A: This is an especially important issue in China. The previous policy of cadre management was certainly faulty in many ways, for example, it was a breeding ground for corruption. We have already progressed in four areas. First, senior officials, that is, ministers and regional secretaries, are chosen by the competent party, or more often by state agencies, after the opinions of some 100 to 200 department heads, directors, and other senior officials have been taken into account. If these opinions are negative, then candidates find it difficult to obtain the positions they are seeking. Second, lower-level positions, that is, directors and department heads, are officially advertised and all affected are asked to give their opinions on the applicants, which could number in the dozens or hundreds. Candidates are chosen on the basis of these opinions. Currently, individuals with university degrees can obtain such positions without being party members, which is a relatively new development. Third, company manager positions are also advertised and notices about vacant positions indicate the salary that goes with the position. Fourth, at an even lower level, that is, in villages and small towns, residents freely elect local leaders.

A: The lack of up-to-date agricultural technologies and the low quality of Chinese agricultural products is due mainly to the unclear legal status of land leasing. The law currently allows peasants to cultivate a certain area of land based on a 30-year lease. However, as land is collective property, if they wish to, local authorities can assign such parcels to different lessees every year. This keeps the peasants in a state of perpetual uncertainty. We would like the People’s Congress to pass a law on land leasing next year that would prevent interference in the use of land. That would allow peasants to cultivate the same piece of land for many years. They would be able to invest in it, to mortgage it, even to sell the lease if they moved elsewhere. This would be an enormous positive change for China’s 800 million peasants.

A: We should pass laws that would create a legal framework for market competition in such sectors, including allowing foreign ownership of companies. Such reforms have started, and these companies have already been transformed into shareholding companies. For example, the local government owns only 10 percent of the shares of Hainan Airlines, while private companies and individuals own the other 90 percent.

A: Many of my friends have bought some, but my position as director of the provincial reform commission precludes me from doing so.

A: About 20 percent of the state-owned banks’ debts are bad and may not be paid back, and another 5 to 8 percent of loans are definitely irrecoverable. The banks transformed some of these loans into shares. Larger banks created their own debt management departments or affiliate companies to reorganize their bad debts and sell them if possible. Those small or medium state-owned enterprises that accumulated too much debt should go bankrupt. I believe that radical solutions should be applied in such cases, and that related companies should be relieved of their bad debts and those that operate under market conditions should start out with a clean slate.

A: I use the term people’s market economy—which is also the title of my book to be published next year—in which the main role in the economy is assigned to workers. We have to take into consideration that China’s workers created an enormous amount of property. János Kornai, the famous Hungarian economist, wrote a book about the shortage economy in socialist countries. I would address this same problem as one of a shortage of ownership rights. This theory was tested when Hainan’s state-owned company that produces drinks from coconuts was transformed into a shareholding company. The company’s employees all received a small portion of the shares for free and more shares for a third of their market price. We must also bear in mind that more highly qualified employees contribute more to a company’s capital accumulation, and thus deserve a bigger share. In the case of the coconut drink company, the management received 25 percent of the shares and other employees got 75 percent.

A: My institute has been carrying out research on the various transformation models and practices for years. We think that China is too big a country to follow any one particular model. However, the Hungarian reforms—which assured the stability of the transformation—have some valuable lessons for us, especially those introduced in the 1980s. When we visited Russia recently, we were quite surprised to learn that the Russians are extremely interested in the Chinese reforms, and generally believe that their own shock therapy has been a failure.

A: In the first half of 2001 China’s GDP grew by 7.8 percent, and economic growth for this year will not be less than 7 percent. However, while the worldwide slowdown, especially that of the United States, will certainly influence China’s economy, we have some advantages that can balance these influences. The domestic market is reviving and market forces have started to boom in the countryside. Private enterprises have gathered strength and progress has been enormous. In the next five years, investments in infrastructure alone will reach $100 billion, and China will spend an additional $30 billion in investments related to the 2008 Olympics. These developments will significantly influence China’s economic growth.