Guest Author: Project Team of Development Research Center of the State Council (DRC), China.

The Kyoto Protocol, as ‘the first game in town’, represents significant progress towards reducing global emissions. Its cap-and-trade mechanism and flexible market-based implementation have been valued highly.

Meanwhile, its flaws have also been widely criticised. Particularly its small coverage and ineffectiveness, and the lack of incentive for countries (especially developing countries) to participate. To effectively fight against global warming, we need a more effective post-Kyoto architecture.

The DRC team has proposed an architecture that attempts to improve on these shortcomings. Read the rest of this entry »

Author: Yongsheng Zhang

When the proposal for the Rio-Chinalco deal was first emerging, the so-called national interest issue was hotly debated in Australia. Some people warned that the deal was not in Australia’s national interest. With Rio Tinto’s rejection of the offer, the deal has now fallen through.

Does the rejection really serve Australia’s national interest, as suggested by key members of the Opposition and some sections of the Australian press?

The reasons why some Australians think China’s SOE investments in Australia, especially in the resources sector, are not good for Australia look convincing. Australia is a free market economy. It welcomes foreign investment, but that mostly (though not always) means foreign private investment, not investment by foreign government-controlled SOEs.

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Special Author: Yongsheng Zhang, Development Research Centre, State Council, and Renmin University, Beijing

The Chinese people had high expectations for smooth and fruitful year at the beginning of 2008 – the year of the Beijing Olympics, the 30th anniversary of China’s reform, and a number in Chinese culture signifying good luck and good fortune.

As it turned out, 2008 was a year in which there was as much bad luck as good. In February, southern China was lashed by a severe snow storm; in March, social turmoil in Tibet; in May, the devastating earthquake hit Sichuan; and the Olympic torch was met by protests in some Western countries.

The Olympics in August were a stand-out and government and land reforms were welcomed. But after the Olympics, the world was thrown into economic crisis, and China had to turn to fighting the rapid onset of economic recession.  The poisoned milk scandal also took place.

These were no trivial tests of the achievements of 30 years of reform. The scale of China’s growth and its speed is without precedent in world history. But the question remains: how resilient to natural and social disasters is the new China ? And what further reforms are needed to assure a harmonious role in the world?

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Author: Yongsheng Zhang

Over the past three decades, institutional changes have been the major driving force for China’s economic development. But, as Ross Garnaut recently stated in Beijing, “many foreign analysts have underestimated the importance of institutions in economic development, and the inevitably gradual nature of successful institutional change”.

If China’s reforms prior to 2000 for establishing a market economic framework could be called the first generation of reforms, then subsequent reforms aimed at improving the market economic system could be called the second generation of reforms (2G), designed to eradicate the hardest institutional barriers incompatible to a market economy.

But the 2G reforms need momentum. For instance, it is not so easy to break the vested interests. However, proper application of the rule of law and civil society measures can provide the momentum and act as a warranty for the success of the 2G reforms and for China’s long term economic prosperity.

The recent strikes of taxi drivers in some places in China is a good example. Read the rest of this entry »

Author: Yongsheng Zhang

The Chinese government has adopted ten major new measures to pump 4 trillion yuan (A$950 billion) into stimulating economic growth through to 2010. And this is just the government expenditure! Economic growth will not be a problem in China.

The New York Times reports:

In a bold move at a time when major projects are being put off around the world, Beijing said it would spend an estimated US$586 billion by 2010 on wide array of national infrastructure and social welfare projects, including constructing new railways, subways, airports and rebuilding depressed communities.

The package, announced by the State Council Sunday evening, is the largest economic stimulus effort ever undertaken by the Chinese government and would amount to about 7 percent of the country’s gross domestic product during each of the next two years.

Beijing also said it was loosening credit and encouraging lending and that it needed to have a more ‘pro-active fiscal policy’ in order to strengthen its economy.

Government expenditure is only part of the story. Read the rest of this entry »

Author: Yongsheng Zhang, DRC of the State Council, PRC and Renmin University

Climate change is a common challenge for all countries. All industrial countries, except the US, have signed the Kyoto Protocol to take responsibility for reducing greenhouse gas emissions. US President George W Bush defended the America’s inaction at the G8 summit in early July 2008 in Japan, saying that he wouldn’t agree to cutting emissions unless China and India did so too. ‘I’ll be constructive. I also am realistic enough to tell you that if China and India don’t share the same goal then we’re not going to solve the problem,’ Bush said. Defending US policy by targeting India and China does not make sense.

The problem of carbon emission rights allocation among all countries is a problem in how to clearly define property rights so as to prevent the externalities of emissions. The principle that should be applied is ‘whoever benefits, pays’. According to this principle, it is not fair, at the stage, to impose the same obligations on developing countries to reduce emissions as on the developed countries, though voluntary emission cuts by developing countries are necessary.

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