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AbstractThe world economy needs a growth‐lifting strategy, and infrastructure financing appears to hold the key. Two new development banks have been established: the New Development Bank and the Asian Infrastructural Investment Bank (AIIB). However, what conceptual framework will they formulate? This paper addresses infrastructural financing issues from the angle of structural transformation as a strategy for global development. Based on the new structural economics (Lin, , ) we stress the 'real' side of transforming natural resources to productive assets using the resource financed infrastructure. As one of the innovative instruments, this approach could, first, combine two otherwise isolated supply chains, resource extraction and infrastructure building, and, thereby, bring developmental results many years ahead of what other conventional approaches could. Second, this could serve as one of the 'least‐cost' options for developing countries, and benefit borrowers disproportionately due to its feature of 'non‐recourse' loans. Finally, in a low‐yield environment, the rate of return from investing in bottleneck‐releasing infrastructure could be attractive to many investors. Future prospects of development financing, including the 'one belt one road' initiative are discussed.

The dominant view of good governance as a pre-condition for economic success is theoretically compelling but empirically difficult to establish. Historical analyses tend to indicate a very strong correlation between institutional development and economic growth. Today's high-income and good-governance countries generally had bad-governance environments at low levels of income. Moreover, some of today's most successful economies still exhibit sub-optimal governance indicators. By focusing on the search for the determinants of some global governance standards that often reflect particular political, ideological and philosophical conceptions of power, the traditional literature on governance has so far failed to offer a set of actionable policies that poor countries could implement to foster inclusive growth in a pragmatic and incentives-compatible way. This article acknowledges that governance problems are indeed major impediments to economic growth. But contrary to conventional wisdom, it argues that the well-known governance problems in African countries are mainly the reflection of their low level of development, and the results of failed state interventions and distortions originating from erroneous economic development strategies. Instead of posing 'good' governance as the main prescription and a prerequisite for sustained growth, development economists should design policy frameworks that offer the maximum likelihood of success because they are consistent with comparative advantage while providing minimum opportunities for rent-seeking and state capture.

This paper argues that the regional income gap of China is endogenously determined by its long-term economic development strategy. Development strategies can be broadly divided into two mutually exclusive groups: (i) the comparative advantage-defying (CAD) strategy, which attempts to encourage firms to deviate from the economy's existing comparative advantages in their entry into an industry or choice of technology; and (ii) the comparative advantage-following (CAF) strategy, which attempts to facilitate the firms' entry into an industry or choice of technology according to the economy's existing comparative advantages. Since the founding of the People's Republic of China, the government has pushed a CAD strategy, i.e., 'leap forward' strategy that emphasized the development of capitalintensive heavy industries. In most provinces, however, the priority industries under this strategy were inconsistent with the comparative advantage determined by the factor endowments in those provinces. Many enterprises in the priority industries were not viable in competitive markets and required interventions in the markets by the government to support and protect them. Consequently, the CAD strategy retarded the functions of market, impeded capital accumulation and hindered technology and productivity progress in the provinces. After the reform, the provinces in the central and western regions continue to follow the CAD strategy and have poor growth performance. Therefore, it is imperative to replace the CAD strategy with a CAF strategy and restructure the existing industries in each province according to the principle of comparative advantage. This latter strategy would lead to balanced development among regions and provinces.

This paper argues that both openness and poverty in a country are endogenously determined by the country's long-term economic development strategy. Development strategies can be broadly divided into two mutually exclusive groups: (i) the comparative advantage-defying (CAD) strategy, which attempts to encourage firms to deviate from the economy's existing comparative advantages in their entry into an industry or choice of technology; and (ii) the comparative advantage-following (CAF) strategy, which attempts to facilitate the firms' entry into an industry or choice of technology according to the economy's existing comparative advantages. To carry out a CAD strategy, many governments of LDCs subsidize the firms in priority sectors by distorting capital prices, foreign exchange, and other inputs; and use administrative methods to allocate price-distorted inputs to the firms. The functions of market will be suppressed. Rent-seeking will be widespread. As a result, economic performance will be poor and the income distribution issue will worsen. Foreign trade will also be retarded. Only if governments of less-developed countries make following their economy's comparative advantage the basic principle for promoting the economy's industrial development, will the economy have an open and well functioning market, maintain a high rate of capital accumulation, upgrade its endowment structure quickly, and see a more equitable distribution of income and fewer poor.

Prospect for the Chinese economy in the 21st century - Speech for the 2001 BiMBA top management class of Beijing University. 1. Introduction. 2. Review of achievements in the Chinese economy after reform and opening up. 3. Factors contributing to China's rapid economic growth. 4. Analysis of key problems in Chinese economy. 5. Solutions to China's economic problems. 6. Prospect for the Chinese economy: Optimistic or pessimistic -- ch. 2. Economic development and Chinese culture. 1. The cultural status of traditional China. 2. Efforts in modernization and three levels ofChinese culture. 3. Economic development and cultural changes. 4. Economic development and the future ofChinese culture -- ch. 3. The revival of China and the future of Chinese entrepreneurs. 1. Chinese Entrepreneurs overseas. 2. Challenges and opportunities for Chinese entrepreneurs -- ch. 4. Curb overheating to prevent supercooling -- ch. 5. Window guidance and macro control - Contemplating the current macroeconomic policies of China. 1. Failure to reach expected effect by raising the interest rate. 2. Striking effect of window guidance -- ch. 6. Will the reform of exchange rate regime of RMB be successful? -- ch. 7. Commercial environment construction and macroeconomic development -- ch. 8. Competitive advantage, comparative advantage, and economic development strategies. 1. Main ideas of the theory of competitive advantage. 2. Comparative advantage is the basis for competitive advantage. 3. The core of the development strategy is to increase the capital accumulation -- ch. 9. Chinese state-owned enterprises and the reform of financial institutions. 1. China's reform of state-owned enterprises: Current status, course, and problems. 2. The structure of China's financial system. 3. Direction of the reform of the state-owned enterprises and financial system in China. 4. Conclusion -- ch. 10. The development pattern of the Chinese financial market in the new century - Forward: China's tasks in the new century. 1. Criteria for the efficiency of different financial market systems and the evolution laws. 2. China's advantageous industries in the early 21s century. 3. Selection of China's financial market model. 4. The main-board securities Market cannot be the financing source for smalland medium-sized enterprises owing to the high cost of financing. 5. The growth enterprise securities market (GEM) is not suitable for Chinese small and medium-sized enterprises. 7. How to regard the merger wave of foreign banking industries and large banks' expansion to personal credit? 7. Conclusion -- ch. 11. On the optimal financial structure in economic development. 1. The economic development stage and characteristics of the financial structure. 2. Brief overview of the structure of real economy and risk characteristics. 3. On the nature and application of various arrangements of financial systems. 4. Evolution of the financial structure: Dynamic matching of the arrangements of financial systems and the structure of the real economy -- ch. 12. Lack of existing paradigm for interpreting the Chinese economy. 1. How to view the previous 25 years of rapid economic growth? 2. Chinese economy should not be viewed based on the current theoretical model. 3. Grasping slight changes to interpret the Chinese economy. 4. Maintaining rapid economic growth in the next two decades. 5. Technology - The most important aspect in the long-term economic growth of a country. 6. Where is Chinese economy headed? 7. What kind of MBA education does China need? 8. Lessons from the West and the challenges and opportunities of Chinese economics. 9. The methodology of the pursuit of knowledge.