The Race to the Bottom - The Crux of Contemporary China’s Socio-Economic Problems (竞次——中国当前社会经济诸问题的症结)
Peking University - School of Economics
December 12, 2009
The purpose of this paper is to show that the race to the bottom is the crux of contemporary China’s major socio-economic problems, and propose appropriate policy solutions. We first analyze the nature of the race to the bottom phenomenon and put forth a basic principle, i.e. a race to the bottom is caused by marketization (or market integration) in conjunction with regulatory decentralization. Therefore, to eliminate the race to the bottom problem within a common market there must be centralization of regulatory power and harmonization of regulatory standards. According to this principle, China’s marketization reform of the past 30 years that features fiscal and administrative decentralization has led to a race to the bottom among China’s regions in a fundamental sense. We also show that the race to the bottom concerning labor standards has profound negative macro-political-economic consequences. We then discuss by turn the major socio-economic problems facing China, to show that the crux of them all is the race to the bottom. Hence, the solution to these problems lies in the proper management of the race to the bottom both on the domestic and global level. Specifically, to eliminate the domestic race to the bottom, China needs to re-centralize its regulatory power and institute common regulatory standards. On the other hand, to better cope with the global race to the bottom, China needs to adopt a strategy of selectively “quitting” the economic globalization (e.g. following a more internal-demand-oriented development model) and play an active and responsible role in the international effort to contain the global race to the bottom (e.g. harmonization of labor and environmental standards).
Note: Downloadable document is in Chinese
Number of Pages in PDF File: 20
Keywords: race to the bottom, administrative regulation, marketization, decentralization reform, labor and environmental standards, 竞次, 行政监管, 市场化, 分权式改革, 劳动与环境标准working papers series
Date posted: December 14, 2009
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