Questions to ponder

Paul R. Krugman, the 2008 Nobel economics laureate, recently had academic exchanges with Chinese economists in Beijing, Shanghai and Guangzhou. He had heated arguments with his Chinese counterparts on some issues.

China routinely invites Nobel economics award winners to visit the country. But unlike previous guests who, purposefully or not, heaped praise on China's economic development, Krugman, due to the current economic crisis or his personal style, said things that made Chinese people "uncomfortable."

He accused China of manipulating the exchange rate of the yuan, for example. He also said that the rapid increase of carbon emissions by China has affected the global environment and that the 4 trillion yuan stimulus package is only a short-term measure containing no fundamental economic reforms.

Some of Krugman's views are no doubt arbitrary and groundless. But some of his points should make China reflect on its development.

According to Krugman, it is unusual for a developing country to export so much capital abroad and it is rare for a poor country to become an exporter of resources. With an insufficient healthcare system and infrastructure, China should use the capital within the country.

His words are shocking. Does Krugman not understand China or are there really some potential problems behind China's miraculous development? No matter how ear-piercing Krugman's words may be, China has to admit that no one forced it to sell products to the US and hold so much of its foreign reserves in US treasuries.

Did China not overstress exports and neglect domestic demand? Did China place too much importance on expanding its GDP? Does selling a lot of Chinese products to foreigners really mean the country is an economic success? Can China say it and its people are rich if it owns so many dollar-denominated assets? These questions need serious pondering.

Krugman did not come to China to debate with Chinese economists, nor did he come representing the US government. He often criticized the US government. So it is not necessary for Chinese economists to overreact to Krugman's criticism.

If China really respects economics and respects Nobel economics awards, it should be tolerant and open-minded enough to listen to Krugman and allow him to comment on China's economic development as an economist, regardless of whether or nor most Chinese agree with him.

Jinghua Times

(China Daily 05/25/2009 page2)