Expert background: Prof. Dr. YAO Yang (姚洋) – one of China’s leading economists
Prof. YAO Yang is Liberal Arts Chair Professor at the China Center for Economic Research (CCER) and the National School of Development (NSD), Peking University. He currently serves as the director of CCER, the dean of NSD, the executive dean of the ISSCAD, and the editor of CCER’s house journal China Economic Quarterly. He also serves as the chairman of China Economic Annual Meetings and chairman of the Foundation of Modern Economics. He is a member of China Economist 50 Forum. His research interests include economic transition and development in China.
CMG: Professor YAO, in your book “The Meaning of Economics” (经济学的意义) published last year, you reflect about where your discipline should put more attention.
Yes. In the book I argue that it is particularly important to better understand China’s political economy. China’s economy is closely intertwined with politics. Many international scholars view China’s system as unlikely to be successful in the long term. But how do we make sense of China’s economic achievements over the past few decades? I believe it should be Chinese economists who should respond to this issue.
Are they not?
Well, there has been a notable improvement in the quality of research produced by Chinese-born scholars in the international academic community. However, in these articles, there are only very few topics actually set by the Chinese themselves. So, one of the most important issues is how Chinese economists can learn to set their own topics. Without your own topics, you can’t have your own economics, you can only run after others. China is a big country with its own set of problems. The research methods of economics are not confined by nationality, but the problems certainly are. We therefore need to be more ambitious here.
What makes the study of political economics in China so relevant?
In China, for instance, the central bank is under government control, and decisions must consider comprehensive factors beyond just economic and financial issues. This is distinctly different than in other political economies.
But the situation is even more complex, involving not only the central government but also local governments. In China, local governments act as financial accelerators because they have strong lending capacity and can thus facilitate new business ventures more easily. They are very peculiar entities in China’s political economy, and their expansion and contraction have a significant impact on China’s macroeconomics and are thus worth studying.
Another type of organization that is very prevalent in China are the state-owned enterprises (SOEs) that also function as financial accelerators.
So, China’s macroeconomic operation is very unique and fundamentally a political economy issue.
Editorial note: This interview draws in part on the English translation of Chapter 8 of YAO Yang’s 2023 book “The Meaning of Economics” (经济学的意义) provided by David Cowhig and has been personally authorized by YAO Yang.