“Korean Corporate Strategies are the Role Models for China – Cooperation Creates More Opportunities”

October 07, 2013

An interview with CKGSB Professor Li Wei, in the Edaily

An interview with CKGSB Professor Li Wei, in the Edaily

A voice of concern is rising as China’s economic growth slows down and issues on the Local Government’s liabilities and property bubble are continuously raised. Professor Li Wei explained remedies for those structural problems cannot be resolved in a short term.

Professor Li showed a great concern over China’s property bubble. As land prices are unlikely to continuously rise, the credit quality on existing debts issued from the banks and the Government’s financial arms would eventually fall. This will cause liquidity shocks and pose a negative effect on Chinese banking system. Professor Li suggested that the new Government needs take measures to rein in property speculation in a short run. In the long run, the Government needs to reform China’s fiscal system so as to end local Governments’ reliance on revenue obtained from land sales and introduce property tax. Professor Li also claimed that as the currency value, wages and property prices rise, it will eventually mark down the price competitiveness that China’s been taking advantage of. He expects that the details on the specific reforms aimed at financial liberalization, fiscal reforms, land reform and Hukou system will be further discussed at the 18th Chinese Communist Party Central Committee’s Third Plenary Session.

However, Professor Li claimed that China still has a growth potential. To narrow the income gap with developed countries, China needs to continue to growth at 7% for two at least more decades. He believes that China has the capacity to realize such growth potential, yet the growth capacity could not be utilized unless structural reforms are carried out and the economic efficiency is improved.

Professor Li mentioned that China’s liberalization momentum should be highly beneficial to its neighboring countries as well as the rest of the world as China remains as an important destination for investment and a rapid growing market for goods and services produced in other countries. In particular, he commented that it would build a mutual interest between Korea and China as Korean firms will have more investment opportunity and China can be offered with valuable know-hows and lessons from Korean firms. Although Professor Li maintained a regrettable view that a European style post-war reconciliation did not take place in East Asia, he claimed that the benefits from economic cooperation among East Asian countries outperforms the tension and hopes that the cooperation can create an alliance for long-lasting peace and joint prosperity.

Please read the full interview in Korean on the Edaily website

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