Vic Edwards

Chinese Premier Li Keqiang may have slid comfortably into the spotlight in his rousing speech to Beijing’s Great Hall of the people on Wednesday, but there is another spotlight that needs to shine for China to maintain sustainable growth – and that is on the country’s inadequate economic infrastructure.

China has high saving rates, an ageing population and lack of welfare safety nets – and will have to build a sophisticated wealth management sector to support healthcare, aged care and education.

Unfortunately the expectations of some of its political and financial leaders seem to be that educational institutions around the world should have detailed knowledge of its economic systems and provide a quick fix.

Sending hundreds of thousands of students overseas to study may help them to gain an insight into how the rest of the developed nations work – but overseas universities cannot   undertake all facets of research and teaching to remediate weaknesses in the future development of the Chinese economic, financial and socio-political system.

Among G20 nations, the US and China wield the greatest economic power. In China’s case, it combines massive purchasing power and the sort of can-do attitude (perhaps minus the personal freedoms) that characterised the building of the US economy during the 20th century.

But China’s desire to succeed is racing ahead of the economic infrastructure essential to realise its ambitions – and of the education and training needed to guarantee the effectiveness of the systems it puts in place to solve ageing, welfare, taxation, environmental and other issues.

International Accounting Standards Board member Dr Wei-Guo Zhang said recently that Australian universities were not capitalising on China’s desire to learn from our experience. Not enough research was being done to adapt Australian laws and institutions to China, while graduates’ were returning with western qualifications not useful or relevant, he said.

 However, China needs to drive more research and education itself.

Most of the students that come to the first tier Australian universities enrol in business or engineering. Very few enrol in law or economics where they teach tax, public finance or social welfare issues. So Chinese students are not seeking knowledge in some of the crucial areas in which China needs to develop knowledge and skills.

China also needs to fund research in areas of need. It has largely thrown the onus of funding for research back upon foreign universities. Foreign universities are cash strapped enough after the global financial crisis. They are increasingly less likely to come up with funds for solving Chinese economic, financial and social problems, particularly so as China was only a minor casualty of the global financial crisis and has not missed a growth target since 1989.

Linked to this is the fact that, until very recently, research on China issues were not considered relevant to top rate academic journals (mainly American or European).

Chinese databases are generally unreliable. Reasonably accurate data rarely extends back more than 10 or 15 years.  In finance, accounting and economics, there is one central data collection covering the Shanghai, Shenzhen and Hong Kong Stock Exchange databases over 20 years. This database, built up by a single, very dedicated Professor from Tsinghua University, is used by accounting and finance staff from the University of New South Wales.

The official Chinese data from government departments is unreliable, flawed and manipulated – so there are very real concerns about results from research conducted outside China using this data.

And in all likelihood the real worth of many of these foreign-trained students may be going unrecognised. Some returning students have analytical skills their bosses don’t have, but the bosses will sign their names to it as if they did it – so these younger people don’t get the recognition.

The Australian School of Business is doing a considerable amount of research into the issues facing modern China – in ageing and welfare, environmental issues (e.g. emissions trading schemes), finance and revenue, post GFC Issues and Australia-China relations, as well as broader economic, financial and socio-political global-Chinese issues.  UNSW has also given significant assistance to China in medical research, fuel cell and energy research as well as developing biochemical means for mopping up pollution spills etc.

Academics sometimes have to update textbooks (as I have done recently with an American textbook on Bank Management) so that it is “Asianized” to account for the impacts and outcomes of the global financial crisis upon China, but also other ASEAN economies. This involved dealing with the differences in government regulation, competition, as well as the ring-fencing of Asian economies from external bubbles and weak but significant financial institutions of western nations. There is no equivalent text coming from China.

Chinese Premier Li Kerbang has acknowledged the “deep-seated and structural problems” facing their economy, saying there was a need to build an “upgraded version of the Chinese economy, focusing on improving the quality and efficiency of development.”

“While growing the economy, our top concerns are raising personal income in tandem with economic growth, strengthening the social safety net and continually improving people’s livelihoods,” he said.

At his Great Hall speech on Wednesday he foreshadowed “painful structural adjustments” needed for the economy to meet the 7.5 per cent growth target.

If the country does not tackle the structures needed to channel private wealth into adequate health care, aged care and education, many in the nation will also have to wear some long term pain.

 Vic Edwards is a Visiting Fellow at the Australian School of Business