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Lin image Wikimedia Commons.jpg

Justin Yifu Lin, then chief economist of the World Bank, in Maputo, Mozambique, in 2011. Photo by UNU-WIDER available at Wikimedia Commons under CC license

12:12 pm | 4. October 2019

The Legend of Lin Yifu

As the framework of former World Bank economist Justin Lin Yifu is offered across the globe as a "Chinese model" for economic development, it's a good time to understand the fuller context of Lin's ideas.

By Elaine Wang

When China’s official People’s Daily newspaper published a list last year of “100 outstanding contributors” to commemorate the 40th anniversary of economic reforms, one luminary to make the official cut was Justin Lin Yifu (林毅夫), the former World Bank economist and official government advisor (国务院参事) now regarded as one of the country’s foremost economic minds.

For many Chinese, Lin has come to epitomize the “official economic scholar” (官方经济学家), a thinker and institutional insider who has made unique contributions to the development of Chinese economic ideas and practices. Some take the adulation even further, regarding Lin as a patriot. Outside China, Lin is closely associated with his “new structural economics” (NSE), a framework that melds elements of  neoclassical economics and structural economics, and argues, in a nutshell, that economies perform better if they follow development strategies building on their particular comparative advantages — with active states that can direct resources to these areas.

A Western-educated economist— the first Chinese of his generation to earn his PhD at the University of Chicago— Lin is often cast as a Chinese insider who can translate China to the outside, "demystifying" its economy. More recently, as the rollout of Xi Jinping's Belt and Road Initiative has corresponded with Lin's promotion of own NSE framework as a Chinese economic solution for developing countries, Lin has become an important face of China's economic outreach and the idea of a "China Model" or "Chinese solution" (中国方案). 

As Łucasz Sarek notes in his article for Echowall, Justin Lin’s ideas have been applied, or referenced, in recent years in the economic plans of more developed countries, including Poland. But where did Justin Lin Yifu come from? And how did he come to be influential within China's policymaking establishment? Taking a closer look at Lin's personal, professional and political development, and his ideas in a Chinese context, can perhaps help us gain a clearer picture.

A 2012 biography of Lin referred to him as "a legend of diagnosing China's economic development." And indeed, much about Lin is the stuff of legend, including the story of how, born in Taiwan in 1952, he came to be an economist at the center of China's economic story.

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A biography of Lin published by the official China Intercontinental Press, run by the Central Propaganda Department, tells the “legendary life of Lin Yifu.”

Drifting Into a New Life

The telling of Lin's story often begins in 1971, when a young student at the National Taiwan University (NTU) by the name of Lin Zhengyi (林正义) became swept up in student political activism around issues such as sovereignty over the Diaoyu Islands and the question of Taiwan's United Nations membership. Lin's former classmates remember him as an ardent and outspoken activist, calling for nationwide student protests as senior representative of his freshman class. 

But Lin's passions and interests soon directed him away from politics and activism. After a stint in the military training in the winter of 1971, he decided to abandon his studies in agricultural engineering at NTU and transfer instead to the Military Academy. He apparently distinguished himself at the academy, and was expected to advance rapidly through the ranks after receiving a commission as an officer upon graduation. 

On May 16, 1979, Lin Zhengyi made a decision that for years after would become the source of much speculation. Stationed on Kinmen Island, just eight kilometers away from the Chinese city of Xiamen, he decided to swim for the other side. He removed his shoes and waded out into the current, drifting for three hours before he was finally arrested by Chinese troops on the Fujian shore and announced his intention to defect. 

Lin does not often discuss the reasons for his decision. But in a letter to his cousin in Taiwan three years later, he confided that his heart had been full of conflict:  

On the one hand, I was Taiwanese, and therefore I hoped to struggle for Taiwan's political status; on the other hand, I felt that I was Chinese, and therefore, I constantly longed for the strengthening of China. Personally, I knew I could advance if I remained with the military, but this internal conflict could not be resolved. And so, returning [to China] was the only path to resolving this contradiction.

Beginning a new life on the mainland, separated from his wife and two young children (the second born shortly after his defection), he changed his name from Lin Zhengyi to Lin Yifu, the name suggesting firm persistence— a man who had every intention of going places. 

"In my heart there was always this indissoluble contradiction."

 

In Taiwan, Lin's stunt was a source of embarrassment. Initial reports that he was missing were followed by reports that he had died, before authorities finally acknowledged his defection. On the mainland, meanwhile, he was welcomed with enthusiasm and afforded plenty of opportunities at a time when the country was embarking on a new path of reform and opening.

In 1980, within a year of his defection, Lin had begun his master's studies at Peking University. When China invited Nobel laureate in economics Theodore Schultz to visit the country and deliver a lecture, the task of interpreting Schultz' speech fell to Lin Yifu — apparently the only choice with both sufficient English ability and an understanding of economics. Schultz was impressed with Lin and invited him to study in the United States. 

Upon his graduation from Peking University in 1982, Lin followed Schultz to the University of Chicago, where he studied agricultural economics. He was reunited with his wife and children in the United States, and they eventually accompanied him on his return to China in late 1987, shortly after he completed a stint as a postdoctoral researcher at Yale University's Economic Growth Center

The Young Delegate

Back in China, Lin Yifu's rapid transformation continued. He was appointed as deputy director of the Rural Development Research Center of the State Council (国务院农村发展研究中心), a name that hardly conveys its importance within economic policymaking at the time. Readers may appreciate the fact, however, that the director of the RDRC was none other than Wang Qishan (王岐山), China's current vice president and the powerful and feared man who spearheaded Xi Jinping's anti-corruption campaign.  

By February 1988, we can find the 35 year-old Lin Yifu making his debut appearance in the People's Daily, his views included in an article on a new strategy to make China's coastal economies more competitive. The next month, his name was included on the published list of delegates to the Chinese People's Political Consultative Conference (CPPCC), the country's legislative advisory body.

When People's Daily reporter Ling Zhijun (凌志军) arrived at Lin's office for an interview, he professed astonishment at his apparent youth. "When he opened the door, I felt puzzled," the reporter wrote. "He just seemed far too young." Could this really be the same man who was deputy director of an influential government research center, a CPPCC delegate, a university professor and, as the reporter noted, also now an advisor to the World Bank? 

He asked as soon as he opened his mouth: "So am I too young to be taking part in this sort of meeting?" I responded: "Age and level of policy deliberation are not necessarily directly proportionate." And so it is! His distinctive understanding of economic development strategies for coastal economies is now receiving attention from those a whole generation older than him. 

From this point onward, Lin remained a central figure in economic thinking and policymaking in China, his views on rural reform policies, the reform of state-owned enterprises, China's bid to enter the World Trade Organization and other issues being regularly featured in the press in mainland China and Hong Kong.

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Justin Lin appears for the first time in the Chinese Communist Party's official People's Daily newspaper. From People's Daily Archive. 

The International Chinese Economist

Throughout the 1990s, Lin developed a global reputation as an important international voice on China's reform and development, with visiting and adjunct professorships at leading universities around the world, distinguished lectures, and advisory appointments at institutions like the Asia Development Bank.

In 1994 Lin co-founded along with five well-known economists the China Center for Economic Research (中国经济研究中心) at Peking University, a think tank that brought together leading Chinese economists who had studied at prestigious universities in the West. CCER was largely the product of Lin's active international engagement, bringing together foreign partners and funders. Visiting the CCER in 2004, Australian economist Ross Garnaut, who had served as the country's ambassador to China from 1985 to 1988, recalled that Lin had spoken in 1989, while an adjunct professor at Australia National University, of "a new center for economic research that would attract back to China a proportion of the best students who had traveled abroad to study economics and achieved at a high level."

"He was persuasive enough," said Garnaut, "for me to include a recommendation on initial funding in my 1993 report to the Ford Foundation on Chinese research and graduate education in economics."

Justin Lin Yifu managed to balance his roles as consummate insider and global connector. Even as he continued as head of the CCER, he held an array of official appointments, serving at various times as deputy director of the Economic Committee (经济委员会) of the CPPCC, and as assistant director of the All-China Federation of Industry and Commerce, which assists China's government in managing the private sector. From at least the 10th Five-Year Plan in 2002, Lin was a key member in the formulation of each five-year planning document from the Chinese Communist Party. 

Another of Lin's talents seemed to be the ability to move seamlessly between the discourses of global economics and domestic Party politics. As China prepared its new blueprint for the economy in 2001, Lin employed not just the cool language of the academic economist, but the warmed-over language of the Party politician, speaking of the 9th Five-Year Plan as a "great and historic achievement," and a "contribution to the world." 

Another of Lin's talents seemed to be the ability to move seamlessly between the discourses of global economics and domestic Party politics.

 

Lin's propensity for re-contextualizing Chinese political discourse, evident to this day, has possibly been one factor contributing to his success. In a 2016 article published in the official People's Daily, Lin quoted Deng Xiaoping’s famous phrase about "emancipating the mind and seeking truth from facts" (解放思想、实事求是)— deeply connected to the Chinese political context at the outset of reforms and the continuing grip of the extreme left— to suggest Deng's wisdom might be instructive for developing countries.

More recently, Xi Jinping phrases like the "rejuvenation of the Chinese nation" and "community of common destiny for mankind" (人类命运共同体) have found their way into Lin Yifu's public pronouncements. Profiled by the People's Daily earlier this year, Lin said Chinese needed to expand their sights, thinking about the impact China's development has on other countries. "In the process of achieving the great rejuvenation of the Chinese nation," he said, "we should also provide other countries with the opportunity to achieve prosperity, doing our utmost to build a community of common destiny for mankind." 

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A People's Daily report in February this year looks at the legacy of Lin Yifu and quotes him on the building of a "community of common destiny for mankind," a Xi Jinping concept.

In 2008, the then World Bank President Robert Zoellick named Lin Yifu as the institution’s new chief economist, the first non-Westerner of its history. This attracted heavy international media coverage. On the one hand, the appointment of a leading Chinese economist was seen as overdue given that China’s GDP had maintained rapid growth for decades. On the other hand, this issue was discussed in the context of Zoellick's endeavor to strengthen ties with China. Shortly before the announcement of Lin’s new position, China, one of the biggest recipient countries, promised to be a donor of World Bank for the first time.

The Role of the State

One of the key aspects of Justin Lin Yifu's "New Structural Economics," which he first mentioned by name in a closed meeting at the World Bank in 2009, is the role of the active state, which Lin argues is needed to direct resources to key industries on the basis of a country's "factor endowments," those qualities that constitute its "comparative advantage," in order to achieve industrial restructuring. However, Lin's core ideas about the role of the state in the economy were already clearly evident in the 1990s— and they formed the basis of very public debates between Lin and other leading Chinese economists in the new century. 

One of the most significant of these debates occurred between Lin and Yang Xiaokai (杨小凯), a Chinese economist based in Australia who was also a proponent of political reform in China. The debate between Yang and Lin, which began in 2000, was high-profile as academic debates go, reported widely in the commercial press. The core of the debate surrounded the notion of the "latecomer advantage" (后发优势), the idea, supported by Lin still, that "a developing country has an advantage of backwardness," that it can bypass the expensive and difficult process of constant technological innovation and industrial upgrading by adopting technologies from more advanced countries, thereby achieving rapid economic growth. Lin assumes that this process of adoption can happen without the need to reform the state and its relationship to the economy. 

In opposition to Lin's view, Yang Xiaokai, who through the 1990s had been a strong advocate of political liberalization in China, spoke instead of the "curse of the latecomer" (后发劣势), emphasizing the difficult disadvantages that a developing country faces if it cannot improve its institutions. 

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Chinese economist Zhang Weiying has spoken out forcefully on the dangers of the statist "China Model." Image by World Economic Forum available at Wikimedia Commons under CC license. 

Yang argued that imitation of developed countries by latecomers could happen on two levels, the technological and the institutional. But institutional changes, said Yang, would have to come first, including the building of constitutionalism—only then could the technological advantages of developed countries be imitated and development secured over the long term. If a latecomer chose only to imitate the on the technological level, it might achieve astonishing growth over the short term. However, without institutional reforms, the government and state-run enterprises would soon exploit their special privileges to benefit themselves and their cronies at the expense of broader economic and social health. In the end, worsening problems of corruption and inequality would sap society of its vitality. Yang Xiaokai argued, in a nutshell, that "without political liberalization, government officials would be too tempted to expand the power of the state to the detriment of the market and individual freedom."

Zhang Weiying (张维迎), an economist who co-founded the CCER at Peking University with Lin Yifu, supported Yang Xiaokai’s arguments, and inside China the contest of ideas between Zhang and Lin defined two broad camps of thinking on the relationship between the government and the market economy. Zhang and Lin had also been on opposite sides of the debate in the 1990s about the reform of state-owned enterprises. While Zhang felt that the way forward for SOEs was privatization, enabling them to adapt to the logic oft he market, Lin believed the question of ownership was not a question of core concern.

Lin has been consistent in promoting this statist view that the government should play a leading in planning and implementing economic development goals. He is a core proponent of what scholar Victor Shih has called a "statist consensus" that has gradually formed among a group of Chinese economists and policymakers over the past two decades, and now forms the heart of the "Beijing Consensus" model. Shih refers to Lin's "New Structural Economics" as "a version of the statist consensus." 

This consensus has been favored by China's leadership in recent years. Lin's NSE has served as a guideline for industrial strategy in China, and a few years after its introduction, the NSE received official endorsement from the Chinese government. Lin has applied the framework to a range of issues, including urbanization strategy. Meanwhile, the government and academic institutions have devoted substantial resources to the development of the NSE framework. Peking University, where Lin is a professor, established the Institute of New Structural Economics in December 2015, with Lin serving as president, and several other major universities, including Guangzhou University, the Yunnan University of Finance and Economics, and Zhongnan University of Economics and Law, have since followed suit. In 2018, the University of Nottingham Business School opened up a New Structural Economics Research Center at its campus in Ningbo. 

Statism for the World 

Understanding the core statist position of Justin Lin Yifu's "New Structural Economics" is crucial in order to properly assess the potential impact of this "Chinese solution" as Lin continues to promote it as a means of instructing developing countries in Africa and beyond. Lin specifically developed the NSE to advise developing countries on their economic development strategies, and his views on development have been widely sought by developing countries across the world. In February 2013, Tanzanian President Jakaya Kikwete invited Lin to serve as an economic advisor to the country, assisting with plans for a new development park. He has been invited for lectures and been showered with honors from Senegal to Ethiopia. 

Lin first named the NSE in a closed meeting at the World Bank in 2009, and first published the concept in a paper in 2011. But the origin of the framework goes back to the time immediately after Lin's return to China from the United States and around his first appointment as a delegate to the CPPCC. Lin has said the idea for the NSE first came to him after he “abandoned the existing Western theories." In 1988, witnessing how China drastically cut investment "in a planned economy fashion" in order to successfully combat inflation, he came to realize that if the government followed the advice of Western macroeconomic theory, the result would be either massive unemployment or worsening inflation. His visit to India, also in 1988, confirmed his conviction in the key role of the "facilitating state" and the fact that, as he says, “factor endowment determines industrial structure.”   

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During a lecture at the South African Institute of International Affairs in 2016, Justin Lin Yifu talks about the prospects of growth in Africa using his NSE framework. Screenshot of video by SAII

But while the astonishing growth rates witnessed in China in recent decades are offered as evidence of the need for an alternative to the neoliberal economics of the West, deeper economic troubles in China have prompted tougher questions about the sustainability of the statist solution of which Lin is a leading champion and re-enlivened, at least behind the scenes, earlier debates about the limits of development without meaningful institutional reforms, including greater democracy and rule of law. 

In a speech in October last year, just as China was ramping up official commemorations of the 40th anniversary of reform and opening, Lin's long-time colleague, Zhang Weiying, sharply criticized the notion of a "China Model," calling it “not just inconsistent with the facts, but likely to produce horrible results for China in the future." One of Zhang's key targets was myth of the effectiveness of state intervention, as he pointed out that economic results had been stronger across the board in China in those provinces along the east coast with the "highest levels of market penetration and the lowest levels of state intervention."  

Zhang warned that the obsessive interest in the statist "China Model" would lead the country away from progress. "If we single-mindedly emphasize the uniqueness of the China model, we will move internally toward the strengthening of our state-owned enterprises, expansion of government power and reliance on industrial policy, resulting in a reversal of the process and ultimately stagnation of the economy." 

Far from theoretical, Zhang's views speak to a growing fear that China's private sector is already in retreat, a phenomenon referred to routinely in China as guojin mintui (国进民退), the "advance of the state sector and the retreat of the private sector." Despite the growing importance of the private sector in China, which now accounts for 60 percent of GDP and 80 percent of urban employment, there are signs of growing state intervention and preferential treatment for state-owned firms, with risks compounded by the ongoing trade war with the United States. Fears reached such a fever pitch in 2018 that the leadership introduced a new propaganda phrase, the "two unwaverings," to state its unflagging support for both the public and the private sector. 

Despite this avowed support, fears persist and they beg tougher questions about the statist assumption at the heart of the "China Model" and Lin's NSE framework even as these are being actively promoted as answers to development elsewhere in the world. 

As Victor Shih writes, Lin has outlined a new model in the NSE in which "the state astutely gauges where the market is going and formulates infrastructure plans and policies for future market development." At the heart of this "model," however, lies the question of the nature of this state and its capacity to make "astute" decisions in the broader interests of industrial upgrading or other goals.

For example, in a vivid group discussion among leading Chinese economists, Guo Qiang (郭强) from China's Central Party School directly addressed Lin Yifu and named what he called three core problems of the current "China Model." First, he said, "power has not, politically speaking, been locked in an institutional cage." The current methods of addressing corruption meaning Xi Jinping's aggressive anti-corruption campaign – were not sufficient to get to the root of the issue. Second, he said, the current system in China was unable to reduce the proportion of the economy devoted to the inefficient state-owned sector to "reasonable levels." Finally, Guo pointed to the changing expectations of the Chinese people as a key "independent variable." "The ordinary people are increasingly dissatisfied with simply material prosperity, and demands for social and political rights are increasingly an independent variable in social change," he said. 

Though Lin published the discussion among these economists on the website of his center at Peking University, he never, at least publicly, provided concrete solutions to the questions raised by Guo Qiang. Nevertheless, these questions go to the heart of the sustainability of the statist model.

Lin has consistently spoken of the need for an active or facilitating state in the process of development, and directly or indirectly he has upheld China as a model in this respect. But as economists inside China warn that the "China Model" could become an impediment to the country's sustained development, the deeper institutional and political questions facing the "facilitating state" should not remain an unaddressed elephant in the room.

As Guo Qiang warned: "As for how to reform, we can debate that best proposals. But we cannot just say we are not studying from the West and use this as an excuse not to reform. The crux of the problem right now is that many people don't even admit the problems exist." 

Echowall staff contributed additional research for this article. 

4. October 2019
Author
Elaine Wang

Elaine Wang is a freelance writer and translator based in Shanghai.