Author: Zhang Nan
"The Ladder of Catching Up: An International Comparison of State-Owned Enterprise Reform and Industrial Upgrading" (hereinafter referred to as "The Ladder of Catching Up") is a good book worth reading and recommending. Since the publication of "The Ladder of Catching Up", it has received attention and praise from Liu Guoguang, Lin Yifu, Kong Dan, Wu Dong, Wen Yi, Lu Zhoulai and other economic circles, industry circles and relevant departments. People's Daily, Guangming Daily, Beijing Daily, China Social Science Daily and other publications have published many recommendations. The author of the book, Dr. Zhou Jianjun, is an associate researcher of the Research Center of the State-owned Assets Supervision and Administration Commission of the State Council, a joint doctor of the School of Economics of Chinese University and Columbia University Policy Dialogue Initiative Organization, engaged in research on industrial development strategy and policy, and has published many academic articles in "Comparison of Economic and Social Systems", "International Economic Review", "Oxford Handbook of China Inovation" and so on. As a researcher at a financial institution, I would like to recommend this book to friends and peers from all walks of life.
Through reading, I myself believe that there are international comparative studies related to the government, US industrial policy, semiconductor catch-up, intellectual property system, combination of industry and finance, Korean chaebols, oligarchic competition, etc., which is the highlight of "The Ladder of Catching Up", and I share with you as follows. In particular, the book helps people to better understand the current industrial policies and state-owned enterprises of China and typical countries in the world, especially in the context of many prejudices and misunderstandings about state-owned enterprises and industrial policies in society.
The book argues that promising governments mean that successfully developing economies are usually accompanied by the positive role of governments, and the so-called "free market" also needs to use government power to maintain order. The United States, which has always called itself a "free market," is in fact a prime example of simultaneous aggressive industrial policy, with the U.S. government investing nearly $5 trillion over the past 60 years. In the 1980s and 1990s, the US semiconductor industry was declining in competition, and the United States organized local companies to carry out joint research and development, and took measures to protect local enterprise products, and soon regained competitive advantage. The United States has been attacking Chinese state-owned enterprises for infringing on intellectual property rights. However, historically, the general state in the early stage of economic development, will be more "loose" on intellectual property protection, of course, including the United States in the early days of the founding of the United States from the United Kingdom "steal" the design of textile machines. Japan and South Korea were also "imitation innovations" in the early stages of development, and there were also "reverse developments" in China.
The section of the book on the problem of Chaebols in Korea is well worth perusing. I think that the dilemma of the Korean chaebol system may be the situation that antitrust wants to avoid at present. As a late-developing country with a weak foundation, South Korea has rapidly achieved industrialization through industrial policies to support chaebols. However, the side effect of the plutocratic system is that the problem of private oligopoly is very serious. Chaebols have grown to the point where they can influence government policies, bribing the president and officials at all levels directly, and government departments and the banking system are powerless to fight. As South Korea's economic development reaches a high level, the South Korean government has also transitioned from authoritarianism to democratization, and also wants to limit the power of the chaebols, but may not be able to do so. On the one hand, the diversification of chaebol companies has penetrated into all aspects of the Korean economy, with an important impact on the country's economy and employment. On the other hand, the timing was not very lucky, and it did not take long for the chaebols to encounter the Asian financial crisis, saving the economy and having to allow the chaebols to develop. In the end, South Korea relied on NGO groups representing minority shareholders to coordinate against the chaebols, and the lawsuit against Samsung lasted for a decade to win. China is now anti-monopolizing Internet platform enterprises with group-based development, and strict supervision of separate industries is an inevitable trend. I believe that the lessons and problems of the Korean chaebol system (such as "too big to fail", etc.) deserve our reflection.
In addition, the book also mentions potential problems in the combination of industry and finance. The combination of industry and finance also played a good and positive role in China in the early years, but in recent years, with the deepening of deleveraging, some enterprises with higher leverage have difficulties in refinancing and repaying debts, and the combination of industry and finance model has produced "side effects", dragging down business operations, and the focus of "industry-finance combination" of some enterprises may deviate from the main business because of the rapid development of financial business in the early years, which is even more lamentable. The book also mentions that GE Capital, GE Capital, GE Capital, GE's financial arm during the 2008 financial crisis, significantly dragged down the group's earnings and later had to divest most of its financial businesses during the period. GM Capital was worth more than $300 billion that year and contributed a lot of revenue to GE before the financial crisis.
The book also devotes a lot of space to the positive role and positive significance of the development of state-owned enterprises. For example, there are discussions about the "crowding out effect" from time to time in society, and the book argues that state-owned enterprises can actually exert the "squeeze in" effect, driving the development of the entire and upstream and downstream enterprises, and bringing new business opportunities. The book features comparative studies and introduces the successful development models of many overseas state-owned enterprises, such as Temasek in Singapore. The author also emphasizes that Temasek's success is also related to Singapore's own culture of the rule of law. Temasek's governance rises to the constitutional level, and investment revenues are strictly guaranteed to benefit the country's long-term development. I understand that "the country advances and the people retreat" is not a policy goal, and it may be the original intention of supervision to punish unfair competition at the right time, avoid oligopoly affecting the normal operation of competitive markets, maintain the space for healthy market development, and expand the scale of the market. In fact, before antitrust, the "data boundary" of Internet giants such as bat was very obvious, and start-ups had to enter one of the giants to have access to the most important "means of production" in modern times - data. After the crackdown on supervision, the Internet platform gradually opens the data boundary, while strengthening data security, which should be more conducive to market development in the long run.
Then again, the influence of oligopoly also needs to be viewed on two sides. Although the South Korean chaebol has a negative impact on market fairness, if it does not form a strong corporate group, it may be difficult to survive the competition with the United States and Japan, and it may not form some of Samsung's global competitiveness in mobile phones and chips. The anti-monopoly of the United States", "saying one thing and doing one thing", is also conducive to gaining a comparative advantage in competition with European companies in that year. In some special industries in China, the high concentration of head enterprises is also conducive to participating in international competition, and CRRC Group may be a good example.
In short, I think that through the perspective of international comparison, this book helps us to more fully understand the important role of national industrial policy and state-owned enterprises (which are actually a form of industrial policy) in different stages of economic development; even the West, which advertises "liberalism", has been actively adopting various forms of industrial policy to maintain the competitiveness of the country and enterprises. To borrow the words of Professor Stiglitz, the Nobel laureate in economics quoted in the book, "Do what we do, don't do what we say.". On the road to China's economic catch-up and upgrading, the importance of the development ladder emphasized in "The Ladder of Catching Up" is self-evident and deserves our deep consideration and attention.
Related links (see ganchaojieti for details):
The "New Book Review" of the theoretical edition of the People's Daily | Professor Wu Dong of Tsinghua University: Give full play to the important role of state-owned enterprises and industrial policy
The "New Book Promotion" of the theoretical edition of Guangming Daily | Professor Lin Yifu's comments on "The Ladder of Catching Up": The Institutional Advantages of China's Economic Development
"Beijing Daily" theory weekly "Academic Book Tan" | Professor Lu Zhoulai's review of "The Ladder of Catching Up": Finding answers in comparison
The content of "The Ladder of Catching Up" and the table of contents of the whole book | CITIC Publishing Group December 2019