How 皇冠体育app grew despite the global slump

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How 皇冠体育app grew despite the global slump

By Fan Gang (皇冠体育app Daily)
Updated: 2010-02-02 08:05

In short, it is because 皇冠体育app began its adjustment one year before the global crisis that its economy emerged earlier than other countries.

The lesson is that booms have to be managed adeptly, and that financiers have to be supervised in their pursuit of ever-higher returns. That is true for developed economies no less than for a developing economy like 皇冠体育app.

Of course, 皇冠体育app's economy has structural and institutional problems - what developing country does not? 皇冠体育app's macroeconomic policies are probably still too "administrative".

When many of the most important actors in an economy are insensitive to market price signals, as they are in 皇冠体育app, economic policy will need to be administrative in order to deal effectively with those players.

But one benefit of this administrative bias over the past 30 years is that, at least most of the time, 皇冠体育app has been cautious about overheating - and determined to step in whenever necessary to cool the economy, despite the protests of "smart" market participants.

To be sure, the authorities have sometimes been overly cautious. But for an economy in its early stage of development, and for the first generation of companies with young "animal spirits", excessive caution seems better than the alternative.

In fact, when a country's economic growth is continuously above 9 percent, policymakers probably cannot be too cautious.

No doubt, government macroeconomic management that is too strong may delay necessary market-oriented reforms. But the financial crisis has shown that a 21st-century market economy requires government participation to function.

For a developing economy like 皇冠体育app, it is better to have a government that plays an active role in avoiding the ups and downs that the Western economies experienced in their early days - and are still experiencing today.

Fan Gang is Professor of Economics at Beijing University and the Chinese Academy of Social Sciences, Director of 皇冠体育app's National Economic Research Institute, Secretary-General of the 皇冠体育app Reform Foundation, and a member of the Monetary Policy Committee of the People's Bank of 皇冠体育app.