Liu Guoguang, male and from the Han ethnic group, born in November 1923, is a native of Nanjing, Jiangsu Province and a member of the Communist Party of China. He is a member of the Presidium of the Chinese Academy of Social Sciences Academic Division. In 1946, he graduated from the department of economics of the National Southwest Associated University. In 1955, he graduated from the Moscow Economics School and became a postgraduate. He currently serves as special advisor and researcher in the Chinese Academy of Social Sciences. In the past he has held the post of vice-president of the Chinese Academy of Social Sciences, Alternate Member of 12th and 13th Communist Party of China Central Committees, Member of the Standing Committee of the National People’s Congress, Director of the judging panel of Sun Yefang Economics and Science Prize, Honorary President of the China Research Society of Urban Development, Director of the National Council for Social Security Fund. His academic expertise is economics. In 1988, he was elected as a foreign academician by the Polish Academy of Sciences. In 2000, he was awarded an honorary doctorate by the Russian Academy of Sciences. In 2005, he won the first ever China Economics Award for Outstanding Contribution.
Major Academic Works:
Issues on Socialist Reproduction. SDX Joint Publishing Company. 1980.
On Economic Reform and Economic Adjustment. Jiangsu People’s Publishing House. 1983.
Dramatic Changes in Chinese Economy and the Development of Marxist Economic Theories. Jiangsu People’s Publishing House. 1988.
Reform, Stability, and Development. Economy & Management Publishing House. 1991.
An Anthology of Liu Guoguang’s Economic Writings (1991~1992). Economy & Management Publishing House. 1993.
A New Stage in Chinese Economic Reform and Development. Economy & Management Publishing House. 1996.
Trends in Chinese Economy — Operation of Macro-economy and Reform of Micro-economy. Jiangsu People’s Publishing House. 1998.
Operation and Development of Chinese Economy. Guangdong Economy Publishing House. 2001.
Problems in Chinese Macro-economy. Economy & Management Publishing House. 2004.
Some Theoretical Problems in Reforming the Management System of the National Economy. (with Wu Jiapei) Chinese Academy of Social Sciences Publishing House. 1980.
Significant Issues on the Development of Chinese Economy. Shanghai People’s Publishing House. 1984
Research on Development Strategies in Shenzhen Special Economic Zone. Hong Kong Economic Information & Agency. 1985.
Research into Reforms in the Pattern of Chinese Economic System. Chinese Academy of Social Sciences Publishing House. 1988.
Economic Development Strategies in Hainan Province. Economy & Management Publishing House. 1988
Two Fundamental Changes in Chinese Economy. Shanghai Far East Publishers of China. 1996.
Some problems in teaching and studying Economics, in Economic Research Journal. October, 2005.
Reform to Benefit the Majority of the People
Heng Lin (Heng for short below): This activity is organized by the Youth Center of the Chinese Academy of Social Sciences. And I was appointed to interview you and sort out materials about your growing experience, academic achievements, and learning and researching experience, which will not only reveal the elegant demeanor of experts in the Academy but also provide varied experience for young scholars. It is worthwhile for juniors to draw some lessons from your research and your life, enjoying learning in particular.Liu Guoguang (Liu for short below): You have many things to do, so please don’t delay them for this interview. I am not a hero, and there is nothing worth writing about. What I have done over the years is my responsibility. Since I am old now, it is time for me to have a rest.
Heng: Our target readers are ordinary people. Your seemingly ordinary experiences are invaluable for numerous students in the pursuit of knowledge. We are longing to hear your valuable experiences.
Liu: All right.
Heng: We are curious about your going to Sichuan at an early age. There are many discrepancies among different versions of the details. Therefore, we want to take this opportunity to clarify the details so as to leave precious materials.
I remember I accompanied you to Chengdu and Chongqing to visit your long-separated alma mater in July 1999. The school is located in the Puyan Temple in Hechuan County (now Hechuan City). The temple, ancient and secluded, with old trees climbing its walls, is a great place for reading. How did you go to Sichuan?
Liu: In 1937, Japan invaded China on a large scale with the Lugouqiao Incident as the excuse. I was then 14 years old and a junior in Jiangning High School in Nanjing. In September, the Japanese army was going to attack Nanjing after the fall of Shanghai, which panicked Nanjing residents into fleeing. In the severe situation, my father fetched me from school in a hurry and asked me to seek refuge with my mother and cousin. Hence, the three of us took a ship along the Changjiang River, transferred to a boat in Hankou, and finally arrived at Changsha to seek shelter in my uncle’s home. He taught in Hunan University at that time. Working in a foreign company, Father was unable to go with us but had to move with the company. The Kuomintang government retreated westward all the way to Sichuan. One year later, Guangzhou fell and almost half China was overrun by the Japanese. The whole nation went westward in disorder, which was a misfortune for the country and a catastrophe for the people.
At the end of December, father came to Hankou on business. Hearing about this, mother and I went back to Hankou to reunite with father. At that time, the Kuomintang government was moving westward and Sichuan became the Great Rear Area to which a good many people and a great deal of baggage were evacuated. Since Hankou was at the point of being captured, a large number of people chose to stay in Chongqing. After entrusting me to my aunt, my parents continued the journey up the river to my uncle’s hometown in Chongqing. The farewell with my parents in Hankou is the last time I saw my mother. In early 1938, my aunt brought me to Chongqing. Since then, I have led an independent life. In April 1938, my parents went along the Beijing-Wuhan Railroad to Guangzhou and Hong Kong and eventually reached Shanghai and Nanjing. Later, the War of Resistance against Japan entered the stage of strategic stalemate where the Japanese occupied East China and Shanghai was isolated.
Heng: “Never go into Sichuan in youth,” as the old saying goes. On the contrary, you went to Sichuan at a young age, which laid a solid foundation for your learning. In the end, you left Sichuan, daring and energetic. As a result, you made your dream of being an accomplished scholar come true. How did all this begin?
Liu: At first, I lived in the home of one of my mother’s friends in Chongqing. Later, when I was enrolled again, I lived in the school.
While retreating westward, the Ministry of Education of the Kuomindang government set up registry offices in cities like Hankou, Yichang, and Chongqing, which gave shelter to students from the occupied areas and registered them. Learning about this, innumerable students went there to register. I wasn’t registered until I reached Chongqing where students came from all over the country. In Chongqing, I came across a lot of classmates and was reunited with them. The number of students was so large that the Kuomindang government was unable to ignore them and had to organize them into schools.
Being registered very late, I wasn’t enrolled in Sichuan High School in Jiangbei County until April or May. The school was later renamed the Second State-run High School. In those days, Chongqing was frequently bombed by the Japanese troops. After two or three months’ making up junior high school courses in Jiangbei County, we moved to Hechuan County for senior high school. I lived in Hechuan for altogether three years from 1938 to July 1941. Graduating from senior high school in 1941, I was enrolled by the National Southwest Associated University in Kunming.
It was in her forties that my mother passed away. I was about twenty-two years old then and studying in Kunming. However, my family concealed the bad news from me until Japan’s surrender to China. After the surrender, father wrote me a letter to inform me of the bad news.
We relied on loans for tuition in school, which was not paid back afterwards. A lot of students were given financial help by others. I was no exception. My cousin was also in Chongqing and offered help to me. Later, I earned some money by being a tutor and a teacher in high school, but it was still hard at that time.
Heng: The National Southwest Associated University is a miracle in the history of education in China. Difficult as the situation was, it had cultivated a good many talents, which is worth recounting in history.
Liu: The National Southwest Associated University, the combination of Qinghua University, Beijing University, and Nankai University, was started in
The National Southwest Associated University was officially closed in 1946 and I happened to graduate before its closure. Then, we took the bus arranged by the University back home. It was natural for me to long to go home, as I had just finished studies and hadn’t been home for eight years. At that time, with the war just ended and society still turbulent, we hung a banner with the words “Students From the Occupied Areas Go Back Home So Please Show Mercy, Dear Countrymen” in large letters when we were transported eastward truck by truck through towering mountains from Kunming to Hunan. Fortunately, we had a smooth journey. After traveling for over a week, we finally reached Changsha. Then, we took a train from Changsha to Wuhan. In Wuhan, we took the boat of the UN Refugee Agency back to Nanjing, where we temporarily served as stewards and stewardesses.
It was for eight years that I hadn’t been home. What a hard life!
After graduation, I originally planned to be a teaching assistant in Qinghua University but failed because of the limited quota. My teacher Xu Yuzhan advised me to pursue a master’s degree. I took his advice and went to Shanghai in about July to prepare for the entrance examination for graduate studies, I met Xu Yuzhan, a local Shanghaiese, when I got to Shanghai he became my supervisor. I went to Beijing for further study. Because of the tense situation before the Chinese Civil War, we had to travel to Beijing by sea. At that time, Beijing and Tianjin were isolated from the surrounding liberated areas. I stayed in Beijing as a postgraduate for only two months. Later on, I went to Nankai University to be a teaching assistant. How?
On one occasion, Chen Xujing, the head of the Teaching Affairs Division in Nankai University, who once taught in the National Southwest Associated University, came to Beijing to hire teachers and asked me whether I was willing to teach there, because Nankai University was short of teachers after the War of Resistance against Japan. That was what I was looking for. Then, I asked Xu Yuzhan for advice. He suggested that I should accept the offer for I would both get paid and have time for reading there whereas I could only support myself here. Hence, I went to Nankai University as a teaching assistant in the faculty of economics in December and stayed there until 1948. Although a teaching assistant was not well paid, it was much better than being a poor student.
Heng: How did you leave Nankai University for Nanjing State-owned Academy?
Liu: Chen Daisun gave me a recommendation and introduced me to Nanjing State-owned Academy. I was eager to be transferred to the Academy as an assistant in the Research Institute of Social Sciences. After the founding of the People’s Republic of China, I was selected to receive further study in the Soviet Union. During the selection process, I was interviewed by Chen Daisun and Nan Hanchen. Mr. Chen, as I have mentioned, was the dean of the National Southwest Associated University and later the dean of the faculty of economics in Qinghua University and Mr. Nan was then the first president of the People’s Bank of China.
Heng: You are lucky to be one of the first international students dispatched by the People’s Republic of China to the Soviet Union. What is your impression of that experience? It is said that you were very studious.
Liu: At that time, China was going to send a group of comrades to the Soviet Union for further study. The Chinese Academy of Sciences notified me of the examination for selecting the comrades. The exam was held in Beijing University. After the exam, political censorship, and preparation, I reached Moscow in October 1951. There were over a hundred international students in the first batch who studied various subjects. Qian Xinzhong, the minister of the Ministry of Health and leader of the group, also went there for further study. The Chinese Academy of Sciences sent four people there. Some of them studied math or physics while only I studied economics. I was the first person sent to the Soviet Union to learn economics. Of course, Luo Yuanzheng, the son-in-law of Feng Yuxiang, went to Leningrad as early as 1948 to learn economics and was considered as the first. However, he wasn’t officially sent by our country. Instead, he stayed there because of Mr. Feng’s death in a shipboard fire on the Black Sea. I should be regarded as the first to be sent by the government. Later, several groups of students went.
When studying in Moscow Economics School, I spent some time in taking Russian and economics classes and most of the time on autonomous learning such as studying, reading the must read books for economics majors and research reports, writing papers, and taking part in activities organized by the Research Institute of Planned Economy. In most cases, I did research in the Lenin Library several bus stations away from where I lived. Every day, I got up early in the morning, went to the Library a convenient place for writing papers with some slices of bread in hand, and stayed there all day, which was the epitome of my life in the Soviet Union. For the rest of the time, I was involved in school activities and activities of the Chinese international students. During my stay in the Soviet Union, I was mostly in Moscow; I occasionally went to Leningrad and sometimes anatoria in the summer. I had only participated in a large-scale journey once that was in the summer of 1954, the Communist Youth League of the Soviet Union organized a two week investigation along the Volga River to Stalingrad and a port on the Caspian Sea for Chinese international students.
Heng: From your return to the early 1960s, you wrote plenty of influential papers, which caught the profession’s attention. Is it mainly due to your accumulation of knowledge in the Soviet Union or your research with Sun Yefang?
Liu: Both of them count. I was certainly affected by what I had learnt in the Soviet Union. At that time, I concentrated on studying Marxist reproduction theory, on such specific problems in China as the extreme Great Leap Forward and imbalanced proportion. Although the study aimed to solve the problems at that time, it appeared to discuss theories rather than specific problems, for it was inappropriate to talk about reality in those days. It dealt with problems in reality concerning factors influencing speed, speed and proportion, relation between fixed assets investment and depreciation, simple reproduction, expanded reproduction, and the relationship between accumulation and consumption. Why did I do research into simple reproduction? Of course, there is no need to study simple reproduction. However, countries competed in equipment with each other, so that even simple reproduction could not be maintained.
The academic atmosphere also provided conditions for my study. It was for about three years after returning that I assisted A. M. Bierman, a specialist from the Soviet Union, in investigating such issues as industrial working capital and circulation of currency in China. In early 1958, Sun Yefang came to the Institute of Economics and encouraged us to do research. On one hand, he thought highly of me. On the other hand, I coordinated well with him. When he was transferred from the National Bureau of Statistics, the Bureau invited Mr. Sopori an expert in statistics from the Soviet Union to give lectures in China. Since the subject of Mr. Sopori’s speech happened to be on the balance of national economy which was what I had learnt, Sun Yefang asked me to take charge of translating the series of lectures and sorting the information from the lectures. Mr. Sopori not only talked about balance sheets but also some theories, commodity production, law of value, and even law of the whole system of reproduction, which was familiar to me. As a result, both Sun Yefang and I were very interested in the subject and shared a successful partnership. In the second half of 1958, we set up the Research Group on Overall Balance of National Economy, with Yang Jianbai as the group leader and Dong Fureng the vice group leaders. The National Bureau of Statistics also established a corresponding department of balance. We went to Henan Province together to examine the real yield and consumption of cereals and imbalance of investment. We thought there was something wrong with the conversion from consumption into accumulation. The problem was put forward by Sun Yefang together with many other problems in real life. In 1961, the Group, under Yang Jianbai’s leadership, went to Liaoning Province to investigate imbalances in agriculture, light industry, and heavy industry since the Great Leap Forward, which encouraged us to think about significant issues on economic theory. In 1960, after being transferred to work in the countryside in Changli County, Hebei Province for almost half a year, I was transferred back to engage in writing On Socialist Economy. The writing was organized by Sun Yefang, with Dong Fureng, Sun Shangqing, He Jianzhang, Gui Shiyong, Zhao Xiaomin, and I as major writers. In addition, Zhang Wentian, Luo Gengmo, and Li Lisan came for discussions with us sometimes.
I wrote a large number of articles, which was described as a “blowout”, my first blowout. Although the articles appeared to discuss pure theories, in fact they were targeted at problems in real life. Later, some people in East Europe, Japan, India, and Britain studied my thoughts on reproduction theory, treated them as patterns of economic growth, paraphrased them, and drew many charts accordingly.
Heng: This was the Chinese version of the Harrod-Domar model. What a pity the study was interrupted! Otherwise, it would have exerted great influence. Moreover, the offprint of your article about Marxist productive labor theory in the early 1980s was well-received and used in a lot of places as a guide to the second volume of Capital, as it was easier to understand than other teaching materials.
Liu: With the beginning of political movements since 1964, all the research stopped. Sun Yefang and Yang Jianbai were the first to suffer. In 1963, Yang Jianbai wrote the article “Prices of Production” with He Jianzhang, which was criticized by the magazine Red Flag and considered as a fallacy of Marxist revisionism. Yang Jianbai was the target of criticism, as well as Sun Yefang, as Sun Yefang stood by Yang Jianbai.
Heng: Yang Jianbai once recounted, “The denunciation of Sun Yefang in
Liu: Then, there was so-called the “Anti-party Group of Zhang and Sun”, in which Zhang referred to Zhang Wentian and Sun to Sun Yefang. In 1964, Sun Yefang was criticized for revisionism. Up to 1965, Kang Sheng sent a working group of over seventy people of socialist education who marched majestically to the Institute of Economics to denounce the Group. They seemed to criticize Sun Yefang, but actually targeted Zhang Wentian. Of course, we couldn’t escape the disaster. Although we weren’t thought to belong to the Group, we were regarded as related to Sun Yefang and should be under political censorship, together with such famous scholars as Sun Shangqing, Gui Shiyong, Dong Fureng, and He Jianzhang. In 1965, all the people mentioned above were punished for over a year. In the second half of the year, we were transferred to Zhoukoudian Town, Fangshan District to continue taking part in socialist education in the countryside. 1966 witnessed the Cultural Revolution. We went back to participate in the movement where Sun Yefang and Mr. Zhang were punished, as well as us. However, we, less important persons, were no longer punished whereas Sun Yefang was sent to prison. From 1964 to 1975, we were engaged in the movement and worked in cadres’ schools, the cafeteria, the tofu mill, and the pig farm, which was what Yang Jiang wrote about in her Diary in Cadres’ Schools. At that time, I was in charge of the pig farm which once kept more than two hundred pigs. The pigs were high-quality Danish ones, which were all sold to international trade companies mostly for export. If we wanted to eat pork, we had to buy Chinese pigs from the companies. We had to carry them by bike back for dozens of miles, which was a hard job because of the rough dirt roads in the countryside. At first, there were only several piglets, and gradually more and more pigs, which taxed my brain. The fodder for the pigs was far from easy to deal with and needed transporting by truck and cooking in the cauldron, with which a good many people helped me. It was by no means a piece of cake to repair the pigsty. The pigs frequently rubbed against the pigsty with the snout, and ran away in all directions when the pigsty was pushed open. And we also had to look for them. Moreover, we were required to clean up the stool and urine, day and night. What difficult work! When recalling those days, I am nostalgic.
The movement continued without cessation until 1973. Premier Zhou asked us to come back to participate in movements. Therefore, the whole Division moved back to Beijing and was engaged in political movements for two years.
However, up to 1975, we gradually resumed our work mainly from the National Planning Commission due to Yu Guangyuan. Without the help of Yu Guangyuan, we wouldn’t have gone back to research earlier than others. While others like some in the Chinese Academy of Sciences were involved or even punished in political movements, we left for the Research Institute of Economics. At that time, Yu Guangyuan set up the Institute in the National Planning Commission, with himself as the head. He not only brought in Xue Muqiao and Xu Dixin, but also selected the backbone of the Academy to join the Institute, all of whom were related to Sun Yefang, including Sun Shangqing, He Jianzhang, Dong Fureng, Gui Shiyong, and me.
After I went to the Commission, my research, which had been interrupted for eight years, slowly recovered. In that period, I was mainly occupied in a great deal of research in a number of provinces in East China, central parts of South China, Romania, and Yugoslavia. I didn’t go back to the Institute of Economics until 1979 Xu Dixin became the head of the Institute and Sun Yefang came back to work.
Heng: In the Institute of Economics, who had the greatest influence on your thoughts and research?
Liu: I think Sun Yefang has had the most tremendous impact upon me. In 1958, he came to the Institute of Economics as the acting head of the Institute and later became the head. After coming to the Institute, the first thing he did was to ask me to work as a translator for Mr. Sopori. The second thing was to set up three research groups, one of which was the Research Group on Overall Balance of National Economy, namely the current Research Center of Macro-economics, transfer Yang Jianbai from the Research Institute of World Economy in the National Planning Commission to the Group as the group leader, appoint Dong Fureng and me as the vice group leaders, and ask us to prepare for the establishment of the Group. Afterwards, I became the vice leader of the Group and academic secretary to Sun Yefang, I come in to contact with lots of things and went abroad with him. In December 1958, I went to Prague with Sun Yefang to attend the Cooperation Conference of Research Institutes of Economics in the World Socialist Countries held in Czechoslovakia. From January to February 1959, I accompanied Sun Yefang to the Soviet Union, which was significant in history. I drew up the lengthy “Report on the Visit to the Soviet Union” and made a systemic introduction to the development of theoretical economics and quantitative economics in the Soviet Union. That is when the study on quantitative economics in China began. After returning from the Soviet Union, Sun Yefang set up the Research Group for Quantitative Economics, with Wu Jiapei, Zhang Shouyi, and so on. Later, the Group developed into the Institute of Quantitative and Technical Economics. After the reform and opening up, in the early 1980s, Lawrence Klein from America led a group of economists to China to give courses on quantitative economics in the Summer Palace, which I was in charge of. The professors were tired out in the hot summer days with only fans turned on. I still remember them today. We founded the subject of econometrics, drew lessons from the Soviet Union before the reform and opening up and from the United States after the reform and opening up. I was involved in all this and promoted the development of research into quantitative economics and the subject of quantitative economics.
Wu Baoshan also had an impact on me. At the beginning of the Liberation, The People’s Liberation Army had just occupied Nanjing. In those days when I was young, he taught me how to undertake research and how to write research reports and start the investigation of the handicraft industry in Nanjing, which was of great help to me. He, one of the few people in China specializing in national income, advised me to learn the balance sheet of national economy when he found out I was going to the Soviet Union, because it was the most important means of the Soviet planned economy and its essential theory. It was Wu Baoshan who guided me to choose the major.
Moreover, Yang Jianbai has also affected me. He is my colleague and excels at conducting investigations. He led us to Liaoning Province and Shanxi Province for investigations several times and to cooperate with the National Planning Commission in research, which not only better familiarized us with the structure and the state of the national economy in various areas and the whole country but also helped us a lot with our studies.
Heng: Now we are quite clear about your experiences and achievements in the 1960s. We don’t have a comprehensive understanding of your academic views and accomplishments after the reform and opening up, nor do we know stories behind them. Could you talk about them briefly?
Liu: In 1978, I wrote the article “Governing Economics in Economic Ways” after the Third Plenary Session of the 11th Central Committee of the Communist Party of China but before the Sixth Plenary Session, when the reform had just started and the Third Plenary Session discussed the reform of the economic system. Although Liu Shaoqi wasn’t yet rehabilitated, whether to use economic ways or executive ways to govern economics could be discussed openly. In the 1960s, the opinion was referred to by Liu Shaoqi and consistently spoken of by Sun Yefang. The Third Plenary Session brought up that the old system was too rigid and needed to be made more flexible. In 1979, in a national seminar on the commodity economy and law of value held in Wuxi City, we put forward the paper “Relation between Planning and Market in Socialism” co-written with Zhao Renwei. Later, the paper was published in the magazine Preprint of the Chinese Academy of Social Sciences and reported and submitted to the General Secretary Hu Yaobang. Reading the paper, he had a high opinion of the paper and considered it as a “model paper” which was coined by him. With such publicity, the ideas in the paper spread more widely.
Heng: Comrade Yaobang commented, “This article studies new issues and is a model paper. When the majority of theorists haven’t yet made up their minds or made their utmost efforts to turn to this field of study, we should exert great efforts to promote this trend of study.”
Liu: The article proposed that the functioning of a socialist economy could depend on the combination of the planned economy and market economy instead of planned economy only. It put forward that we could make fundamental changes to the current economic system, get rid of the highly centralized economy favored by Joseph Stalin, and adopt the integration of the planned economy and market economy. It also suggested that the planning should guide the economy and mainly regulate the macro economy and the market should mainly govern the micro economy. This idea paved the way for the establishment of “government is regulating the market and the market is guiding companies” in the academic community.
The article attracted much attention at the Annual Conference of Atlantic Economics, regarded as academically significant and published in the then Atlantic Economic Review together with a paper by James Meade the Nobel Prize winner for economics.
In September 1982, the People’s Daily published my article “Adhering to Directions of Reforms” which suggested reducing mandatory plans and increasing guiding ones. Not only did the People’s Daily publish a commentary, but also Red Flag published a criticism with the author’s name signed on it, which raised denunciation of me. However, as the old saying goes, “facts speak louder than words”, subsequent facts proved my views in the article right, although it was in fact subversive to suggest giving priority to guiding plans in the planned economy.
Of course, people’s knowledge of the idea intensified, as the reform was carried out to a greater extent. Nowadays, someone was arguing for his invention of the “market economy” as early as 1956, which was a bluff. It was Deng Xiaoping who first came up with the “socialist market economy”. We did nothing but some work under the general guiding thought. In 1985, we suggested turning market moderation to better account after the establishment of the Shenzhen Special Economic Zone. In 1988, before the establishment of Hainan Province, we formally put forward the construction of the socialist market economic system in the plan we made for Hainan. All those ideas were eventually more widely applied.
I advanced the thought of “two changes” very early. In October 1983, my article “Discussing Buyer’s Market Again”, published in the People’s Daily, was the first to bring up that the priority in the reform was to solve shortages with the transition to the buyer’s market, which was both a reflection on the Soviet planned economy and the Great Leap Forward and a concern for the realities and theories in East European countries. We paid a visit to several East European countries and inspected their reform of the system. We first examined how others reformed, tried to reform, and then reformed according to our specific situations. At that time, a large number of problems and difficulties came out, which urged us to reform. In October 1983, I wrote the article “Research into the Economic System and Economic Development Strategy with Chinese Characteristics” in Qingdao. In December 1984, the book On Economic Reform and Economic Adjustment was published with this article as its epilogue.
Heng: An important part of your economic thoughts was about reforms in the system and development strategy, which consisted of a good many new problems and theories, and a large number of suggestions for strategies. In the past, some foreign scholars interpreted documents and intentions of the Central People’s Government in the light of your ideas.
Liu: In November 1985, the People’s Daily published my article “On Changes in Two Economic Patterns in China”, which systematically put forward the target of reform for the first time and theoretically reveal changes in the pattern of the economic system and that of economic growth. The change in the economic system evolved into the transformation from the traditional planned economy to the socialist market economy while the change in economic development referred to the transformation from extensive economic growth to intensive economic growth. These two changes was proposed by Karl Marx in his reproduction theory and was unfamiliar to the Chinese until the Fifth Plenary Session of the 14th Central Committee of the Communist Party of China as the “two fundamental changes”. In July 1987, the book Research into Reforms in the Pattern of Chinese Economic System, which I was in charge of, was published, well-received, and honored as one of the ten economic works influencing the economic construction of the new China.
Heng: Since 1984, for almost two decades, you have been involved in drafting or being consulted about documents and governmental reports related to a number of plenary sessions of the Central Committee of the Communist Party of China. Over the years, the Central Committee of the Communist Party of China have come up with a series of significant theoretical innovations, such as the planned commodity economy, the Primary Stage of Socialism, the socialist market economy, which was partly due to your efforts. It was said that in June 1992, before the commencement of the Fourteenth National Congress of the Communist Party of China, President Jiang Zemin conferred with you about the formulation of the “socialist market economy”. The Central Committee attaches great importance to your opinions and suggestions or values views of the Chinese Academy of Social Sciences with you as its representative. In August 2005, the leader responsible for publicity in the Central Committee once remarked, “Comrade Liu Guoguang, an influential and devoted economist, adheres to Marxism. Since the reform and opening up, he has published a lot of articles, participated in many discussions about strategic decisions, and made great contributions.” Of course, you once advanced some views which struck home out of responsibility, which were words from the bottom of your heart with the conscience of an intellect, without taking personal grudges into consideration.
Liu: In 1988, I made a speech at the Second Plenary Session of the 13th Central Committee of the Communist Party of China and suggested facing up to inflation, which harmed some people’s interests and was unpleasant to their ears. Some people objected to my idea and major decision-makers also advocated rushing through inflation, which I was strongly against. When some of my views became more widely known, some people sent me letters to threaten me and claim to end my life by using peanuts. However, many people supported me. For example, Xue Muqiao and Rong Zihe the former vice minister of the Ministry of Finance wrote letters to encourage me and thought my view was right. Hu Qili joined the discussion of our group and took notice of my speech. Later, at Oxford University, I wrote another article “Discussing Inflation Again” that was correct. The facts prove that it will court disaster if we fail to face up to inflation. Personal interests do not matter whereas national interests count. When focusing on economic development, we should ensure the economy is stable and healthy.
As a matter of fact, since we found signs of economic overheating, we had proposed the policy of “creating a relatively loose environment for reform” and gradually formed into the “loose school” around us with our own thought of reform “seeking improvement in stability”. In 1987, when people probed into the medium stage of reform and heatedly discussed whether to put stress on reforms in ownership or on prices, we contended an integrated and comprehensive way of reform in both aspects without any bias towards any aspect. Our plan was right and at the same time effectively criticized the idea of “inflation beneficialism”. In the light of the actual situations, we suggested rectifying economic order, controlling inflation, and intensifying reform selectively.
Heng: The medium stage of reform referred to the years from 1988 to 1995. When inflation reached a peak, there was panic buying during July and August in 1988, so in September the government had to control, rectify, and reform. All these actions proved your views were right.
Liu: Overheating means pursuing large quantity and fast speed regardless of objective conditions, which exceeds economic capacity and causes serious inflation. Therefore, we have to stop the overheating economy and even adopt a “hard landing”. However, stopping all of a sudden or stopping too fast results in ups and downs in the economy. There were too many such ups and downs before and after the reform and opening up. Later, the government took a series of measures to consolidate and sharpen macro-economic regulation and control, adopted moderately tight policies, gradually led the growth rate and prices to reasonable areas, and realized a “soft landing”. Afterwards, “moderate tightness” was written in the resolution of the Party as an important policy of medium-and-long-term macro-economic regulation and control, which counted for much. In all previous analysis conferences of macro-economy in the Chinese Academy of Social Sciences, I put emphasis on employing the thought of reform “seeking improvement in stability”. I think highly of the “soft landing” because it accords with China’s situation and is a relatively successful orientation. Therefore, in the future, we should pay more attention to taking precautionary and fine-tuning measures so as to avoid ups and downs.
The neutral fiscal policy and monetary policy is both one of my important opinions and my latest thought for macro-economy. I drew the conclusion of the neutral fiscal policy and monetary policy from experience of controlling inflation and deflation. Until now, the Central Government still adopts the neutral fiscal and monetary policy without much change.
I’m also interested in other areas, such as reform of state-owned enterprises, financial reform, opening up, regional development and co-ordination, and natural environment, and wrote articles about them. My articles seldom deal with rural problems, which is a defect. It is impossible to investigate all kinds of problems, since everyone has limited energy.
My last article on reforming enterprises was my speech in Canada in 2002. Since then, I have observed and considered some different viewpoints. As for reforming small-and-medium-sized enterprises, I’m in favor of the joint stock partnership, namely the cooperation between labor and capital. The cooperation is supposed to be more or less balanced, without the operator holding the largest share. Otherwise, its nature and the trend will be totally altered, and enterprises will be eventually sold or acquired at a low price. And in turn almost all local state-owned enterprises will be bankrupt. With regard to the reform of property rights, we should change the realizations of management rights and use rights without changing the ownership. Full privatization is also wrong.
Heng: Talking about your thoughts, I have to mention what has happened recently. After 2005, you opened up new worlds of research. Some people say you object to reform and the market economy.
Liu: What they say is ridiculous and makes no sense. I don’t mind their remarks and laugh them off.
What I’m opposed to is not the reform of socialism or the socialist market economy, but how they reform. It is known to all that they want privatization, full marketization, neo-liberalism, and “democratic socialism”.
I didn’t open up a new world of research, as Deng Xiaoping suggested when criticizing “liberalized” views of reform.
Heng: Were you under stress? Your views offended lots of people, harmed some people’s interests, and made them annoyed and antipathetic.
Liu: No stress at all. Neither the Central Government nor the masses say I am against reform. Plenty of people agree with my ideas. Those who oppose me are not large in number, but influential in the mainstream media. Some of those offended are my good friends, with whom I have worked and been on good terms with. It’s unavoidable to have different views. Everyone has his own ambition. With social diversification and hierarchical interests, it’s inevitable for them to have biased opinions. I didn’t intend to offend them. However, I have to tell the truth when finding some facts. Therefore, it’s inevitable for me offend some people and harm their interests.
Heng: Some people say you set such a big trend in society after eighty years old on purpose. What do you think?
Liu: I’m a quiet man, never thinking of being high-profile or arousing any controversy. The two short declaration-like essays, mentioned repeatedly now, namely “My Innermost Feelings at Eighty Years Old” and “Speech for Winning China Economics Award for Outstanding Contribution” at eighty-three years old, are my thoughts and feelings before retirement and produce an enormous reaction in society, which prevents my retirement rather than promoting it. The speech in 2005 was quite unexpected for some people and it annoyed them. Someone was the first to express his dissatisfaction and the whole group around him were all discontented and said that I was against reform and the market economy. In fact, I opposed that they abandoned and distorted the socialist market economy. Later, a young comrade, from the Research and Development Center of Social Sciences in Institutions of Higher Education at the Ministry of Education, interviewed me. I talked about eight or nine problems openly and spontaneously, which became the article “Problems in Teaching and Researching Economics” which caused an even greater reaction. The Government was in favor of and valued my viewpoints and thought they needed exploring. However, those people didn’t believe it at all and sent someone to Tianjin to announce that it didn’t exist at all. I didn’t expect that it would annoy or displease them or arouse such a big controversy.
The event spread more and more widely on the Internet. I neither expect so nor oppose it, because I was undecided on the one hand and I thought the problem should be discussed in public on the other. There were a good many good articles on the Internet, a fraction of which were edited and collected in Cyclone Liu, and some others were included in another book. It was Liu Yiqing who was one of the editors of Cyclone Liu and died of a cerebral hemorrhage when sending parcels in the post office. I really miss him even though I didn’t know him before. He didn’t tell me about the book until they almost finished it. And he thought the problem needed discussing in our country. Apart from Cyclone Liu, he also edited Cyclone Lang. Mr. Lang, namely Lang Xianping, though not understanding Chinese situations better than economists in mainland China, seized upon such crucial issues as privatization and MBO. As for the social cyclone caused by Lang Xianping, over ninety percent of people stood by him while the opposition dared not say anything and only several of them objected openly. Similarly, they edited Cyclone Liu, not for my sake, but for the sake of supporting correct opinions and directions of reform and opposing privatization and liberalization. What we were opposed to were privatization and liberalization.
This phenomenon isn’t determined by how competent I am, but by the fact that the problem is concerned with essential issues like marginalizing Marxism, neo-liberalism prevailing, and whether we should keep Marxism. Of course, western economics is necessary. However, it becomes problematic if it replaces Marxism as the mainstream economic system. When my article was sent to the Central People’s Government, the leader in the Government wrote to leaders responsible for publicity in August 2005 to remark on it, “Many ideas are worth attaching great importance to.”
When it spread through the Internet, the event aroused a big controversy, for the problem itself was thought-provoking and many people cared about it and looked for solutions to it.
Heng: Some people said you only wanted equity instead of efficiency or reform.
Liu: That’s one of the charges against me. Have you ever read my article “Giving Priority to Efficiency When Necessary”? The viewpoints included in it are in line with those in the Fifth Plenary Session of the 16th Central Committee of the Communist Party of China.
Those of my views were issued before the Fifth Plenary Session and were controversial. There were similar words in the manuscript of the Fifth Plenary Session, such as “giving priority to efficiency and attending to equity” and “emphasizing efficiency in the first distribution of wealth and equity in the redistribution”. However, there were no such opinions in the Fourth Plenary Session. My point is that efficiency isn’t unimportant but should be valued when necessary. This article was sent to Comrade Hu Jintao and he instructed Comrade Zeng Peiyan responsible for drafting documents for the Fifth Plenary Session to read it. I can’t say the documents for the Session took my opinions, but the final documents prove that my views are in line with those of the Government.
What I have written before are about theories. Nevertheless, a series of views since the “Speech for Winning the China Economics Award for Outstanding Contribution”, such as “laying more emphasis on equity”, “giving priority to efficiency when necessary”, and “thinking about reform not equating opposing reform”, are criticized and concerned with realistic problems.
After carefully examining all my articles since the Award, leading comrades from related departments thought they conformed to the spirit of the Government, adhered to the route of the Third Plenary Session of the 11th Central Committee of the Communist Party of China, and were in line with those of the Government in general and that there weren’t any signs of opposing reform. Their judgments were a great support for me. In the Speech, I think we put much more stress on the market economy than socialism, planning, and Marxism. When we are talking about the market economy, our words should agree with socialism. Those that disagree with socialism shouldn’t be mentioned at all. The more, the better, as long as they were in accordance with socialism, including the market economy. What I have said in the Speech isn’t wrong at all. Some people are against me. What they advocate are, in fact, full privatization and liberalism without the government’s regulation, control, or intervention, and minimizing the functions of the government, and that the government only needs to create a good environment for the market economy, which distorts directions of socialism and I object to that.
We shouldn’t simply talk about reform, but should discuss socialist reform. It’s wrong to lay less stress on socialism and even worse to take no notice of it. The tone I set in the Speech is right. When people say they adhere to reform, we should make sure what kind of reform they adhere to. If they change socialism into capitalism, that’s not reform at all. It’s wrong to oppose reform, but it’s worse to abandon socialism. They say we oppose reform. As a matter of fact, we don’t oppose reform but object to anti-socialism reform. The majority are in favor of reform with the opposition in the minority, as Deng Xiaoping once said. Since reform will make most people’s life better, why not support reform? Of course, people support reform. Even though some people oppose it, they are opposed to some ways of reforming it. No one objects to reform on the whole. Now some regard those who stress socialism as opposing reform, do wrong to us, and push the masses to the opposite side of reform, for the only purpose of dreading others’ telling the truth.
I think there’s no doubt that every Chinese hopes China can become better and better except those having an axe to grind. Then, what’s the difference between us and the opposition?
It’s evident that it’s not because we are prejudiced against each other, but because we adopt different class standpoints. Now we never talk about class conflicts or class struggles, but we shouldn’t throw away how Marxism analyzes different social classes. While talking, everyone takes up a stance. Does he take the stance of wealth and capital or that of labor? It’s difficult to distinguish others’ stances if we don’t employ the way Marxism analyzes social classes. Now some people juggle with socialism and mislead the public, saying socialism can be interpreted in over a hundred and sixty ways. Then, which way should China take? They say that democratic socialism is also socialism, that in fact democratic socialism in North Europe is true socialism, that we should take Bernstein’s socialism, the true Marxism and learn from North Europe, and that our Marxism and Leninism are totally wrong. They promote their views so widely that they cause heated discussions and serious criticism. As a matter of fact, Mr. Bernstein is a traitor to Marxism.
Marxism doesn’t totally deny peaceful reformism on condition that it doesn’t take place at the expense of the working class’s interests and the public’s interests. Sound social welfare doesn’t necessarily equal socialism and the Welfare State won’t become a socialist country automatically. Some western countries do succeed in sound social welfare by means of drawing lessons from socialist countries in order to ease the class conflicts within capitalism. However, they stand for private ownership, require the distinction between labor and capital, and still take capitalism by giving welfare benefits. There is still the ultimate social conflict in those countries and it won’t change that the poor will be poorer and the rich richer. Up to now, wealth is still concentrated in America, which we should avoid in China. They also say there is no experience of socialism to learn by. Does it mean we should turn to the European way?
We should keep pace with the times without changing some basic principles. Otherwise, we deviate from socialism. We should adhere to the essence of socialism. The ultimate aim of the Manifesto of the Communist Party is to wipe out private ownership. Of course, we have to admit private ownership during the Primary Stages of Socialism for hundreds of years. Nonetheless, we will eventually eliminate private ownership. Although we can avoid talking about wiping out private ownership, we have to acknowledge theoretically that socialism excludes private ownership and that the essence of capitalist private ownership is to exploit the work performed by the proletarian. Now we admit of private ownership on condition that public ownership is given the priority. But democratic socialism never considers these essential issues.
The socialism we talk about is Deng Xiaoping’s socialism that consists of two indispensable parts: the predominant role of public ownership and the goal of common prosperity. The absence of any part will result in non-socialism. Marx’s socialism is also like this. Though Marx aimed to eliminate private ownership, China is unable to achieve it at present and needs the private economy. But we should forbid its replacing public ownership and the prevailing of wage labor. If the predominant role of public ownership and distribution of wealth according to work are replaced with distribution of goods and pay according to factors of production and capital, the work of migrant workers is worth three hundred to five hundred Yuan at the market value and will be decreased below the market value with so many labor powers in China, which won’t meet the demand for labor powers in simple reproduction. Lots of cases have occurred like this: the nation becomes more powerful and turns to capitalism and the wealth is owned by the minority with the majority not benefiting. That’s not our goal.
Arguments over theories reflect the process of development in our real life. In spite of the diversification of people’s interests and thoughts, the theme must be socialism and it should be maintained. Otherwise, we will lose our way. If we adopt capitalism or a great gap between the rich and the poor, the reform will be a failure. “If the reform results in a big gap between the rich and the poor, the reform is a failure,” Deng Xiaoping once said so. It’s significant to decide whether there is a great gap between the rich and the poor.
Deng Xiaoping proposed two overall situations: the first is to let some people and areas get wealthy earlier and to achieve common prosperity later; and the second is to allow eastern China to develop first and then help the west to develop. We let some people and areas get wealthy earlier and they should help solve the problem of “common prosperity” at some time, on which many parts of Deng Xiaoping’s thoughts put emphasis. Then when is the right time to solve the problem? Deng Xiaoping answered, “We should tackle the problem when we have built a moderately prosperous society.” That is to say, we should solve it at the end of twentieth century when we more or less reach the goal of building a moderately prosperous society. However, it’s almost 2008 now and it’s high time that we took measures to solve it. It will be too late if we wait until the gap between rich and poor becomes great. Of course, it’s impossible to handle the problem in a short time frame but it can be dealt with step by step. I’m afraid I should raise the issue. Now, the Government attaches great importance to education, medical care, housing, narrowing down the gap between urban and rural, and increasing farmers’ incomes, and so on, and get down to improving them one by one. However, the problem of ownership hasn’t been included on the agenda yet.
It’s of course important to value well-being and distribution of wealth but it’s more important to emphasize the property ownership system as the determinant. Paul Samuelson, an American economist, also acknowledges that property is the most important factor except such subjective factors as education and intelligence. The more capital one has, the more returns one gets. The more privatized the society is, the greater the gap between rich and poor is. This is fact. It’s not adequate to let the majority be wealthy only by means of labor and intelligence. And now it’s time to solve the problem of common prosperity. That’s why we should highlight socialism. Therefore, it’s more crucial to adhere to the predominant role of public ownership than to solve the problem of distribution, for the ownership system is fundamental.
Heng: Why do you do work so hard to displease some people?
Liu: Economics is the science of interests. However, the aim of economics should benefit the majority instead of the minority and harming the interests of the public. Lots of people seem afraid to offend the minority. In reality, if the minority is wise enough, they should know that social stability will secure their wealth. Therefore, even if it’s for the sake of their interests, we should lay emphasis on public interests and protecting the interests of the majority. In the past, reform was said to emancipate and develop productive forces, which isn’t totally right and far from enough. In fact, we emancipate productive forces for the sake of the people. When significant policies in the national economy are involved, we should hold fast to the standpoint of the people and that of the interests of the majority and uphold the truth. We are supposed to adhere to anything beneficial to the prospects of the nation and the people.
Economists can choose to speak for the benefit of enterprises as long as they make sense. Nevertheless, they shouldn’t whitewash vices, deceive or mislead the public, or do harm to the interests of the public. Even if such acts aren’t disclosed to the public, they are shameful. It’s indispensable to abide by basic virtues to be a scholar and to be a man. Otherwise, they will be despised by the people. If we don’t punish those scholars who have no conscience, society will be greatly corrupted.
Economics needs no hype. The same is true for the media. I agree with Wang Yuanhua an expert in The Literary Mind and the Carving of Dragons on the idea that we should prevent hype from corrupting the academic community. Some people hype their academic accomplishments up just like speculating on the stock market, and some take advantage of their “small circle” to hype themselves so as to create academically hot news, which is false and feeble.
Heng: Do you have any suggestions for young students?
Liu: Keep your feet on the ground. Work diligently and conscientiously. Do more reading, investigation, and think a lot.
Heng: Thank you very much. You have provided lots of information and helped us clarify some controversies and get to know more facts today. They are treasures.
The close-up picture on the first page of this article was taken by Hou Yibing.
Heng Lin, a male doctor in economics and associated researcher, worked in the Institute of Economics in the Chinese Academy of Social Sciences from 1997 to 2005 and was transferred to the Academy of Marxism in the Chinese Academy of Social Sciences as the research director. His major academic achievements include Beyond the New Economy, China’s Keynesianism, and nearly one hundred papers.
(Translated by Xu Xiujun)
Editor: Wang Daohang