Scholars: 'Smart' regulation necessary to guide economy

(China Daily)
Updated: 2012-09-17

Scholars and entrepreneurs exchange insights at a symposium during the World Economic Forum's Annual Meeting of the New Champions in Tianjin. Photos by Wang Jing / China Daily

Confidence in China's future economy is mainly the result of continued government-guided regulationand innovation, said scholars and entrepreneurs at a symposium of the Summer Davos Forum inTianjin on Sept 12.

But Lu Hongjun, president of the Shanghai Institute of International Finance, said the governmentshould play "a different role in future economic regulation than what it played over the past threedecades".

"There are three kinds of regulations the government can make," he explained. "Hard regulations likethe 4 trillion yuan ($632.4 billion) stimulus plan are taken when desperately needed, and the effect isvery powerful.

"Another kind of regulation is softer, basically providing guidelines for certain industries.

"But what's the most important is smart regulation," he said. "It is an invisible hand to guide andpromote innovation from the bottom up."

James Turley, chairman and CEO of Ernst & Young, said "China is absolutely doing the right thingsalong the right path".

"Having smart regulation - not no regulation - is what I'm nodding at."

Government regulation and the market are "two hands working cooperatively" to drive the nation'seconomy, said Zhang Bingjun, chairman of State-owned Tianjin TEDA Construction Group.

He said the government must take the lead in a number of industries such as infrastructure and newenergy development because "there is actually no profit in the beginning and possibly over a very longperiod afterward".

"But in some other sectors, where there is full market competition, the government should loosen itshand and let the companies play," he said.

Liu Changle, CEO of Phoenix Satellite Television based in Hong Kong, said the government shouldfirst play the part of investor in key projects including infrastructure, major research projects and large-scale industries such as aircraft and aerospace industries.

Second, it should be the founder of market order, he said.

The nation's future economy should highlight technical and product innovation and new energydevelopment, while paying more attention to western China, said Lu.

Emerging sectors

Seven emerging industries have been selected as strategic emerging industries by the Stategovernment, including environmental protection, new energy, new materials, bio-industries and high-end equipment manufacturing.

When companies are investing in those sectors, "to reduce risk, they should not act too fast or in toolarge a scale", said Liu. "Without upgraded technologies, large investment will lead to great waste andloss".

"The key element in the development of emerging sectors is expansion and development of lowerreaches of the market," he said. "If the government just makes policies and guidelines blindly, andignores the market, industries will lose vitality."

Knowledge economy

"Part of what will fuel China's future growth is the recognition that the industrial era will give way to theknowledge era," said Turley. "We see in the globalization drive a lot of value creation in intangibleproducts, virtual assets and intellectual property - technology is certainly impacting all of them.

"What is going to drive China's growth is having a real, more open and free exchange of knowledgewithin and between companies. And it creates a cultural exchange when the people realize thatknowledge is not to be held closed, but to be shared."

He said China has done "well as far as creating and securing patents, but less well in commercializingthem".

Liu added that China's industrial transformation has come to the stage that the "labor intensive modelis no longer the norm". Technology, innovation and education will play crucial roles at this time oftransformation, he said.

zhangzhao@chinadaily.com.cn

(China Daily 09/13/2012 page4)