Economist who swims against tide

Justin Yifu Lin received an honorary doctorate from Vlerick Business School and Catholic University of Leuven in Belgium on Sept 8. CHINA DAILY

He used basketballs to help him swim to mainland, and now helps keep national economy above water

On a night in May 1979, as China was launching its reform and opening-up drive, a young soldier from Taiwan braved the Taiwan Straits by swimming from the outlying island of Quemoy to the mainland using basketballs as a floatation device.

Justin Yifu Lin went on to gain a master's degree in political economics at Peking University, and then a doctorate in economics at the University of Chicago. He gained global prominence, once serving as a World Bank chief economist.

While he sharpened his free market thinking, he tailored it to the Chinese vision of the balanced roles of the government and the market's invisible hand.

Partly because of the contributions of scholars such as Lin, China has achieved more than three decades of rapid growth. And he believes that with some adjustments, the country still has the potential to sustain the miracle for another 20 years.

Lin also believes that China's successful experiences and development patterns can be copied by economies that are still catching up, especially those in Africa. He has encouraged Ethiopian leaders to take that path, and Chinese leather and shoemaking plants have started to shift to Ethiopia, which is primed for an economic takeoff.

His thoughts on the economics of development show an independent streak, reflected in his 25 books with titles such as Against the Consensus: Reflections on the Great Recession.

Lin, an adviser to the Chinese government and professor at Peking University, is the Chinese economist most widely recognized in the West. Vlerick Business School and Catholic University of Leuven in Belgium awarded him an honorary doctorate on Sept 8.

At the ceremony in Belgium, Louis-Henri Verbeke, chairman of Vlerick Business School, heaped praise on Lin.

"He is not the only economist who 'begs to disagree'. Very few, however, distinguish themselves in so doing as world-class players. Even fewer give credit to their team rather than themselves for so doing.

"Almost none have created an institution which provides first-rate thinking to a leading nation and trains that nation's economic leaders."

Lin is founding director of the China Center for Economic Research at Peking University.

After the introduction, Lin spoke to the students and professors at length on why he thinks China can achieve long-term economic growth, the gap between China and developed economies, China's costs and potential, and the global significance of China's success.

Lin says he is quite confident China has the potential to maintain annual growth rate of 8 percent for the next 20 years if its deepening of domestic reforms is successful and global conditions allow.

"What I mean is the potential, and I must emphasize that," Lin says.

In 2008, China's per capita income was 21 percent that of the United States as measured in purchasing power parity, which indicates that there is still a large technological gap between China and advanced economies, he says. "So China can continue to enjoy the advantages of backwardness before closing up gaps."

China is faced with an economic downturn while it has begun to shift its economic engines from relying on investment and trade to being driven by consumption. During the process of shifting economic development patterns, Lin says, China has to come to terms with three major challenges: income disparity, corruption and environmental pollution.

The first two challenges have made ordinary Chinese "unhappy", and if the environment worsens, neither rich nor poor will feel happy, he says. "So we must come to terms with such challenges."

Lin says the world's poor, especially in Africa, missed many development opportunities during colonial rule by the West and after that.

They deserve a better life, he says.

During his term as World Bank chief economist, from 2008-12, he devoted a lot of time to visiting Africa. While he was the first Asian to occupy this position, he once said, "More importantly, I may be first World Bank chief economist understanding the needs of developing countries."

Among the development lessons African countries can learn from China, he cites the dual-track approach to reform, offering transitory protection to nonviable firms to maintain stability while liberalizing the sectors in which the country has comparative advantages.

He refers to the Ethiopian leadership's decisions in 2011 and 2012 leading to a shift of China's shoemaking and other plants to that country. Now, shoes made in Ethiopia have been exported to other African countries and Europe. "The Ethiopian example has shown how China, Africa and Europe can form a relationship of trilateral cooperation," Lin says.

In shifting some manufacturing to Africa, which has plenty of labor and resources, China and Europe also benefit from offering technology, know-how, capital and export markets, he says.

Lin says he is concerned about Europe, which is still at risk of slipping into a third recession since the 2007-08 global economic turmoil, which would cut China's exports and investment in the continent.

"The risk cannot be removed right now as the European Union (especially in the eurozone), has not come up with necessary structural reforms to improve its competitiveness."

The eurozone's GDP, according to the European Central Bank, was unchanged in the second quarter of this year compared with the previous quarter. It also followed Germany and Italy reporting GDP declines by 0.2 percent in the second quarter, compared with the first quarter of this year.

To help revive the economy, the European Central Bank cut its interest rate further early this month, and the exchange rate of the euro against the yuan fell to 7.95 on Sept 8 compared with 8.68 on May 8.

Further depreciation of the euro, as a result of loose monetary policies, will help boost exports from the EU, Lin says.

The eurozone's competitiveness, according to the traditional formula used by multilateral lending institutions such as the International Monetary Fund, should be a result of further structural reforms and depreciation of currency, he says.

"But the problems are that the countries in Europe, hit heavily by financial and debt crisis, don't have their own currency, and if you use such instructions, it means currency depreciation in the whole eurozone."

"If the eurozone currency depreciates further, this would cause a 'competitive depreciation of the dollar', which is something that the global economy is not prepared for," Lin says.

To help the global economy grow at a faster pace, Lin says it is important for the major economies to consider a "grand plan infrastructure construction" to shake off economic stagnation and crisis.

Europe still has room to improve its infrastructure, and such measures would boost its exports of technology and products, Lin says.