WMU News

Brookings Institution official to discuss economic changes in China

January 8, 1998

KALAMAZOO -- The status of China's economic transition will be examined in a lecture Wednesday, Jan. 21, at Western Michigan University.

Dr. Nicholas R. Lardy, a senior fellow in the foreign policy studies program at the Brookings Institution, will speak at 3 p.m. in Room 3508 of Knauss Hall. His topic will be "China's Unfinished Economic Revolution."

The free talk is part of the WMU Department of Economics' 34th annual guest lecture-seminar series titled "When Is Transition Over? Economic Reform in Post-Communist and Communist Countries." The year-long series focuses on the dramatic economic changes sweeping through Central and Eastern Europe, the former Soviet Union and China.

Lardy serves on the board of directors and executive committee of the National Committee on United States-China Relations and is a member of the Council of Foreign Relations. He says that while China's transition seems quite successful, it is premature to make a judgment.

"Economic growth has been rapid," he says. "China has attracted record amounts of foreign capital, and the growth of foreign trade has been extraordinary. But difficult reforms in the state-owned sector have been postponed.

"A large and growing share of state-owned firms are not profitable, but they are not restructured or shut down. This has been made possible by a massive increase in bank lending to state-owned enterprises based almost entirely on deposits from the household sector."

The result, Lardy says, is that China now has a banking system that is at least as fragile as those of Thailand and Korea. While China has yet to experience a banking and financial crisis, he predicts that the country will have to go through a domestic restructuring at least as difficult as that Korea currently faces.

The Department of Economics co-sponsors the lecture-seminar series with the W.E. Upjohn Institute for Employment Research in Kalamazoo. It is directed by Dr. Annette N. Brown, assistant professor of economics.

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