China's Economic Development and Legal Reform: Financial Markets and Corporate Governance

China's Economic Development and Legal Reform: Financial Markets and Corporate Governance Introduction: Jeffrey A. Bader Senior Fellow and Director, China Initiative, Brookings Moderator: Lael Brainard Vice President and Director, Global Economy and Development, Brookings Panelists: Kenneth Dam Senior Fellow, Economic Studies, Brookings Ruoying Chen John M. Olin Fellow and Lecturer, University of Chicago Law School Albert Keidel Senior Associate, Carnegie Endowment -------------------------------------------------------------------------------- Thursday, March 09, 2006 10:00 a.m to 11:30 a.m. The Brookings Institution Event Information UNCORRECTED TRANSCRIPT KEN DAM: We don't know yet how this balance will work out over time. We will just have to hope. I think it's particularly a serious challenge in the financial sector, because it's all very well to worry about conflicts here and conflicts there. Maybe it will create an unstable political situation, but putting that aside, if we're talking about development, it's really the financial sector that I think is potentially most at risk. And one of the reasons is not that they had a top down system at one point. But you start reforming; you create all kinds of interest groups, who don't want more reform. They're doing just fine, thank you, in the present somewhat chaotic situation where political officials can benefit from developers taking over farmer's lands and so forth. So you get a lot of conflict there. It's that transition situation that's particularly difficult. But I'm very impressed by the Chinese leadership. They seem to know where they're going. Deng Xiaoping talked about crossing the river by feeling for stones. I don't know exactly what he meant, but one thing was that he didn't try to take on really strong interest groups head on, but rather move by indirection. It was a kind of evolutionary approach that has been used. It's getting harder and harder as these partial reform interest groups form and get stronger. But it is a kind of guided evolution, and it seems to be working, and we just have to hope that it does work. Because it's very important not just to China but for the world economy and the United States. Read the full transcript (PDF—166kb) -------------------------------------------------------------------------------- Event Information Over the past two decades, China has been transformed from an underperforming state-planned economy into a market-oriented juggernaut. China recently surpassed France, Italy and Britain to become the world's fourth largest economy. Despite its economic development, China is often derided by the financial and business communities for poor corporate governance, an inefficient financial sector, and lax enforcement of substantive law. How are we to reconcile China's fantastic economic growth with its Rule of Law profile? How important is legal and financial sector reform to China's past and present economic growth? To examine these questions, Brookings has invited a group of leading experts including Kenneth W. Dam, Senior Fellow, Brookings, and Max Pam Professor of American & Foreign Law at the University of Chicago Law School; Ruoying Chen, John M. Olin Fellow in Law and Economics and Lecturer in Law at the University of Chicago Law School; and Albert Keidel, Senior Associate, the Carnegie Endowment. Jeffrey A. Bader, senior fellow and director of the Brookings China Initiative will make introductory remarks and Lael Brainard, vice president and director of the Global Economy and Development Center at Brookings will moderate the discussion. An audience question and answer session will follow the presentation.