Yu Pinghai: "You can't blindly copy methods of developed economies"

Yu Pinghai: "You can't blindly copy methods of developed economies"

Russian-Chinese conference "From Вiscussions About Shock Therapy to Search for Optimal Economic Model" was held yesterday in the Institute of Asian and African Countries of the MSU. It was attended by economists, political scientists, international affairs specialists and orientalists of the two countries. Chairman of the Supervisory Board of the New Structural Economics Institute of the Peking University, Editor-in-Chief of the Doway News Media Co. media group (Hong Kong), Dr. Yu Pinhhai,  answered questions of Vestnik Kavkaza at the sidelines of this event.

- Economists define "new structural economy" as somethings built based on "factor of ownership of resources" and taking "advantage of underdeveloped state". What does this mean in practice?

- This theory basically tells you when you’re doing economic development you should look at the endowment effect of your society. Whether you have natural resources, good labour force or technologies, or you have a lot of capital, for example, you shoyld plan your economic development strategy accordingly. There shouldn't be a blue print, like the West has universal values that do not differentiate at all among different countries, so all countries are the same. But in reality, all countries are different. So the size of the population, capital accumulation, technology level – they all different.

So the new structure economics is a better way to describe how economy is being developed, especially when you are at the low development stage. Because a lot of developing countries in the past have learned from the advanced economies, but they don’t just learn, they copy. This is where mistakes begin. Because the advanced economies don't have the same endowment effect.

So you shouldn’t use the same methods as the advanced economies use, cause in reality, they all use the same methods like linearization of foreign currency, privatization of enterprises and minimum control from the government. All of that affects economic development of developing countries. 

So the new structure economics is nothings like that. All economies have different kinds of endowment effects. So we have different development programs for different countries.

- What causess current trade war between China and the US?

- I think the problem of China and the USA is basically a structural conflict between two different kinds of development model. China is a less developed country compared to the USA. But China is rising very fast. In a lot of areas it is threatening the USA. 

And the US doesn’t carrye out reforms as much as other economies like China and Russia. So there’s always a problem when rising economy creates some kind of threat to an advanced economy. So I think they need to do a lot of adjustments among the two economies. And the so-called trade war is just another part of this conflict. These two economies have to learn to communicate and converge in the future. I don’t see this war lasting for too long, but it will continues for quite a while. But it won't be a real war.

- What do you think about prospects of economic cooperation between Russia and China?

I think the two countries have a lot of things in common. They both decided to have a more aggressive development program. These countries have different endowment effect. China has very strong labor resources, very strong technologies, but it's not as strong as Russia in natural resources, for example. So there are a lot of things that can help the two to work together. But I think they need to seriously evaluate complementarity of the two economies and gradually see whether they can identify some methods of cooperation between them. I see a very good future for the two countries if they work together.