 I'm going to open things up a little bit and say China is number one. What does this mean? Will China become number one? Does China want to become number one? Who'd like to start on that particular issue? Will China become number one and when? Liga. All right. So thanks, Michael. Thanks for the opportunity and at the lunchtime Michael and Jen said, you know, you're young, it's not coming so to pull it off the last minute. So will you step in, you know, join the panel? I said, I'm happy to do it, but there's no preparation. So I only know the title, that's the requirement. So whether China is to become kind of, you know, the number one, I think the first one is about the definition issue. How we define, you know, China or whatever country as a number one. China already the largest economy in PPP terms, which is the purchasing power parity. The passing United States by 2014, which is the, according to the International Monetary Fund, the estimation. And China is the largest manufacturing producer in the world. China is the largest trading nation in the world. China is the largest creditor nation in the world. China has the largest, you know, the market for certain goods like automobile, largest producer as well as the largest market. China has the largest, the so-called middle class, something like 300 million people. So by all this definition, we can see China is there, you know, pretty big now. But however, the question is about whether China is the, you know, the largest, you know, the political friend. So there's a debate about whether, you know, you know, the G2 discussion about the U.S. China. I think on the economic front, you know, perhaps, you know, even for the slower growth of China, something like 4 to 5 percent per annual, that perhaps in 10 years' time on the real term, in terms of national account, China will be the largest economy in the world. So the question is that, I think it's not about timing. It's about whether China, from now on, what China needs to do in order for China to be so-called graduated towards developed country and the status, what sort of institution China needs to build, and etc. So this is the issue about not just the pure economic point of view, but also from other dimensions in terms of international architecture. And I'm not so familiar with the political or the geopolitical story, but certainly that is also another dimension, which is also need to be, you know, to brought in about this China factor in doing that. Thanks. Thanks, Lidia. Jane, would you like to... I think it's a really bad idea for economists to try and forecast, and that's what we're asked to do if we want to talk about when China is going to be number one. I spend a bit of time doing some modelling, some demographic modelling in a big global economy context that projects through to 2050, and I'm always very careful to talk about projections as opposed to forecasts. That said, we've recently been looking at the question of China's growth slow down and what underpins that, and there are two main factors, and that is a slow down in the rate of growth of its labour force, and also now a reduction in its savings that reduce the amount of funds that are available for investment, both within China's economy and abroad. So we all know and we're getting used to what Li Keqiang talked about as the new normal rate of growth. It's around 7% very conveniently. It came in right around 7% at 6.9% last year. A lot of question marks about whether those numbers are believable, and there are very different opinions about where it heads out to in the future. When we talk about economic modelling, we think about alternative possibilities. We ask questions like, what if savings rates decline more rapidly than we expect them to, which would be a consequence of financial market reforms and a whole range of other reforms happening at a quicker pace than we might expect them to. We can ask questions like, what happens if China increases or abolishes the one child policy and there is a responsiveness to that and you change the rate of labour force growth and then you get different growth rates as a consequence. Again, projections put us in the realm of looking at growth rates between say 4% and 6% or 7% all the way through to 2050 if nothing catastrophic happens or if there's no crisis. The whole point about a crisis is that you can't predict it and you can pretend to predict it. Lots of economists do. There's lots of them talking up. I mean, and we heard this morning that the IMF has put the Chinese financial market as the number one risk, I think they said, facing the global economy. We just don't know how big that risk is and welcome to hear from the audience or from anyone else about financial risk. But it does seem to be the biggest contender for something that might be around the corner and that will possibly ensure that China doesn't become number one in our lifetimes. But I don't see that happening. I'm also very prepared to be wrong. That's the nature of economic forecasting. Thanks, Jane. Chris, I'm going to move to you. Does China want to be number one? And if it wants to be number one, what does that mean? Well, I'll re-tort back to you. Who doesn't want to be number one? Everybody wants to be number one. When I came across this panel, I started to put together some thoughts on thinking about China as number one. And the first thought that crossed my mind is China will never be the United States in 1945. China will never be the United States in 1992. So even if China becomes number one economically, it'll be hemmed in geopolitically a lot more than the United States ever was. Let's not forget, the United States is one big island with beautiful Canada to the north and poor little Mexico to the south. Nobody else around them. So when I started to think about China as number one, my train of thought went back to the paper I co-wrote with Julian Gruen and that we're going to be presenting tomorrow. And that actually was more thinking about, okay, if China emerges as a major power, what is happening to the international system itself? So rather than just seeing, okay, China is emerging as number one, how is it going to impact the international system, the question became what is actually happening in the international system itself? What are the major tectonic geopolitical, geoeconomic changes that are occurring and how does China fit in? Is China reinforcing these changes or is it working against these changes? What is the role of China in the larger tectonic shifts that are taking place? So this was a much more dialectical way of thinking about what is happening and have a reciprocal China in and out. And two thoughts came to mind, give me a few minutes and it's going to get very depressing, so bear with me. The first thought was that it's just Carl Poliani's double movement. It's basically saying, look, you get very strong free market capitalism. At some point in history you're going to get a counter-movement that works against it back. And that's been happening actually in China already since the mid-2000s under the Hu Jintao administration. The Chinese have actually started to hem in some of the enormous inequalities that the prior liberalization started to create. They started to create universal welfare systems, reform the medical care system. They should, creating an American-style privatized health care system and rather are going in the direction of a European state-managed and mainly state-owned health care system. So I think globally we're seeing a massive double movement happening and I have to refer to the US election cycle, which for me is one of the most fascinating, it also one of the most depressing election cycles that we ever experienced. But you're seeing that of the four leading candidates, three are non-establishment. They're counter-movements, including Ted Cruz who's actually quite wacko. People always think he's better than Trump, I wouldn't argue so. But both Trump and Sanders are clearly fringe candidates and Sanders is a clear far left, at least in the US system, and Trump is a far right candidate. So in some sense China has been leading this and Xi Jinping is very much an expression of the same type of political phenomena that is we need to hem in the market and especially private capital. And I think this is happening globally and China is very much part of this. The other main tectonic shift is what I call fragmentation. Geopolitical fragmentation on the level of the global system where there is no one leader anymore and China has faced as much with this as the US or the EU or anybody. You look at the G20, we have papers today on the G20 talking about how it's become a very unwieldy organization and really not that much is happening there anymore. I do not think that the Trans-Pacific Partnership, the TPP will ever pass and it probably will be kind of the tombstone of globalization that we've had for the last 35 years. And fragmentation is also happening on the social level where people are losing their identities as a class or as some corporate interest and people are taking selfies and this is me and I'm on Facebook and I'm Twitter on Snapchat, I'm on WeChat, whatever. So the whole globe is changing and China is very much part of this. I'm going to end here, I have actually eight points of what's happening. So if you want to listen to them at the end and be really depressed and need a stiff drink, I'll have them for you. Kjell-Erik, I'm going to bring you in here about these issues about China and its intent, its hope to become number one and what that means for China. Now, I'm not an economist so I can do some forecast, I guess. And... Probably get them right. Yeah, who knows? Well, I've heard that economists, they have this rule of 69, meaning that the economy of a country will double, you know, according to 69 divided by the growth rate of per capita. And that will mean even though the Chinese growth rate is going down to 6.5, maybe 6.5 to 7, that is not unrealistic for the next 10 years, then the Chinese economy will double. But the U.S. economy will take around 39 years to double. So you can figure it out. That means that in 39 years the Chinese economy will be 80 trillion dollars. The U.S. economy will be 32 trillion dollars. So something is going on and that is a tectonic shift in my mind. Robert Vogel, you know, is even more optimistic or pessimistic. You know, he has even higher figures. And according to him, Europe, my home turf will be reduced to 5% of global production by 2040. That is a gloomy picture. U.S. will be around 15 and China 40. Anyway, I think the most important issue here is the political issue. And I'm happy you brought it up. I think that the fundamentals are there for China to continue to grow if nothing happens on the political front. And that could be, you know, that could be security issues, international issues. It could be, you know, a new president in the U.S. who would like to stop China from growing further and that could create a crisis that could stop this growth process or something could happen, you know, in the Taiwan Strait. You know, they're going to elect a new president or they have already done that. And we don't know how that would play out. Something could happen, you know, in North Korea. Who knows? So there are some international issues. But probably even more important are internal issues. And I'm really unhappy. I think that the young Yao is not here because I was supposed to comment on his paper which I enjoyed reading. But I'm not sure I agree with him. Because according to a young Yao, the challenge we are facing is not just an economic challenge. It's also a political challenge because the Chinese have a superior political system which will outperform our political system. I'm not sure about that, but according to a young Yao, you know, this system where you have a electorate which is the Chinese Communist Party selecting leaders for the long run, even the president, you know, has to go up there a long, long career ladder, you know, and he ends as president as a civil servant. And the whole system is, you know, superior to us, to our system. I'm not sure about that because one problem here is that who monitor the electorate? Who monitors the CCP? And young Yao has no answer to this. He says it's not necessary to monitor the CCP because, you know, its role is guaranteed according to the Constitution and the administrative setup and so on. I don't think that is an answer. The problem is that no one monitors the CCP. It's about the law. It defines the law. You know, decisions made by the CCP are just as important as the national laws. So you have a party of almost 90 million people who defines its own rules. And that leads me to one really big worry and that is what is going to happen on the leadership front. You know, next year we're going to have a new party congress, the 19th party congress. Will those people who are supposed to step down, step down? Will Wang Qixi stand step down? He's supposed to step down because he is going to become 68 years of age. And then according to unwritten rules, you cannot be re-elected to the Politburo Standing Committee. But since he is the second most important and powerful person in China, can he step down? Many of my colleagues in China are really unsure of this. They don't think he will. And that opens the door for Xi Jinping to stay on, you know, at the 20th party congress in 2022. You know, some kind of Putin scenario and that is the frightful scenario. So, if this electorate, this party is going to rewrite the rules, you know, for leadership selection, then China will face a very destabilized political situation. And I think that is one of those factors that could prevent China from becoming number one, you know, and that is these political external but also internal factors. I just follow on from that. I'm also very disappointed that Yao Yang isn't here today and I might, I'm probably the only other person in the room who's had the chance to read the paper that I was hoping he would be here to discuss. Kelt Eric's started to talk about it a little bit, but I'm interested that you saw him as presenting the Chinese seletocracy, as he calls it, where the Chinese Communist Party is the electorate as being superior. I thought he was quite careful. He was attempting to talk about the pros and cons of both systems of democracy versus this seletocracy and I agree with you that he seemed to come up with more reasons or more advantages for a seletocracy based on the Chinese Communist Party and they were about the promotion system that encourages long-termism and a really very much a dedicated civil service and a dedicated officialdom to providing the national good. But he was, I thought, fairly careful to, I mean, he's writing this for a Chinese university. He's in, at Peking University today with the premier visiting. That's why he's not here. You know, there is a certain element of wanting to follow some sort of party line and I think we're seeing that more and more with Chinese academics working within China. But I thought he was very careful to say the one, there is, this is a legitimate selectorate because it's written into the Constitution. It does pretty well on delivering outcomes because you've got all these brilliantly clever officials who have put their life's work into being good officials. Where it fails is on popular consent and he mentions in particular the lack of freedom of speech and also on who monitors the CCP. But he actually did have a solution to that at least in the version that I saw and that was that it's the China People Political Consultative Conference that the NPC plays the role. In any case, I get into territory that I'm not comfortable talking about so I won't go there. But it was a fascinating paper and I think it is absolutely central to this question of if China gets to the top, can it do a good job? This is about whether the Chinese Communist Party can monitor itself or create a system that makes sure that they are at least benevolent dictators if they intend to remain dictators. Can I just have one other little point on the question of who wouldn't want to be number one? I think it's like I would assume that Xi Jinping now wants China to be number one. But I actually think, you know, Lee Gung pointed out a number of ways in which China is now the largest, this and the largest that and there is a question of power that comes with absolute wealth. But they, I think, rank about 77th still in terms of per capita income. This is a poor country and you made the point as well, Keltarik, that there are so many internal problems that China faces and just holding the country together, it's really their number one objective so that the party can stay in power. There are so many internal concerns that I have often thought they would quite like to be left alone by the rest of the world so that they could focus on internal problems but instead their growth has been so rapid that they've been forced to consider the questions that we're considering today. So if any country on earth didn't want to quite yet be number one I would have thought maybe it could have been China. Thanks, Jane. Chris, I'm going to throw to you, you coined the term Sino-capitalism to talk about China's particular approach to quasi-market. I think we could say quasi-market economic organization. Let's just say China does become number one. Let's project forward. How in your opinion would China or will China want to change the way the global economic institutions and rules work to more reflect its Sino-capitalist approach? Well, in many ways for those of you who are not familiar this whole idea of Sino-capitalism is derived from Chinese history. It really goes back to the imperial political economy where you had a state dominance system and you had very subservient capital and subservient markets in a sense. Now, I don't think there's any market economy anywhere. Okay, there's no free market. All markets are regulated and socially constrained. In China, this deal is just a lot more explicit. Markets are here as a tool, but if they don't work the state is absolutely willing to rein them in to change the rules, to change the regulations. If China becomes number one and I actually personally have graved-outs especially the political equation, I think things in China as in so many other places on the globe are really, really in bad shape. I mean, we are looking at the advent of neo-fascism in my opinion. But if China does make it, this system of Sino-capitalism will probably spell a very different type of global economic system. A global economic system that is less predicated on free markets or free trade and much more managed trade and on managed markets and especially on managed finance. And tomorrow when we're presenting the paper on the R&B, the Chinese currency, we actually argue that if the R&B becomes a new monetary anchor, the risk profile will be totally different from the US dollar. Meaning, the Chinese government will basically tell all investors this currency is managed by the state and as a result, its price will be relatively stable. But you lose because we're going to constrain liquidity. If you speculate against us, we'll speculate against you and we'll win. So this is a system that is going to be a lot less volatile, a lot less speculative. I mean, this is what the Chinese government would like to do. Even internally, we see that they have great difficulties. I mean, Chinese speculate on everything. They're, you know, the born gamblers of the globe and you could see Chinese speculative manias and everything from poor tea to garlic. There was even a garlic speculative mania. So, but the Chinese government is very much aware of this and doesn't like speculation. Clamps down, comes in, creates warehouses where they store garlic so that they can release it into the market if things get out of hand and they'll do the same thing globally. So I think this is going to spell a very different relationship between state and market and especially state and capital, meaning private capitalists, especially finance. There is a reason that if you look at the Chinese economy, the most state-dominated sector remains finance, much more so than most any other. Many telecoms would be another one, oil and gas. But finance is clearly dominated by the state, not only the banks, but also the brokerages and anything else. And I personally believe that this might not be so unwelcome globally, that there is actually a large reservoir of global sentiment, perhaps less so in the Anglo-Saxon countries, but globally that sees huge amounts of speculative capital crossing borders and destroying economies in its wake as not a very good way of managing the global economy. So there might actually be resonance to what China has been doing internally, in terms of its managing its economy, to what China is likely try to attempt to do when it becomes number one. I want to ask you about whether you also believe that we're seeing the slow death of the multilateral trade system. We're seeing the slow death of the free-wheeling kind of capitalist system that we've seen for the last 70 years. This I think is a very important context in which we discussed about the shift in power between the big nations. And we know still benefit from the post-war political economic architecture, UN World Bank and IMF and GATT and later on the WTO. But we also noticed that this kind of system is collapsing, especially on the monetary and under-trade. On the monetary front, basically from 1971 when the President Nixon delinked dollar and gold, we know that it's already the symptom. It's actually showing the system is not being sustained. And of course, another 40 years evolved. We now, through different type of crisis, financial crisis in particular, we know that the system is not holding up. So at the same time, we saw the relative power shift in economic and political. So the rising power, whether, you know, they will see how their interest will be protected in participating more actively in designing the new system or even to revise the rules and regulation. So we are at the junctions of doing that one. On the trade front, we know that the WTO is really in kind of a, not a crisis, but maybe a crisis. And we don't see the prospect of, you know, at a multilateral level, you know, to move ahead. And again, you know, this is a lot of the bilateral and sub-regional trading groups are emerging. So what's this going on? And whether for the big power, you know, like China rising power, we have a stake in doing this bilaterally or sub-regionally, et cetera. But even everyone doing that one, China is also doing that one. But whether we can see, raise the question about all the prospects, whether the big power can collaborate in a more, in kind of a, you know, push for the WTO, the multilateral trading system and forward. I think that is a historical opportunity for China actually to step in in a way to, you know, to cooperate with other countries. But at the same time, we see the sub-regional and the bilateral forces are so strong, even China and United States. So when everyone doing that one, we see a little hope that multilateral trade, you know, negotiation will make a breakthrough. So this is on financial reform is a big, big task. Nobody knows the blueprint about to move forward. And knowing the system is not ideal. And in fact, it's collapsing. And but new system is yet to be emerged in that sense. So on that front, it's not just the, I think there's a solution. Let me just edit a couple of points. That's for the big power to cooperate in certain area, those area which actually has a kind of a common interest shared by those power or by many other countries. I can name a few. One thing is about the climate change. The other one is about the poverty reduction. And the third one perhaps is about international security. So on those issues, if the big powers, whether you are number one or number two doesn't matter, you need to cooperate. Otherwise, we have no hope to solve those problem of global significance. If we fail to do that one, you can see the consequences. And that affects everyone, right? So I think there's a common ground in which big power can cooperate. Okay, ladies and gentlemen, I'm about to throw to the audience for questions and answers. But Kilterrick, I know you want to say something, but I've got a question for you. But I would like to answer. Oh, okay. I want to ask you a question. No, I would actually like to respond to Chris McNally's wonderful concept of Sino-capitalism. I read your paper for this conference and I really enjoyed reading it. I'm not sure I'm too happy about the concept because and I tell you why. And that is because you call it Sino-capitalism which seems to me to overplay capitalism in China. When I look at the Chinese system, I don't think it is a class stratified system. I think it's a rank stratified system. Class is not the important thing. Rank is important. And everything is stratified according to rank and the Chinese Communist Party is doing it and all the gun bull, the cartels are ranked. Even the big SOEs are ranked. That's one point. And the other one is that I know in your paper and in your writings that you stress the role of the state. But I'm just sort of a little bit afraid that the role of the state is disappearing in the concept of Sino-capitalism because the role of the state is very, very important in China. And when we look at the economy, you know, the strategic sectors of the economy, the key sectors of the economy are dominated by the state. Are dominated by the 106 SaaS companies, huge companies, and most of them are on the Global Fortune 500 list. Tiananhao has 95. So passing Japan rapidly catching up with the US. So you have these huge companies and there's been a lot of talk about SOE reform being really crucial to economic reform in China. And we thought it would happen at the third plenary session in November 2013. A very ambitious reform program was put forward. But if you compare that program with the opinion from August last year, you'll see it's not about, you know, creating competition. It's about consolidation. It's about creating even bigger monopolies, you know, merging these huge monopolies and creating even bigger monopolies. The reason is not internal competition. The need for introducing market reform in Tiananhao, the reason, the specified reason is external competition. China has to make it on the global level playing field. So for some of these reasons, you know, when you flesh it out, I agree with you. But sort of the concept of Sino-capitalism sounds a little bit too optimistic for us capitalists in the West. Are you suggesting that it should be called Sino-socialism instead or what the Chinese call it? Socialism with some Chinese characteristics? Capitalism, Sino-capitalism, normal class or capitalism, communist capitalism, neo-socialism? I'll use, I'll be very brief. The term has a Chinese translation that I also translated. And the Chinese translation for Sino-capitalism is Zonghua, Zifen Shuihui. Zonghua because it's bigger than China. It's Taiwan, Hong Kong. Everywhere you find Chinese, you have Sino-capitalism. Zifen Shuihui, it's the Chinese translation for capitalism in my opinion is absolutely wrong. It is Zifen Zuihui, which basically means capital ideology. But capitalism is not an ideology. It's a socioeconomic system that defines our time. You cannot avoid capitalism unless you're North Korea. And even North Korea is to some extent subject to the global capitalist logic. Capitalism is predicated upon capital accumulation much more so than free markets. Markets are secondary. It's about giving people the opportunity to accumulate vast amounts of capital. That's capitalism. And in China, we have that. Both private and interestingly the state. And I wouldn't take issue with anything else you said. It all fits. I agree very much that the logic of Sino-capitalism is predicated on strengthening both the state and private capital simultaneously. And that's what the West often gets wrong about China because it's in some sense contradictory. But that's what's been happening. You look at your paper on the stimulus. It's beautiful. You show it that actually private companies invested as much as state-owned companies following the 2009 economic stimulus. And if you look at private companies in China, they've made great strides. They're very powerful, but they behave in some ways kind of as a sort of mirror image to the state. They have very similar behavioral patterns, although they're actually privately owned. I will end here. Now, ladies and gentlemen, your turn. Chandra, we might start with you. Michael, I enjoyed the discussion, but there were two missing things which I would like to highlight. You discussed about economic dominance in terms of macroeconomic aggregate. Ignoring the fact China is a country with 1.4 billion people. You need to look at on per capita terms, right? If you look at per capita income, China is going to be a lower middle, upper middle income country for a while. And again, the indicators are also fundamentally flawed. The purchasing power parity adjusted GDP simply reflects the fact that China is at a lower level of development because of that non-tradable prices are low. Naturally, per capita income has to be higher than the dollar per capita income. But this is not my main point. The second point is that a country to become number one, you need not only economic power as Joseph Nye in his work has been highlighted. You need soft power. Soft power mean the knowledge base, R&D base, human capital development and all sort of thing. I don't think China can match U.S. in terms of soft power indicators within next two, three decades. There is a saying in Chinese later, I read Samya. China has created a lot of iPad jobs, but not a single Steve Jobs. You get the point, right? Does anyone want to respond to that, Chris? I have a very short response. She said, China, it's going to take China 20 to 30 years to catch up with the United States in terms of soft power. Well, if Donald Trump wins, I think it'll be a year. Okay, yeah. Kay Henderson, I'm retired. I used to work in a policy area as a policy advisor. The question that I have is, China being number one, what does that really mean? Is it number one in world international leadership or economically? Aren't there various number ones on which you could identify the position of China? The other comment I want to make and perhaps it's a little bit cynical, select talk, select talkracy to get it out. Isn't in a way what's happening in the U.S. right now a sort of select talkracy? And in fact, even though people vote on the choices, but they're only presented with a limited number and perhaps choices they're not even agreeing with. And the ranked system, it almost reminds me of historic aristocracy when you're talking about a ranked system. What is the difference? I mean, those are the comments that I have. I guess I wouldn't mind some answers to it. Okay, who'd like to go first? Number one, ranking or rankocracy? I will avoid the number one question and leave it to one of you and try to answer this question about ranking. But first, I cannot say it, select talkracy. You know, it's not supposed to be the whole population, it's supposed to be part of the population and even a select talkracy, which is the Chinese Communist Party, is the large one in almost 90 million people. Some scholars like Susan Shirk, they're limited to the Central Committee and party elders, you know, selecting the leadership and they also talk about double accountability. You know, you select this leadership and the leadership has to be accountable to the select talkracy. And you can question that. You know, Wang Chishan, for example, he continues, you know, then they're defining their own rules. And actually, just a small note here. Yang Yao is not alone on talking about this superiority of the Chinese system, you know, that you have leaders and they work their way up and once they're up there, you know, they're quite clever. It's not like in Denmark where you can have a minister of finance who's 24 years old, you know, because he comes in horizontally as a result of an election. In China, you work your way up, you know, and that is superior. Other people like, for example, Hu Angang will say the same or Wang Xiaoguang in Hong Kong will say the same. Zheng Yongnian has also written about, you know, the Chinese system, which is open. They call it an open system that we can also discuss. Open system where you select the best. It's based on meritocracy. It's based on merits. Everybody has a chance. It's neutral because it doesn't take a stance towards, you know, social conflicts. You know, you can advance the interests of the peasants in the 80s and the state sector in the 19s and so on. So it's neutral towards, you know, societal interest and it's not based on interest groups having a say in the political process. This is also something you can discuss in relation to China because there seem to be interest groups, you know, preventing an obstacle to political reform. Anyway, the ranking system, I think, you know, you have 27 ranks in China now and it's fantastic how it operates, you know, and the Chinese then know it, you know, by heart, you know, where are you in the system? According to your position. And at each rank, there are benefits. There's a salary scale, but there are also benefits. And once you reach this crucial vice ministerial level, Fubu Ji, you know, all kinds of benefits, you know, in terms of car, three-liter engine, you know, office, 52 square meters, traveling, first class, you know, the kind of banquet you can arrange for your friends and so on, there are all kinds of benefits and they are stipulated, they are fleshed out according to these ranks. So ranks are crucial in China and that is also why the SOE leaders and maybe we'll talk about it tomorrow. The top SOE leaders, the 53 nomenclature companies leaders are at vice ministerial level and they have been for the last 15 years attempt to abolish administrative ranking for SOEs, but they fight it. They want to keep this vice ministerial ranking because they are all kinds of benefits. They are even willing to go down in salary if they can keep the vice ministerial ranking. So it's absolutely crucial in understanding the political system in China. I've just got a couple of comments to make on all responses. It's really not important, I don't think, when China gets number one or even how we measure it. What we're interested in thinking about and so perhaps that means it was a silly question to pose but I think the point is that China has risen to at least the second ranking in terms of lots of different ways of measuring things and its voice is becoming louder. I think also particularly post-GFC we've seen a rise in confidence within China to challenge the global norms of the international system and there's a couple of examples of that. The first one, again, I don't think that Yao Yang declares the select oxy to be superior, but what he does write in the paper is that it is time for China to create a new narrative which he puts in capital letters and the new narrative lies somewhere between the traditional Marxist narrative of the party and the democracy narrative which pervades the rest of the world and which essentially asserts that the only logical endpoint for China's path is a democratic revolution or some sort of democratic system. Within China, most people can't quite see how that transition plays out and I think essentially Yao Yang saying let's start talking about other possibilities. We see that coming also out of the economists like Huang Yiping in how he talked about the One Belt One Road Initiative. He's a Western-trained economist. He believes in markets. He believes in a large number of the ways that the current global liberal order does things and yet he's still prepared, certainly to Chinese audiences, to challenge the way that things have been done in the past to say oboe presents an opportunity. It presents a way for us to actually present an alternative to the Washington consensus and he refers to that specifically that doesn't necessarily suit all countries. So I think the point is that China's risen to, in however you measure it, risen to a level that now enables its voice to be stronger and we're starting to see that come out, particularly in a focus on how that state market interacts. Just very briefly to get back to Chandra's point is about a relatively low per capita income right now for China in comparison with other countries. I just want to add some facts about the speed of China in converging or raising their per capita income. From 2000 per capita to 8000. So when controlling this per capita income level, it takes China's about 16 years. For Japan, 17, but for all the Western power, you know, big nations in the past, it's about 80 to 100 years. So that is the other things. And within 30 years, you know, when you have a double digit growth continuously for nonstop. So you're all wondering what's going on. You know, whether this is, you know, due to a kind of a mixed system of market forces and state intervention and etc. I think that's probably the background that will give some people in China, including economists, some kind of, you know, confidence seeing that there's something right in the system. And otherwise, you know, how come you can achieve such a great economic performance? On the other hand, you know, there's a, you know, we know the debate is about the Washington consensus with the Beijing consensus, right? So in the way that is the, it's all very much divided whether China should follow the, you know, market orientation reform continuously after 30 years of achievement. And there's a debate immediately after the GFC, the Global Financial Crisis. And again, you know, people learn the lessons and seeing that whether we should let market, China should let market to go as it is. Or you should have some kind of a more regulatory sense and a government intervention, and etc. So this kind of debate is ongoing now. And there's no kind of a clear direction about whether the kind of a pure market reform will be, you know, a dominant role or the steady invention. So perhaps, you know, if you can just kind of speculate a bit, it's about, you know, mixed economy and with a certain character, characteristics of China. Thanks very much. Dean Yehman from DFAT. Fascinating discussion. There seems to be a couple of themes going. One is on the, this idea of the selectocracy versus perhaps a democratic system of government and whether that's going to be ultimately beneficial or harmful to China's economic, continued economic rise. There's also this other theme, I guess, that you've been discussing or touched on a few times about China's kind of global leadership role and to the extent that that, you know, is a central kind of question in terms of China assuming that global number one role. So I just guess in terms of reconciling those two themes, what do people really think is the key question that we should focus on in looking at China's continued economic rise? It seems to me that in many ways, China's had a kind of a, in the past, an outlook which has been very much focused on not interfering in other countries' internal affairs, very much dealing with its own problems. Is that starting to change now? And if so, to what extent? It seems that there are some examples of China taking very much a global leadership role. But equally, there are examples or counter examples of areas where it seems to want to be predominantly domestically focused. So I just wonder where you see these two kind of themes converging and how that might play out, I guess, in the next decade or so. I also didn't have a chance to talk about the selectocracy, really well. By the way, aristocracy is inherited by birth. So this is not an aristocracy. The selectocracy would be much more similar to the imperial examination system. And it still was the rich in the imperial system that were able to afford to educate their sons to take these exams. And in a similar sense, we have the kind of Chinese middle classes and upper classes who are becoming part of the selectocracy now. Certainly wasn't the case before. But I really like your question of how you're trying to combine these two major trends. And I would argue that China at this time, especially on the international level, is still very much in an experimental phase. They're basically saying in certain areas like the AIIB and they didn't expect the backlash from the Americans. For them, it was much more about reforming the Asian Development Bank, which is a deeply, deeply troubled institution. So and just be more effective in investing in Asian infrastructure, mainly as a means to export Chinese industrial over capacity. So there are certain areas where the Chinese are going to take international and global initiative. But a lot of them actually, if you look at it, have to do with their domestic challenges. So they're using global means to solve their domestic problems. And this is to some extent also what we're arguing about the internationalization of the renminbi. They don't want to change their domestic system. So they're going to try to change the international system and they're getting big enough that they gradually can do this. But on the political side, I personally actually am going to be taking a much more sinister view of China. I personally don't think that China has a selectocracy. So I disagree with Yaya because you have a leader that is basically supporting a personality cult. And that's exactly the opposite of what a selectocracy should be doing. Selectocracy, according to the paper, should be basically picking the most capable technocratic professional leader, not somebody that needs to support a new personality cult to gain charisma and some sort of legitimacy. So something's really deeply, deeply wrong and troubled in the Chinese political system. And I would argue that's globally the case. So again, China is in a sense leading a trend where the power of global capital has become so immense, the power of global corporations that nation-states are either resorting to trying to wall themselves off or some form of neo-fascism, meaning suspending liberal democratic institutions in trying to basically deal with the enormous power of corporations. And there we come back to the United States where you see this exactly happening. I mean, Donald Trump is the ideal candidate to fight back against corporations because he's not bought. And he's also the ideal candidate to kind of wall the United States off back into isolationism, which is, in my opinion, the natural state for the United States to be in. So I'm being a bit pessimistic here because I think China and Xi Jinping in particular kind of leading the way in creating new mini-Muscellinis globally. We have Putin, I think India's Modi is getting very close with Hindu nationalism. This has nothing to do with being a democracy or an authoritarian system. This is basically a reaction to the onslaught of global massive corporations that are so much more powerful than political systems, especially of small countries, that the political systems themselves fray, suspend basically democratic institutions and result back to a very viral type of nationalism, isolationism, as well as dinguism and all the demagoguery that comes with it as a package. So very briefly to answer your questions is about how the big power like China to get a task right and to deal with that issue both internally and externally. I think there's one thing which is very important, which is the economic rebalancing. I already referred to the high growth period but why China need to rebalance the economy at the moment. We know the growth in the past is driven by the input of factor production, massive labor, millions of migrant workers moving from rural to urban. There's a massive capital investment because of high-saving. High-saving ratio is about half of the GDP and so there's an implication about balance of payments and current account. But just to find that one, first half of the kind of a period of reform because of the reform, because of the incentive effect so they have a very important impact on the productivity. But that productivity impact is actually diminishing very rapidly and right now it's very low. So therefore you can see the growth cannot be sustained by simply increasing all the factor production labor and capital. On the labor side it's already as you know that China is exhausted by the pool of unlimited supply of labor and not much left. On the capital, you know, the use of capital is the inefficiency of utilizing capital is a big problem right now. Measured by the capital of a ratio is increasing all the time. So therefore the rebalancing is on that one is to try to find a way to boost the productivity growth. So that's on the supply side. On the demand side is the investment consumption and net export. China is just too big to be so dependent on export and with such a larger economy and export dependence ratio is just so high. So therefore now China has to export, right? Otherwise, you know, there's no way to sustain that industrial manufacturing power, powerhouse in the way that is, but who will buy it? You know, also it's a deficit country need the money. So therefore China lend the money to this surplus country to the deficit country in order to buy the goods from, you know, from the produce in China. This is the so-called global imbalances that the problem has been accumulated for a long time. Now, you know, you can readjust that one through crisis but however there is some kind of a policy measures that can be taken by both side but on China side is in particular of rebalancing. That means for the growth to be sustained by domestic consumption rather than investment and by doing so also reduce the external dependence that net export for China. This is ongoing but however there's a critical question is because of if the demand, we need for the demand to shift from deficit country to surplus country. That means from United States for example to China but in the transition period it's very difficult because the consumption is increasing in China but not to the extent that can offset, you know, the reduction of other country. If that is the situation that we will have probably, you know, people talking about the global recession and it's because of that and because the transition is not a smooth one. Yeah, my answer would be that the Chinese they don't care much about the outside world. They're not interested in the outside world. I mean it's a society, it's a country and it has always been like that very much concentrate on its own affairs. So you see it in certain ways. I mean for example, now first of all we have been, you know, we have been working on dragging China into the international system, you know, for years and years and we seem to have succeeded, you know, that now China is firmly integrated in the international system certainly in economic sense and now we are a little bit unhappy about it and I don't think that the Chinese feel that they're fully integrated and I don't think that they actually really would like to be. If you look at the political setup, you'll see that the foreign minister is not even member of the Politburo. That speaks volumes about the role of foreign policy in China. Internal issues are important. Internal issues will decide, you know, who's in charge will decide the fate of the country and at a certain point, China is willing to put its international positions at stake if internal power struggles or power issues, you know, are there and important. For example, you know, when China, you know, broke with the Soviet Union in the 60s, that was really costly and it was part of the famine in the early 60s and again in 89, many observers of political scene in China said that, you know, they cannot crack down on students because that will jeopardize the reform process and that will create a lot of reaction from the international community. But they did because it was a question of, you know, who rules China. It was a question of the political future of China and when that is at stake, you know, the Chinese Communist Party, you know, will always choose political power, will always choose, you know, internal affairs over external affairs. So I think that, you know, for China, it's still Chinese internal issues that are important and China is not eager to step into the role of United States. They're very comfortable having United States assuming this role as the policeman of the world, you know, they, you know, as long as the United States uses all these resources on that, you know, they're very happy, you know, growing in the U.S. Seattle, you know, under the umbrella of the U.S. security, you know, they're very happy. They're not eager to challenge the U.S. So that is a fundamental problem, you know, that you have this big, big elephant, you know, which is so important in the world of becoming more and more important. But it's not willing to take the responsibility because it doesn't really care about the outside world. Lauren. I have a comment on the low per capita income, number one world economy, either in PP or apps or current dollar terms. Isn't that, I mean, I kind of see that as a, it's almost a Chinese middle kingdom dream, whereby precisely because they still are a developing country, they don't have to step up to that American role. But at the same time, they're richer citizens. They're biggest companies will actually be players on par with developing countries in, sorry, with developed countries in terms of, you know, that the probable quality and standard of technology in Shenzhen or Shanghai or wherever will be world standard. But at the same time, China will be a developing country, which means its kind of middle kingdom style relationship with anywhere from Guinea to Papua New Guinea can be a peer relationship. But actually it can also be a peer relationship with Western Europe and so on. So it's kind of a middle kingdom dream to not be, to not be the highest per capita income country at the same time as being a very powerful absolute economy. So, you know, there's all this talk about that, but it doesn't really appear to be an inconvenient status quo at least for a 30 year trajectory or whatever comes after that. It appears a kind of a pretty convenient transition status quo almost as China rises to shift whatever comes in that power shift. I just wanted to add also, I was glad Ligang brought up the imbalances story just because, I mean, you know, America is such a big deficit country and to some extent that willingness to have deficits has enabled the global economy to go forward for many years and you compare that to kind of the EU's problems where you have all these Northern European surplus countries and the problems with their Southern European European members. If China becomes the kind of Germany of number one world economy, that could present, you know, quite a few challenges. So how China navigates it's whether it becomes America or whether it becomes Germany on that kind of imbalances level will really have a big say in how the world economy goes forward. Thanks, Lauren. I think they have excellent comments and there is something quite nice, I guess, or convenient for China to sit in that middle kingdom status as you call it. They could thank Mao Zedong for that. He was the one who encouraged them to have lots of babies and that by having lots of Chinese people, that would make them strong. And, you know, when we're talking about Chinese wealth and power as we've done today, it is there are these two questions. There's about aggregate output and size that makes China very big but it's the per capita question and the fact that their fertility rates if you're a population pessimist like I am were so high in those early years that kept per capita income down. Then we come into the reform period and not only because of the one child policy, in fact, well before that fertility rates start plummeting. You showed the graph earlier this morning and contrasted China's demographic dividend period of the past with what lies ahead for Africa and for India as well. And so China's, you know, subsequently benefited from a shrinking population that has brought per capita income gains but the vast size of the population has still constrained the rate of that increase in per capita income. Just one question that I've really gotten it's for the panelists and it relates a little indirectly to your comment earlier, Dean, and to the cynical comment there. And I think it's not a cynical question to ask how different is the situation in China and with a Chinese enterprise, whether it's state owned or privately owned that now has Communist Party cells set up in it. And this is a question that I don't have an answer to. How different is that enterprise out functioning in the global economy and providing capital for the rest of the world that they're demanding particularly in America? How different is that from an American Wall Street-based company that is connected with Washington and lobbying in its own ways to, you know, have things work to its advantage? And I think that question's absolutely central as we try and understand what China's rise means here. And I don't have the answer and it's the same question relating to your one about democracy. How do I value the fact that I get to choose between two people who I don't like compared with a Chinese person who has no choice but to take the one person that they don't like? I don't think democracy and selectocracy or dictatorship or whatever it is are quite as far apart as most people see them but I don't know how to measure the value of that, you know, of that distance. And I'd love to have a measurement on it because I'm an economist. Can I pass that to you for a response? Because I think you made the point today. It doesn't matter if they're privately owned. It doesn't matter if they're state owned. It's the fact that they're connected to the party that makes us uncomfortable. And it should make us uncomfortable just as it makes me uncomfortable the Wall Street Washington connection. But even more so. Well, I don't know whether I'm uncomfortable, you know. But I do see a revitalization of the party, a strengthening of the party rather than a withering away of the party. You know, there's a lot of re-centralization going on in China at the moment, certainly in terms of anti-corruption campaigns but also, you know, in other areas. And I see that re-centralization also going on in terms of management of the state-owned enterprises, the SOEs. There are sort of regulations coming out recently, for example, stipulating that all companies should have a dangzu, not just a party committee but also a party group in all SOEs but actually also NGOs and private companies should also have it. So in addition to a party committee, you have a party group. And if you look at this opinion from August last year, you'll see that there's one section talking about the role of the party, saying that the party should be involved in running the company and there should be duplication of positions, you know, that the chairman, if there is a board of the company, that the chairman should be the party secretary. And the chairman is always in a Chinese SOEs debauchery, number one. So the number one in a company will not be the CEO appointed on the basis of competencies but will be the party person who is appointed on the basis of political affiliations. And some economists are not an economist but some economists would say that this is a problem. This is a problem if China really wants to go global and create companies that can compete at the global level playing field and that's what they want to have. And that is why they're nurturing, supporting these companies. And if you don't follow that up with management reform, you're going to have a problem as far as I can see it. But of course it's not a problem if the party is excellent. If they are all uncorrupted, you know? Then it's not a problem. Just want to make a point. Lauren mentioned about whether China will turn in another Germany. And I think one lesson learned from GFC is that why Germany is still engine of Europe or even the global economy is that it stick to the manufacturing. And so China actually learned that lesson, you know, stick to the manufacturing rather than move very quickly to build this kind of a financial empire. We know the leverage and the leveraging is all related to that one. So, but however, moving towards a higher end, producing higher end manufacturing requires a lot of things. Not just purely as I mentioned earlier based on labor or capital. It's actually the nation need to have a system which is encouraged innovation, entrepreneurship, and this one is very much lacking in China. So even though government spend a lot of money on R&D, you can see the ratio of that in GDP is increasing all the time. But we need to ask questions about whether that institution and the building is actually a conducive in current those kind of a spirit. And that's a question. Okay, one last question, Paul. Thank you. It's not so much a question, but just adding to Jane and Kiel, Eric's discussion about the role of state and enterprises. I think just to go to the question of what's the difference between a well-connected private sector company in the U.S. and a well-connected SOE in China. I think if you get to say be the president of Boring Corporation or something like that, obviously you've got good connections with politics and all sorts of things. And you've got the U.S. protecting your interests in various ways. But once you stop being the president of Boring, you might probably go off and join the board of the Symphony Orchestra or something, but you've had your career high as being the head of a major corporation. There's no ladder further up than that. Whereas if you get to be the head of Cinepec, so I think it's the second largest company in China now as of second or third in Global 14500, you're not there and you pat yourself on the back. I had a great career because I got to be head of Cinepec. You're there because, well, the next step, you want to get up to ministerial level and because you really want to be on the Politburo and hopefully the Politburo Standing Committee. So it's the fact that the SOE, the career structure, isn't just you've reached the peak of the corporate career, wasn't that great or you made a lot of money for you and your family, wasn't that great, but it's integration of business and politics rather than you've got business which sometimes co-ops politics and vice versa. Indeed. I'd like to have a final word, something that you're burning to say that you haven't quite had the chance. It actually has something to do with what Keel Derrick said. So, which Keel, I think you're absolutely correct that the Chinese Politburo, the leaders, are absolutely concentrating on what's happening domestically. But I think the difference in the last five to 10 years, but especially the last five years is, is that so much that's happening domestically in China is influencing the international system and then swapping back right into China so that any leader, any leadership cohort in China now has to take an active interest in what is happening internationally and indeed is starting to try to manage what is happening internationally. In some cases, it's to protect themselves from like what happened in the global financial crisis. So that is, for example, their motivation to internationalize the renminbi is to have a rely on their own currency for trade financing and all other financial transactions and therefore not be dependent on the US dollar. In other cases, it has to do with domestic legitimacy like what's happening in the South China Sea and other geopolitical areas. But I don't think that a Chinese leader now will not care about what's happening internationally. So I take issue with that. Yeah, final words. And I think there's important issue there and which is common to both the developed and the developing country, including the transition economy in China. That common phenomenon is the rising income inequalities in rich country, in poor country, in emerging economy. The measure of that one is the increasing share or capital share in total GDP of international income. It's everywhere. So therefore, for the global agenda in terms of dealing with those kind of income inequality issues, I think it will be quite important in the way because in China, we know that it's a very rapid growth rising per capita income, the total economy, but also accompanied by very, very equal distribution of income. So inequality is among the highest in the world. So to deal with that one is a challenge. However, how to do it, whether there is a trade-off between efficiency and equity. That means if you deal with the equity issue, you will compromise the efficiency. If there's a trade-off there, whether it's a trade-off, whether the society, the government will be in a position to deal with that one in finding a right balance between maintaining the efficiency, the continued improvement, but at the same time to respect the social, you know, the equity issue. So I think it's a big challenge. It's a global challenge. But if you want to do more, I think you can really, the term of the Piketty is the book capital in the 21st century. So that's, here we go. Which essentially describes trickle up, not trickle down. Yeah, and actually Piketty does not have a chapter on China, but he could have a chapter on China because China also has its super managers. I mean, China has managers who have a salary 200 to 300 times the average salary of the employees and the company. So China has its super managers, but he doesn't write about it, you know, some of us will have to do that. But I do agree with you that inequality is a huge issue, you know, in general, in China. I also think the Chinese leaders are aware of this, that this is, this is endangering actually the legitimacy of the party. Last September, I was at a conference in Beijing on party and corruption. And your former prime minister, Kevin Rod, was actually there also. And they took us to meet with Wang Qishan. So we had a meeting with Wang Qishan, almost two hour meeting with him and the great hall of the people. And what he constantly talked about was inequality and the danger to the legitimacy of the party and they had to address this. Otherwise, the legitimacy of the party and the system was a danger. So they're aware of that. Whether they can solve it is another matter. But it is a huge issue. It's not just a global issue. It's also an issue in China. Can I just add on one more pessimistic note directly related to that? I recently did some research with a couple of people at Beijing University on the inequality of opportunity in education. And they were planning to launch a book on that topic and got a call from the Department of Education the day before the launch saying there would be no press conference and they were not to discuss the findings of the book with the press in any way. So legitimacy being questioned, you come back to the very big problem of Xi Jinping being in control of a party that is still controlling the press. And that is something that is, you know, we haven't really gone to, but is a really depressing point to end on. So I'll hand over to Michael instead. Well, ladies and gentlemen, I'm not sure as a result of the last half hour and a half whether China is going to become number one or not. I think the measure of a really good panel discussion is a panel discussion that the chair completely loses control of and that goes in absolutely fascinating directions. I'd like to thank you for coming along to what has been a fascinating day and particularly this panel discussion. I'd like to thank Eric Brodsguard, Jane Golly, Lee Gung Song and Chris McNally for their thoughts and can you please join me in thanking our panelists.