to live, you have to have a point of view say that high prices are due to the Super-currency. What do you think the root causes of the currency over the produce is?

Jinglian: currency over the most fundamental reason is the growth pattern in my opinion. With investment to stimulate growth, in order to ensure that the growth rate reaches a certain level. And you own actual potential growth rate, the level of this technology is that you can now reach, often to more than. Over how to do, to send the bill on the backlog of such resources. Just because you are living beyond their means, to master more than the actual number of resources going to use it to support growth. So will the money over.

After the reform and opening added a new factor, because this used to stimulate growth in investment mode, it will create a situation where overcapacity and lack of consumer demand. So to tackle this problem without changing the investment-led growth pattern, we learn the Japanese way is export-oriented, affluent part of our products sold overseas to go.

It played a very good effect in a period. But after a few years or a little longer, all these countries there is a problem, that is too much foreign exchange. Forex much later on create a pressure: their currencies to appreciate. Such economic structure to the original cause of the impact on export enterprises exporting regions are opposed to appreciate. Then the government often respond to such a request, the central bank's intervention to the acquisition of foreign exchange, to suppress the national currency. So the country 's foreign exchange reserves has increased a lot. For example, nearly four trillion dollars of foreign exchange reserves, it's not fall from the sky, which is issued by the central bank to buy it with money to come. Monetary economics is called in our high-powered money. The central bank issued the purchasing power of a dollar is not a dollar but caused a few bucks. So nearly four trillion dollars of foreign exchange reserves, the central bank issued hundreds of thousands of yuan currency to buy, these ten trillion yuan currency loans through bank deposits changed, the role of the loan becomes deposits formed nearly one million billion in purchasing power. That's why I say our money over it.

After the Super-currency, particularly in East Asia, preservation methods we first thought is that the house. Our stock market collapse and lost, so he is more focused on the real estate market. Fundamentally speaking, let prices fall, it is imperative to an appropriate degree of monetary control. However, because our economy is to a considerable extent by the monetary support, austerity is not too fast. After the bubble about tightening too fast will break the bubble broke this disaster too.

But the real problem it causes must be addressed is that people do not live in the house. This problem must be solved immediately. So I think the government should adopt the approach taken by many developing countries, such as low-cost housing. First, find a way to provide some lower-priced or cheap rental house; Another way is to give low-income housing subsidies.

First Financial: government work report also talked to classify control the property market, so people think there might be another restriction. How do you see this classification regulation?

Jinglian: I do not quite understand why the regulation, the regulation does not know why.

First Financial: You think it should be the invisible hand of the market?

Jinglian: That is an invisible hand, the amount of currency to try to go on. Another is the government quasi-public goods. Because this is the basic duty of a government. This is your basic duties, the government should hand to solve this problem. As for many years has been engaged in the purchase of what the problem is solved, I always did not understand.

First Financial: If you are not limited to the purchase, holding the hands of a lot of money that people may put the property as an investment product or speculative grade, the higher the more speculation. Is there pressure in this respect?

Jinglian: So the problem here, the government must consider the child when the invoice is to ensure that the people you do not devalue the tickets. This is a credit money, is that you trust me this ticket is not to devalue. But I forbid you to buy this, you should not buy that, this okay? Invoice child when you are committed to the people of this ticket can buy things.

First Financial: Some people around me I heard an interview with Mr. Wu, Mr. Wu said that prices will ask the emergence of a turning point.

Jinglian: to fundamentally solve this problem, but also a smooth solution to this problem. As I said earlier, you can not ask excesses. I'm not worried about it not go down, I was worried it collapse. Year after the collapse of Japan has not up to now. So I do not think the macro authorities to take measures to take the initiative to pierce the bubble. This stuff is best not to form a bubble, after the formation is to find a way to make it slowly shrinking.