Table of Contents

序言（Preface)
简写表（Abbreviations）
第一章 概览（Big Picture）
第二章 货币政策（Monetary Policy）
第三章 地方政府融资平台（Local Government Financing Platforms）
第四章 房地产市场（Property Market）
第五章 能源（Energy）
第六章 投资与重点工程（Investment and Key Projects）
第七章 未来改革展望（The Outlook for Major Reforms）
第八章 中国的新领导层与新政府（China’s New Leadership and Government）
第九章 国家发展与改革委员会（National Development and Reform Commission）
第十章 财政部（Ministry of Finance）
第十一章 人民银行（People’s Bank of China）
第十二章 商务部（Ministry of Commerce）
第十三章 工业与信息化部（Ministry of Industry and Information Technology）
第十四章 国有资产监督管理委员会（State-owned Assets Supervision and Administration Commission）
第十五章 中国银行业监督管理委员会（China Banking Regulatory Commission）
第十六章 中国证券监督管理委员会（China Securities Regulatory Commission）
第十七章 中国保险监督管理委员会（China Insurance Regulatory Commission）

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Case Study – Transitional Governments
The key goals for the 12th Five-Year Plan represent continuity in policymaking from the ideas outlined by former President Hu Jintao for the 11th Five-Year Plan. In the 2005 National People’s Congress, Hu pushed forward the ideas of the “harmonious society” (和谐社会, héxié shèhuì ) in conjunction with his “scientific outlook on development”
(科学发展观, kēxué fāzhăn guān).
While the harmonious society concept can be traced back to Confucius, in this sense it is a socio-economic theory that is the end goal of the scientific development concept. In essence, it is putting the people first through sustainable development, social welfare and a humanistic society.
These two concepts, when initially announced, represented a new direction for China’s economy, shifting away from its previous development pattern. It was a refinement and acceleration of what former President Jiang Zemin proposed of “keeping pace with the time” (与时俱进, yǔ shí jù jìn), which was the first step taken in moving China away from the previous model of “growth at all cost”.
Still, much more is needed to shift away from this old model and create the well-off society envisioned by former leaders. In 2011, then Vice Premier Li Keqiang said that China will continue scientific development during the 12th Five-Year Plan period, accelerating the transformation of economic development. This is not surprising, as Li would have been very much engaged in the formation of the 12th Five-Year Plan as executive vice premier, and it therefore reflects some of his own views. Policy continuity is important for stability, but he may choose to emphasize different aspects of the plan as Premier. For example, after the Party Congress in November 2012, Li continually stressed his new vision for urbanization as a driver of China’s growth, taking an old idea and giving it new direction.
In the future, President Xi Jinping is expected to introduce new key terms and development guidelines and Li Keqiang will introduce new economic reforms. Scientific development will continue for a period, but this will be altered as Xi will put his own mark on policy. It will be important to monitor this and see how this will affect former President Hu’s plan for a harmonious society and how this will change the implementation of the 12th Five-Year Plan. Things will certainly change under Xi, who said “空谈误国，实干兴邦 or kōngtán wùguó, shígàn xīngbāng” (empty words harm the country while hard work revitalizes it) to explain that changes and work are needed to realize the Chinese Dream.
On November 29, 2012, newly elected Party leader Xi Jinping defined the Chinese Dream as “to realize the great renewal/revival of the Chinese nation”, and expressed his confidence that the dream will definitely be achieved. Three months later, Xi further explained the Chinese Dream in his speech at the closing session of the NPC, at which he was elected President.
At that time, the Chinese Dream became a hot topic all over China. Not only did all sectors of the economy incorporate the Chinese Dream into their daily jobs and corporate strategies, but school children also gave speeches on the topic. Indeed, it can be seen as a successful publicity campaign, as it involved the entire nation and led to large-scale grassroots discussions in a short period of time.
Although Xi has his views on the Chinese Dream, highlighting the Path, Spirit and Power of China, it is more designed as an umbrella concept which allows each person to express the Chinese Dream from his own perspective. Seeking to build a relationship between the nation and its citizens, it is a smart approach and is not seen simply as just another political slogan.
Following decades of rapid development and opening-up, China and the Chinese people are gaining confidence to use these words that make reference to the American Dream, a national ethos which stresses egalitarianism and promises the opportunity for prosperity regardless of one’s social situation. It is a signal that the new leadership is willing to go ahead with concrete reforms.
In fact, the Chinese Dream does not mean a change of direction. It includes all the reforms and developments discussed in this book. It simply means that now is the time to get it done.


Preface
Preface
The English language literature on China is seemingly endless, the vast majority of which tries to explain aspects of China’s history, culture and economy to the Western world. This is a commendable task, for the history is expansive and the culture very different from that known in the West, whether in the United States of America or Europe.
Lately, many of these books have focused on China’s meteoric rise to the world stage, its incredible potential, the innumerable risks overcome and the many more that lie waiting. No matter what point in history authors begin their account of China’s growth (most commonly either in 1978, the beginning of the reform and opening up, or 2001, when China joined the WTO), however, the focus almost always turns to what China should or needs to do in the future to succeed in becoming a global superpower.
The problem with this approach is that the recommended course proposed for China is formed on the basis of experience in other countries which, while similar in certain ways, is also very different. Generally speaking, authors usually make comparisons to either the growth model of the West or that of Japan and the Asian Tigers of South Korea, Taiwan, Hong Kong and Singapore. People look to the US economy because China is in the process of adopting some more market-oriented reforms, and the US has long been the paradigm of the free market. Meanwhile, comparisons to the Asian Tigers give comfort, as it is thought that cultural similarities make the path more predictable. When following either approach, however, the end solution is China transitioning towards a free market economy. We believe this conclusion is premature.
The Chinese, possibly more than the people of any other country, are students of history. China’s history is longer than any other modern civilization and almost everyone in China, whether the common man or top officials, views history as an indispensable part of where they are and where they will go.
Three events in history stick out as to why China will not follow the same path of other nations. The first two contradict a path built on the Asian Tigers model, while the third raises questions about the US model. First, there are the large currency reforms undertaken by Japan in the mid-1980s under pressure of foreign governments, which contributed to one of the largest economic bubbles in history. Second, there is the Asian Financial Crisis in 1997 and the effect it had on the majority of the region. Third, and most important, is the global financial crisis that began in 2007, which made many people rethink the correctness of the financial model in the US on which the structure of global markets has been based.
Beyond these three, there are countless other events in the history of China and the world that have shaped the opinions of top policymakers in ways that are far removed from the Western way of thinking.
So, instead of focusing on what China should do, in this book we will attempt to explain what the most likely path of reform will be. Each step of the way, we will explain the unique historical conditions that have led China’s economy to where it is now, and how historical and cultural factors affect the decisions that are likely to be made in the future. We will try to shed some light on the Chinese economy and explain why and how some quintessentially Chinese practices are used to solve problems, highlighting both the positive and negative effects of China’s distinctive economic model.
Most books on China tend to fall into one of three categories. The first category is those books that try to explain how to do business in China. For the most part, they are stories of how entrepreneurs and businessmen got swindled out of their money and undercut by domestic competitors. They generally present China in a negative light. Second are those books that are less about personal experience, but yet still focus on the negatives, outlining what they see as the inevitable failure of China’s system. Third, and lastly, are those books that focus on the positives and defend why China will continue its unprecedented economic success.
In contrast to all of these books, we attempt to be as neutral as possible on China’s economic prospects. While we recognize that the task facing China’s new leaders is immense, we choose not to simply focus on the negatives, nor will we highlight only the positives. We attempt to elucidate areas where China has potential, as well as draw attention to problems that the leaders face, outlining how they may attempt to address them.
By no stretch of the imagination is this an easy task, but we believe our respective backgrounds make us uniquely qualified to do so. We, the authors – one Chinese and one American – have lived and worked both in China and in the West. Our experience and ongoing collaboration, with countless hours of thoughtful dialogue between us, puts us in the uncommon position of being able to analyze and succinctly explain what could be expected.
Without the input from the Chinese psyche, many books on China miss subtle forces that have profound impact. Meanwhile, the addition of Western thought to such Chinese thinking may elucidate certain inferred forces or actions that would otherwise remain unexplained to the outside world.
The book is split into two parts. The first part is a review of China’s economy and the reforms that can be expected, as mentioned above. The book is framed in the context of the 12th Five-Year Plan, which lasts from 2011 to 2015. China began to use five-year plans in 1953 as a way for the central government to guide economic development. Although many things have changed over the last 60 years, policymaking remains rooted in central planning.
The second part is designed for reference purposes. It will offer fresh insight into China’s newly elected leadership, from the Top Seven in the Politburo Standing Committee down to the new heads of each major ministry. It will include outlines of major functions of the different regulatory agencies and the most important people in each body, as well as other key terminology that must be known to understand China.
The second part, in many ways, should be more useful than the first in terms of understanding China. While there are many reforms on the agenda of top policymakers, the decisions on which reforms will be prioritized over others and how quickly they will be implemented are related to the disposition of the people in charge and the relative distribution of power between individuals or government agencies. While China has many potential reforms to undertake, they will not be addressed in order of economic priority, as one might expect.
The reforms will be undertaken based on the ability of the new leadership to negotiate with special interest groups. While this is true in many countries, accentuated, for example, by the partisanship within the United States Congress, the negotiations in China are of a different nature given the historical power structure concentrated among just few individuals. Therefore, understanding the power dynamics and the predilection of the newly elected leadership is of utmost importance.
This book, therefore, has two uses. First, it can be used as a tool to give a background and history of economic policy and a review of what reforms are likely to be enacted in the medium term. The second is to act as a reference manual for all things related to China’s economy. Whether it is the structure of the government, the tasks of each agency or the particular leanings or influences of each person, the information can all be found in this book and can give a basic understanding of how policy is enacted and carried through.
Preface
The English language literature on China is seemingly endless, the vast majority of which tries to explain aspects of China’s history, culture and economy to the Western world. This is a commendable task, for the history is expansive and the culture very different from that known in the West, whether in the United States of America or Europe.
Lately, many of these books have focused on China’s meteoric rise to the world stage, its incredible potential, the innumerable risks overcome and the many more that lie waiting. No matter what point in history authors begin their account of China’s growth (most commonly either in 1978, the beginning of the reform and opening up, or 2001, when China joined the WTO), however, the focus almost always turns to what China should or needs to do in the future to succeed in becoming a global superpower.
The problem with this approach is that the recommended course proposed for China is formed on the basis of experience in other countries which, while similar in certain ways, is also very different. Generally speaking, authors usually make comparisons to either the growth model of the West or that of Japan and the Asian Tigers of South Korea, Taiwan, Hong Kong and Singapore. People look to the US economy because China is in the process of adopting some more market-oriented reforms, and the US has long been the paradigm of the free market. Meanwhile, comparisons to the Asian Tigers give comfort, as it is thought that cultural similarities make the path more predictable. When following either approach, however, the end solution is China transitioning towards a free market economy. We believe this conclusion is premature.
The Chinese, possibly more than the people of any other country, are students of history. China’s history is longer than any other modern civilization and almost everyone in China, whether the common man or top officials, views history as an indispensable part of where they are and where they will go.
Three events in history stick out as to why China will not follow the same path of other nations. The first two contradict a path built on the Asian Tigers model, while the third raises questions about the US model. First, there are the large currency reforms undertaken by Japan in the mid-1980s under pressure of foreign governments, which contributed to one of the largest economic bubbles in history. Second, there is the Asian Financial Crisis in 1997 and the effect it had on the majority of the region. Third, and most important, is the global financial crisis that began in 2007, which made many people rethink the correctness of the financial model in the US on which the structure of global markets has been based.
Beyond these three, there are countless other events in the history of China and the world that have shaped the opinions of top policymakers in ways that are far removed from the Western way of thinking.
So, instead of focusing on what China should do, in this book we will attempt to explain what the most likely path of reform will be. Each step of the way, we will explain the unique historical conditions that have led China’s economy to where it is now, and how historical and cultural factors affect the decisions that are likely to be made in the future. We will try to shed some light on the Chinese economy and explain why and how some quintessentially Chinese practices are used to solve problems, highlighting both the positive and negative effects of China’s distinctive economic model.
Most books on China tend to fall into one of three categories. The first category is those books that try to explain how to do business in China. For the most part, they are stories of how entrepreneurs and businessmen got swindled out of their money and undercut by domestic competitors. They generally present China in a negative light. Second are those books that are less about personal experience, but yet still focus on the negatives, outlining what they see as the inevitable failure of China’s system. Third, and lastly, are those books that focus on the positives and defend why China will continue its unprecedented economic success.
In contrast to all of these books, we attempt to be as neutral as possible on China’s economic prospects. While we recognize that the task facing China’s new leaders is immense, we choose not to simply focus on the negatives, nor will we highlight only the positives. We attempt to elucidate areas where China has potential, as well as draw attention to problems that the leaders face, outlining how they may attempt to address them.
By no stretch of the imagination is this an easy task, but we believe our respective backgrounds make us uniquely qualified to do so. We, the authors – one Chinese and one American – have lived and worked both in China and in the West. Our experience and ongoing collaboration, with countless hours of thoughtful dialogue between us, puts us in the uncommon position of being able to analyze and succinctly explain what could be expected.
Without the input from the Chinese psyche, many books on China miss subtle forces that have profound impact. Meanwhile, the addition of Western thought to such Chinese thinking may elucidate certain inferred forces or actions that would otherwise remain unexplained to the outside world.
The book is split into two parts. The first part is a review of China’s economy and the reforms that can be expected, as mentioned above. The book is framed in the context of the 12th Five-Year Plan, which lasts from 2011 to 2015. China began to use five-year plans in 1953 as a way for the central government to guide economic development. Although many things have changed over the last 60 years, policymaking remains rooted in central planning.
The second part is designed for reference purposes. It will offer fresh insight into China’s newly elected leadership, from the Top Seven in the Politburo Standing Committee down to the new heads of each major ministry. It will include outlines of major functions of the different regulatory agencies and the most important people in each body, as well as other key terminology that must be known to understand China.
The second part, in many ways, should be more useful than the first in terms of understanding China. While there are many reforms on the agenda of top policymakers, the decisions on which reforms will be prioritized over others and how quickly they will be implemented are related to the disposition of the people in charge and the relative distribution of power between individuals or government agencies. While China has many potential reforms to undertake, they will not be addressed in order of economic priority, as one might expect.
The reforms will be undertaken based on the ability of the new leadership to negotiate with special interest groups. While this is true in many countries, accentuated, for example, by the partisanship within the United States Congress, the negotiations in China are of a different nature given the historical power structure concentrated among just few individuals. Therefore, understanding the power dynamics and the predilection of the newly elected leadership is of utmost importance.
This book, therefore, has two uses. First, it can be used as a tool to give a background and history of economic policy and a review of what reforms are likely to be enacted in the medium term. The second is to act as a reference manual for all things related to China’s economy. Whether it is the structure of the government, the tasks of each agency or the particular leanings or influences of each person, the information can all be found in this book and can give a basic understanding of how policy is enacted and carried through.