China must draw the right lessons from the failures of its one-child policy — Yasheng Huang

MIT Sloan Prof. Yasheng Huang

MIT Sloan Prof. Yasheng Huang

From South China Morning Post

In 1983, the UN gave China and India awards for their efforts to control the population. The recipient for India was its then prime minister, Indira Gandhi. She famously pushed for a compulsory sterilisation campaign and even suspended elections in order to enforce it. Her programme failed miserably, and one of its enduring effects is a pervasive distrust of India’s health care system, which still plagues public health efforts today.

By contrast, China’s one-child policy was in place for 35 years until this October, when the government announced a shift to a “one couple, two children” policy.

The contrast in duration between the Chinese and Indian population control policies cannot be sharper, and it is this, among other differences, that prompted some Western observers to argue that the authoritarian Chinese system is more capable of enforcing politically tough but economically rational policies.

The reality is much more complicated. It is true that India has a higher fertility rate than China and it is also true that India could not enforce population controls as effectively as China has. But there are many other differences between China and India that would account for a lower fertility rate in China, regardless of policies. Chinese women enjoy a higher socio-economic status than Indian women. Chinese basic education and public health are far superior to those in India. All these factors would have led to a declining fertility rate in China even if China did not have the one-child policy in place.

Read the full article at South China Morning Post.

Yasheng Huang is the International Program Professor in Chinese Economy and Business and a Professor of Global Economics and Management at the MIT Sloan School of Management.

China’s economic policymakers have to learn to let go if they want to establish credibility — Yasheng Huang

MIT Sloan Prof. Yasheng Huang

MIT Sloan Prof. Yasheng Huang

From South China Morning Post

The ability of the Chinese government to control is undisputed and unparalleled compared with governments in other countries and, indeed, compared with the Chinese state during imperial times. If the stock market does not go up, then prevent it from going down by shutting it down. If too many investors want to cash out their positions at the same time, just charge them with “malicious intent to sell” and arrest them as proverbial chickens to scare off the monkeys.

The problem is that a government so focused on and obsessed with controls is not one that cares about or is particularly good at establishing credibility. A government needs credibility when it tries to convince others to do its bidding without the ability to dictate actions directly.

In his book, The Courage to Act, Ben Bernanke wrote about how US Federal Reserve officials debated and deliberated long and hard about particular words and phrases, and even about the usage of different punctuation marks, in their communiqués with the public.

The reason is that the effectiveness of the Fed does not depend on its ability to arrest people at will but on how it is perceived by market participants – whether it is perceived as being capable, deliberative and above all credible. If the Fed lost the confidence of the market, much of its influence and leverage would evaporate.

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The end of China’s growth model — Yasheng Huang

MIT Sloan Prof. Yasheng Huang

MIT Sloan Prof. Yasheng Huang

From The Boston Globe

Stock markets continue to respond strongly to China’s economic woes, fearing a crippling slowdown since China suddenly devalued its currency two weeks ago — a move widely interpreted as a desperate attempt to support growth.

But Chinese growth in the future will be limited until the government makes fairly substantive structural reforms.

China’s growth model is one in which the role of the state in the economy has become more intrusive. For years, many US observers hailed China’s government-led and investment-heavy model as a pillar of strength. Their favorite comparison is between the spunky new airports in Beijing and Shanghai and the supposedly dilapidated New York JFK and Los Angeles airports. While comparison has an element of convenience to it — you have to depart from a US airport and arrive at a Chinese airport when you visit China — the “airportology’’ is flawed, because it doesn’t take into account that China has clearly overbuilt, and at a considerable cost to its middle class.

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For breathable air, China must reduce the costs of its growth — Yasheng Huang

MIT Sloan Prof. Yasheng Huang

MIT Sloan Prof. Yasheng Huang

From South China Morning Post

The visible effect of pollution in China is undeniable. I recently spent two weeks in Beijing, where I grew up, with my family. For the first seven days, the sun did not shine. A hazy layer of greyish-white smog hung over us. Every morning, I checked the air quality index, which uses guidelines set by the US Environmental Protection Agency (EPA), on my smartphone app and the results were alarming.

Air quality came in at around 300. According to the EPA, levels between 301 and 500 are considered “hazardous”, meaning people should steer clear of all outdoor activity. Essentially, it’s like breathing in the fumes from a forest fire. (For comparison, Boston’s air quality is about 45.)

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Why democracy still wins: A critique of Eric X. Li’s “A tale of two political systems” — Yasheng Huang

MIT Sloan Professor Yasheng Huang

MIT Sloan Professor Yasheng Huang

From TED Blog

Imagine confusing the following two statements from a cancer doctor: 1) “You may die from cancer” and 2) “I want you to die from cancer.” It is not hard to see a rudimentary difference between these two statements. The first statement is a prediction — it is saying that something may happen given certain conditions (in this case death conditional upon having cancer). The second statement is a preference, a desire, or a wish for a world to one’s particular liking.

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