LSE-PKU Summer

School - 2015

QUINN CAMPBELL, 08/2015

A great group of people

Class dinners…

Contents

The Program

The Course

Meeting Times

Assessment

The Material

Major Takeaways

Insights & Observations

Summary

Program

2 week intensive course at the prestigious Peking University

Jointly accredited by LSE and PKU

15 courses offered

Each approaches important issues facing China

Taught in English by LSE or PKU faculty

All are renowned specialists in their respective fields.

Diversity of attendees

Over 40 different countries represented

Both students and professionals

Cultural Experience

Program includes cultural events and immersion.

The CourseTHE GLOBAL ECONOMY:

Rethinking World Leadership and The Great Shift East

Professor Danny Quah

What does this

shift mean for the

future???

Source: D. Quah (2011). The World’s Shifting Economic Center of Gravity.

The Professor - Danny Quah

LSE

Professor of Economics and International Development

Kuwait Professor

Senior Fellow at LSE IDEAS

Chair of the LSE-PKU Summer School Board

National University of Singapore

Tan Chin Tuan Visiting Professor in the Economics Department

Malaysia’s National Economic Advisory Council

Served from 2009 to 2011

Studied at Princeton, Minnesota and Harvard

Assistant Professor in the Economics Department at MIT prior to LSE

Gave the 3rd LSE-NUS Lecture in 2013, a TEDxLSE lecture in 2012, and the inaugural LSE Big Questions Lecture in 2011.

Current research focuses on the shifting global economy and the rise of the east.

Meeting Times

Daily

Lectures

Mornings from 8:30 to 12:30

Taught by Professor Quah

Do not miss

Entertaining

Seminars

Afternoons from 1:30 to 3:00

Led by very capable LSE PhD candidates

Review and supplement lectures

Attendance taken

Assessment

Midterm Essay

50% overall grade

1000 word max

Due Monday morning of the second week of classes

Final Exam

50% overall grade

4 essay prompts. Instructed to respond to two.

2 hours. Afternoon of the final Friday.

Certificates, Transcripts, and

Statements of Attendance

Certificates, jointly issues by LSE & PKU, are awarded to students with

passing grades

Transcripts are sent out a few months after the program

Statement of Attendance

Issued to students who attend at least 80% of seminars but do not wish

to submit the essay or sit for the exam

Target Audience and Ideas..

Global Power Shift

“Through Economics, and politics and international relations, and

history…”

Mid-careerists or students with interests in applied economics.

Ideas from Macroeconomics. Economic Growth. Open Economy

Macro. International Finance.

Source: D. Quah (2015) EC206 Course Presentation Slides. LSE-PKU Summer School 2015.

Major Themes

Is China’s economic rise sustainable into the future?

What economic and political challenges does China’s rise pose to

the established international system?

Has the “American Century” come to an end, and is the U.S. no

longer the provider of world leadership?

How do we design a “rational world order” that “does good for the world” without any one country needing to act altruistically?

Reading List

Syllabus & Reading List

Extensive!

Not required

But supplemented the lectures very well

Includes articles, essays, studies and even TED Talks

Material from multiple disciplines:

Economics

International Relations

History

More…

The Lessons

1. Lesson 1: Overview – Growth and Evolution

2. Lesson 2: Overview – Governance and Leadership

3. Lesson 3: The Middle-Income Trap

4. Lesson 4: The Rise of Asia and China

5. Lesson 5: Global Imbalance and Trade

6. Lesson 6: International Financial Architecture

7. Lesson 7: International Spillovers and Coordination

8. Lesson 8: Global Hegemony and Leadership

Insights – China’s Growth Continues

Continued Chinese growth faces a number of obstacles, such as

the Lewis-Turning Point, the Middle-Income Trap, high investment

rates & low domestic consumption, and more..

BUT China’s economy will avoid any major slowdowns and will

continue to rise. China has astonished before:

Pulled 600mn people out of poverty since 1980

9.8% average annual GDP growth since 1980

Insights – Threats to China’s Growth

The Middle-Income Trap but

China has many similarities with other escapees (Japan & Asian Tigers)

Over-Investment

Chinese per-capita investment 1%, vs 10% in Japan & 5% in U.S.

Dysfunctional Polity – corruption and extractive elites

Xi is hard-set on removing the corruption that threatens the party’s

credibility

Insights – What’s next?

China’s continued economic rise will give it much stronger political power – potentially putting it on par with the U.S.

By 2050 the world’s economic center of gravity will sit between India and China – this area will also be the world’s most populous area…

What will happen if world political power still resides in Washington D.C.?

The age of U.S. unipolarity may well have come to pass.

Are the US and China doomed to conflict?

Offensive Realist IR theorists believe the answer is: yes.

I do not. The US and China have the potential for a peaceful future:

Americans must increase our understanding of China through study abroad.

There are opportunities to work together in international institutions instead of working against each other.

Insights – China’s Potential to Lead

If China is to assume a world leadership position alongside the US, it

must make a few changes:

Work on its Soft Power

The Central Government cannot continue to be arrogant towards other

countries or towards the Chinese people.

China must show greater respect for human rights.

China must provide more public goods – the AIIB is a good start.

China must accept what comes with this role

It wants the good, like the yuan gaining admission to the IMF’s basket of

special drawing rights currencies

Both won’t accept the bad, like helping in the Middle East.

Insights – Trade Imbalance

America’s trade imbalance is with the world. The imbalance is only highest with China because China is most capable of meeting U.S. demand.

If it wasn’t China, it would be another country (or countries).

“We don’t have a bilateral trade problem with China. We have a multilateral trade problem with over one-hundred different trading partners.” – Stephen Roach

Furthermore, today’s global value chain misrepresents trade deficits

E.g. – the entire wholesale cost of an iPhone is added to China’s bilateral trade surplus vs. the U.S.

Actually, China only earns 3.6% of the wholesale cost

Insights – International Financial

Architecture

World Reserve Currency

USD – will remain reserve currency into foreseeable future

Triffin Dilemma – difficulty in trying to simultaneously achieve domestic monetary policy goals and meet other countries’ demand for USD.

Federal Open Market Committee (US monetary policy making body) cannot, by law, take into consideration the needs of other countries.

Rework International Financial Architecture

“Supranational Currency” – such as the IMF’s Special Drawing Rights (XDR)

Further insulate the global financial system from problems in any one country

Would prevent one currency from bearing the Triffin Dilemma

Multilateral policy body tasked with managing the world reserve currency could provide cooperative and coordinated monetary policy-making.

Insights – Global Policy Making

Game Theory – Mechanism Design

Can the “game” (global system) be designed in such a way that when each country acts in its best interest the greatest common good is produced?

Yes.

Establishing a supranational currency governed by a multi-lateral institution.

Greater cooperation within existing international institutions.

Governance reform of current institutions to provide greater democracy.

Insights – Global Hegemon

Hegemonic Stability Theory (HST) – belief that the world is more stable when a single nation-state is the dominant world power.

Does the world have a global hegemon today?

No, unfortunately I’m afraid the “American Century” has ended.

Weak recovery from global financial crises due to U.S. diminished influence.

Failing to provide stability in the Middle East. Unwilling to stop Russia in Crimea

Abstaining from helping Greece.

What’s next? Hopefully a more balanced world.

One that doesn’t need a global hegemon.

Outside of Class

On top of classes and the cultural events, LSE students were also invited to attend these extra-curricular events:

Keynote Speech from UK Secretary of State of Foreign Affairs: UK’s perspective on global affairs

LSE-PKU Round Table: “China’s Global Engagement: Domestic Reforms and International Challenges”

LSE China Conference 2015: “Telling the China Story: Media and Communications in a Turbulent Age”

LSE-PKU Round Table

Professors Michael Cox (LSE - IR), Danny Quah (LSE - Economics), Qingmin Zhang (PKU - IR) and Jian Zhang (PKU – Domestic Policy) gave frank assessments of China.

Fielded questions afterwards

Professor Jian Zhang gave a refreshing critique of President Xi’s weak economic policy making.

Event fell on the second day of Beijing’s surprise yuan devaluation

Professor Quah was amongst the first to stand by the move, describing it as allowing a greater role for market forces.

Provided contrast to American media calling it a “currency way”

IT WAS FUN.

Recap Video

Watch the video here!

I gained…

Understanding of China

Economic Analytical Skill Set

Trust in China

Conclusion

Great Program

LSE-PKU summer school is extremely well organized and provides highly

relevant courses to today’s world.

Great course

I recommend it for anyone interested in the economics or international

relations involved in China’s future.

Great group of people

Classmates came from all walks of life, from all over the world. All very

intelligent and enjoyable people.