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Xinmin is a Program Manger at the Stanford Center on China's Economy and Institutions (SCCEI). Before join SCCEI, Xinmin was an administrator with the King Center on Global Development at the Stanford Institute for Economic Policy Research since January 2018. She has previously worked as an associate director at the Academic Service Center for the Fudan Development Institute (FDDI) at Fudan University in China. She holds a master's degree in political science from Fudan University. She is the translator of three books published in China: "The Military Revolution and Political Change: Origins of Democracy and Autocracy in Early Modern Europe", "The Dolphin Way: A Parent's Guide to Raising Healthy, Happy, and Motivated Kids-Without Turning into a Tiger" and "Teenagers Learn What They Live: Parenting to Inspire Integrity & Independence".

Program Manager, Stanford Center on China's Economy and Institutions
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Over much of the last four decades, China's economy has ballooned, growing to become the world's second-largest economic power behind the United States, when measured by GDP. Yet alongside the rapid growth came mounting local government debt. While foreign observers have long recognized China’s local government debt as a risk, only recently did the Chinese Communist Party call out the problem as alarming. 

Why have central authorities allowed local government debt to grow with such little direct intervention? The answer to this question has much to do with a “grand bargain” between China's central government and localities during the 1994 fiscal recentralization reform, according to a new study, "China’s Local Government Debt: The Grand Bargain," published in the January issue of The China Journal.  The study’s co-authors are Stanford political scientist Jean Oi, a senior fellow at FSI and director of the China Program at APARC, Adam Liu, a former doctoral student of Oi, and Yi Zhang.


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The Origins of China's Massive Local Government Debt

The 1994 reform left localities with a tremendous fiscal gap. But then Beijing in fact gave localities enough autonomy to seek funding independently and the green light to create new backdoor financing institutions that counteracted the impact of fiscal decentralization, show Oi and her colleagues. They call this dynamic a “grand bargain.” The bargain’s purpose was to garner regional cooperation in fiscal and financial recentralization campaigns. The result, as the co-authors document, was far from the intended outcome. The policy resulted in greater decentralization, as local leaders used backdoor financing to meet expenditure responsibilities and bolster local development.

The study offers a fresh interpretation of the political economy surrounding the 1994 fiscal reform and a new understanding of the grand bargain, in which secretive financing was the quid pro quo offered to localities to sustain their incentive for local state-led growth after 1994. Oi and her colleagues draw upon municipal and county data as well as interviews and memoirs of key party leaders, architects of the 1994 fiscal reform, to support their assertions about the dynamics of China's economic rise and the local debt problem. Their findings highlight the "paradoxical political dynamics" of China’s political economy. As the 1994 fiscal reform recentralized tax revenues, "countervailing policies substantially promoted decentralization and fiscal empowerment of localities and decreased the transparency of local financial arrangements."

Granting localities the right to operate local state banks was a necessary but insufficient step for establishing the backdoor financing needed to sustain the grand bargain. Local governments needed a middleman to circumvent the bans on borrowing.
Liu, Oi, and Zhang

The grand bargain led to China's continued growth. The drawback, however, was that this economic growth has been accompanied by the accumulation of local government debt with little transparency and central control. When the global financial crisis impacted growth rates, local deficits and debts spiked. In response, Beijing began to shut down backdoor financing and opened front-door options that were transparent and under the control of national authorities — but with limited success.

Reining in Local Government Financing Vehicles

The researchers posit that "only beginning in 2017 did the Communist Party’s own Central Leading Group on Finance and Economic Affairs and various government-related media begin to label local government debt as a threat to the economy, raising the alarm bells by calling it a 'gray rhino,' a likely high-impact threat that was being ignored." Why, then, didn’t Beijing quickly put a stop to local government debt? Why did central authorities wait until 2015 to put measures in place, and wait even longer to identify local government debt as an economic threat?

Oi and her colleagues explain that studies of policy implementation and regulation in China tell us that the national government faces information asymmetry problems, where localities can subvert upper-level directives because the center has imperfect knowledge of what local agents are doing. Such subversion is most likely when local interests are not aligned with Beijing’s. Now, in the wake of the COVID-19 pandemic, the question is whether the pendulum will swing back toward more tolerance of local debt for the sake of economic growth.

All indications, the authors agree, suggest that during COVID-19 and its aftermath, especially as China also has vowed to win and maintain the fruits of the battle against poverty “at all costs,” localities are going to need extra resources, borrowed or not. The center’s pendulum, at least for now, is swinging further away from fiscal discipline toward local incentives and growth.

[Xi's] anticorruption tactics and exerting tighter control to reduce local government debt have not solved the debt problem because the root causes are institutional.
Liu, Oi, and Zhang

Evading Institutional Reforms

Oi and her colleagues contend that the expansion of local government debt is a feature of China's developmental model, which aims to "circumvent rather than tackle difficult institutional reform, kicking the can down the road, opting for an easier fix to avoid the potentially high political costs.” 

The authors' primary takeaway is therefore that local government debt in China is not a local problem. Similar to other developing nations that depend upon local partners, China faces a dual-commitment problem: "growing the local economy without debt requires the central state to simultaneously commit to respecting its local agents’ access to and control over the fruits of local development (of which local fiscal resources are the most crucial part), while exercising credible fiscal discipline over precisely the same set of local agents that the center seeks to incentivize.”

For nearly three decades, Chinese central authorities have relied on the grand bargain to boost the nation's economic might. Oi and her colleagues reveal that the problem of local government debt reverberates to the highest echelons of the Chinese state decision makers and continues to present strategic challenges for the economic juggernaut.  

Read the article by Oi et al

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Jean Oi
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Jean Oi Elected Vice President of the Association for Asian Studies

APARC’s Jean Oi, a China expert, will begin her term with the AAS in March 2022, serving on a four-year leadership ladder of vice president, president, and past president. Representing all the regions and countries of Asia and all academic disciplines, the AAS is the largest professional association of its kind.
Jean Oi Elected Vice President of the Association for Asian Studies
(Left) Congratulations Adam Yao Liu, Winner of the 2020 BRICS Economic Research Award; (Right) Portrait of Dr. Adam Liu
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Stanford Ph.D. Alumnus Wins BRICS Economic Research Award

Dr. Adam Yao Liu, a former doctoral student of APARC China Program Director Jean Oi, has been awarded the 2020 BRICS Economic Research Award for his research on how banking systems in China are developing.
Stanford Ph.D. Alumnus Wins BRICS Economic Research Award
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New research in 'The China Journal' by APARC’s Jean Oi and colleagues suggests that the roots of China’s massive local government debt problem lie in secretive financing institutions offered as quid pro quo to localities to sustain their incentive for local state-led growth after 1994

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Background: Social-emotional development during the first three years of life is associated with later social-emotional development and cognitive development. In rural China, research has found large shares of children under age three are developmentally delayed, yet little is known about the paths of social-emotional development before age 3 or how developmental paths predict later social-emotional skills and cognitive skills. 

Aims: To investigate the paths of child social-emotional development during ages 0–3 and examine how different paths predict social-emotional development and cognitive development at preschool age. 

Methods: Three waves of longitudinal panel data from 1245 children in rural Western China was collected. Child social-emotional development was measured by the Ages and Stages Questionnaire: Social-Emotional. Child cognitive development was measured by the Bayley Scales of Infant Development and by the Wechsler Preschool and Primary Scale of Intelligence-Fourth Edition. Four paths of child social-emotional development were classified: “never” social-emotionally delayed; “persistently” social-emotionally delayed; “improving,” or “deteriorating.” 

Results: 331 (27%) were never social-emotionally delayed; 373 children (30%) were persistently social-emotionally delayed; 149 children (12%) experienced improving social-emotional development; and 392 children (31%) experienced deteriorating social-emotional development. Children who were never social-emotionally delayed or who were on an “improving” path had higher social-emotional development at preschool age (p < .01). Children who were persistently social-emotionally delayed (p < .5) and on a deteriorating path (p < .01) had lower social-emotional development at preschool age. Children on the persistently delay path also were shown to have lower levels of cognitive development at preschool age (p < .01). 

Conclusions: Different paths of child social-emotional development before age 3 are associated with different social-emotional and cognitive development at preschool age.

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Early Human Development
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Scott Rozelle
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Purpose: To determine the prevalence of visual impairment and glasses ownership among Han Chinese and Hui minority junior high school children in Ningxia Hui Autonomous Region, China. 

Design: Population-based cross-sectional study. 

Methods: Vision screening was conducted on 20,376 children (age 12–15 years) in all 124 rural junior high schools in Ningxia. Personal and family characteristics, glasses ownership, and academic performance were assessed through a survey questionnaire and standardized mathematics test, respectively. 

Results: The prevalence of visual acuity (VA) ≤6/12 in either eye was significantly higher among Han (54.5%) than Hui (45.2%) children (P<0.001), and was significantly positively associated with age, female sex, Han ethnicity, parental outmigration for work, shorter time spent outside during recess, shorter time spent watching television and higher time spent studying. Among children with VA≤6/12 in both eyes, only 56.8% of Han and 41.5% of Hui children had glasses (P<0.001). Glasses ownership was significantly associated with worse vision, greater family wealth, female sex, higher test scores, age, parental outmigration for work, understanding of myopia and glasses, higher time spent studying and Han ethnicity. 

Conclusion: One of the first of its kind, this report on Han and Hui ethnic schoolchildren confirms a high prevalence of visual impairment among both populations, but slightly higher among the Han. Both groups, especially the Hui, have low rates of glasses ownership. Future interventions and policies designed to improve glasses usage should focus on populations with lower incomes and seek to correct erroneous beliefs about the safety of glasses and efficacy of traditional eye exercises.

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PLOS ONE
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Huan Wang
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Policies implemented by the CCP in Xinjiang since c. 2016 have become a central issue in PRC international relations, leading to international determinations that those policies constitute genocide; scrutiny of global supply chains for Xinjiang cotton, textiles and polysilicon; US sanctions on companies and individuals and Congressional inquiries directed at Airbnb and other multinationals operating in Xinjiang; and diplomatic boycotts of the Olympics. The assimilationist policies, if most extreme in Xinjiang, are related to the broader Zhonghua-izing campaign against religion and non-Mandarin language and perhaps even to intensified control over Hong Kong and efforts to intimidate Taiwan—an aggressive intolerance of cultural and political diversity that is emerging as a central feature of Xi Jinping’s tenure. This talk will review the Xinjiang crisis to date and suggest how we should understand these events and trends.



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James Millward is Professor of Inter-societal History at the Walsh School of Foreign Service, Georgetown University, teaching Chinese, Central Asian and world history. He joins the Walter H. Shorenstein Asia-Pacific Research Center (APARC) as visiting scholar with the China Program for the 2022 winter quarter. He is also an affiliated professor in the Máster Oficial en Estudios de Asia Oriental at the University of Granada, Spain. His specialties include Qing empire; the silk road; Eurasian lutes and music in history; and historical and contemporary Xinjiang. He follows and comments on current issues regarding the Uyghurs and PRC ethnicity policy. Millward has served on the boards of the Association for Asian Studies (China and Inner Asia Council) and the Central Eurasian Studies Society, and was president of the Central Eurasian Studies Society in 2010. He edits the ''Silk Roads'' series for University of Chicago Press. His publications include The Silk Road: A Very Short Introduction (2013), Eurasian Crossroads: A History of Xinjiang (2007), New Qing Imperial History: The Making of Inner Asian Empire at Qing Chengde (2004), and Beyond the Pass: Economy, Ethnicity and Empire in Qing Central Asia (1998). His articles and op-eds on contemporary China appear in The New York Times, The Los Angeles Review of Books, The New York Review of Books and other media.  

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James Millward Visiting Scholar, APARC, Stanford University; Professor of Inter-societal History, Walsh School of Foreign Service, Georgetown University
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Tuesday, February 15, 2022 | 4:00-5:15 pm Pacific Time

Carbon Trading vs. Direct Allocation:  Theory and Application to China's Carbon Abatement

The Emission Trading System (ETS) and Direct Allocation Scheme (DAS) are two popular schemes to achieve a given target of carbon abatement. We compare their welfare implications under incomplete information and with local externalities of such abatement (e.g., changes in air pollution). We show that the ETS addresses incomplete information but not heterogeneous local externalities; the opposite is true for the DAS. Therefore, the policy choice depends on the relative significance of incomplete information and heterogeneous local externalities. We apply the theoretical results to the Chinese data and discuss why a national ETS can be undesirable.


About the Speaker

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Guojun He is an economist working on environmental, development, and governance issues. Currently, he is an associate professor in Economics and Management & Strategy at the University of Hong Kong (HKU). He holds a concurrent appointment at the Energy Policy Institute of the University of Chicago (EPIC) and serves as the research director of its China center (EPIC-China). He is a co-editor of Journal of Environmental Economics and Management and China Economic Review

His research tries to address some of the most challenging problems faced by developing countries and seeks to produce empirically-grounded estimates for optimal policy design. The majority of his work focuses on understanding the benefits and costs of environmental policies, while he also has a broader research interest in development and governance issues. His work has been published in leading economics journals (like QJEAER: InsightsAEJ: Applied) and science journals (like PNASNature: SustainabilityNature Human Behavior, and The BMJ). 

He has won multiple academic awards, including the Best Paper Award from China Health Policy and Management Society, Masahiko Aoki Best Paper Award Nomination, and notably two Gregory Chow Best Paper Awards from the Chinese Economists Society. He was named a Young Scientist by the World Economic Forum.  

He obtained his Ph.D. degree in Agricultural and Resource Economics from U.C. Berkeley and received undergraduate education from School of Economics at Peking University. ​Before joining HKU, he worked at Hong Kong University of Science and Technology and Harvard University.​


Seminar Series Moderators:

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Headshot of Dr. Scott Rozelle

Scott Rozelle is the Helen F. Farnsworth Senior Fellow and the co-director of Stanford Center on China's Economy and Institutions in the Freeman Spogli Institute for International Studies and Stanford Institute for Economic Policy Research at Stanford University.  For the past 30 years, he has worked on the economics of poverty reduction. Currently, his work on poverty has its full focus on human capital, including issues of rural health, nutrition and education. For the past 20 year, Rozelle has been the chair of the International Advisory Board of the Center for Chinese Agricultural Policy, Chinese Academy of Sciences (CAS). Most recently, Rozelle's research focuses on the economics of poverty and inequality, with an emphasis on rural education, health and nutrition in China. In recognition of this work, Dr. Rozelle has received numerous honors and awards. Among them, he became a Yangtse Scholar (Changjiang Xuezhe) in Renmin University of China in 2008. In 2008 he also was awarded the Friendship Award by Premiere Wen Jiabao, the highest honor that can be bestowed on a foreigner. 

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Hongbin Li is the Co-director of Stanford Center on China's Economy and Institutions, and a Senior Fellow of Stanford Institute for Economic Policy Research (SIEPR) and the Freeman Spogli Institute for International Studies (FSI). Hongbin obtained his Ph.D. in economics from Stanford University in 2001 and joined the economics department of the Chinese University of Hong Kong (CUHK), where he became full professor in 2007. He was also one of the two founding directors of the Institute of Economics and Finance at the CUHK. He taught at Tsinghua University in Beijing 2007-2016 and was C.V. Starr Chair Professor of Economics in the School of Economics and Management. He founded the Chinese College Student Survey (CCSS) in 2009 and the China Employer-Employee Survey (CEES) in 2014.

Hongbin’s research has been focused on the transition and development of the Chinese economy, and the evidence-based research results have been both widely covered by media outlets and well read by policy makers around the world. He is currently the co-editor of the Journal of Comparative Economics.


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School bullying is a widely recognized problem in developed countries, but remains under-investigated in developing countries, especially in remote rural areas. In this paper, we examine the prevalence, correlates, and consequences of bullying victimization and its relation to educational performance and creative attitudes. Using data from 10,528 students across 120 primary schools in rural China, we find an alarmingly high prevalence of bullying victimization and that several individual, family, and school characteristics are correlated with bullying victimization. Analyses indicate students who are bullied frequently score lower in Chinese, reading, and math tests and creative attitudes. Taken together, the results demonstrate a need for further research and policy interventions to reduce bullying in schools.

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Huan Wang
Matthew Boswell
Claire Cousineau
Scott Rozelle
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China’s rapidly growing local government debt problem has long been recognized by foreign observers as a risk, but inside China, only recently was this problem called out as alarming.  Why has local government debt been allowed to grow with little direct intervention from central authorities?  Based on a forthcoming paper, Oi will show how a “grand bargain” the central authorities entered into with the localities allowed Beijing to take the lion’s share of tax revenues after 1994, but also allowed localities to gain new resources and power as a quid pro quo.  While the bargain provided an expedient and seemingly successful strategy that worked for more than a decade to fuel rapid local state-led growth, it had significant costs that are now becoming increasingly visible.  Because land finance was the core means by which localities raised revenue, Oi also will help explain why the problems with property developers like Evergrande are so important to China’s future economy.   



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Dr. Jean C. Oi
Jean C. Oi is the William Haas Professor of Chinese Politics in the Department of Political Science and a senior fellow in the Freeman Spogli Institute for International Studies at Stanford University. She directs the China Program at the Walter H. Shorenstein Asia-Pacific Research Center and is the Lee Shau Kee Director of the Stanford Center at Peking University. Professor Oi has published extensively on China’s reforms. Recent books include Fateful Decisions: Choices That Will Shape China’s Future, co-edited with Thomas Fingar (Stanford University Press, 2020); Zouping Revisited: Adaptive Governance in a Chinese County, co-edited with Steven Goldstein (Stanford University Press, 2018); and Challenges in the Process of China’s Urbanization, co-edited with Karen Eggleston and Yiming Wang (2017). Current research is on fiscal reform and local government debt, continuing SOE reforms, and the Belt and Road Initiative.

 


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This event is part of the 2022 Winter webinar series, The Future of China's Economy, sponsored by the APARC China Program.

 

Via Zoom Webinar. Register at: https://bit.ly/34mnOcc

Jean C. Oi Director of Shorenstein APARC China Program; William Haas Professor of Chinese Politics, Stanford University
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Tuesday, February 1, 2022 | 4:00-5:15 pm Pacific Time

The Impacts of Pollution Levies on Chinese Firms

China's rollout of emission fee reform since 2007 provides a quasi-natural experiment to study the effectiveness of pollution levy on firm emissions and economic consequences. Using firm-level financial and pollution data, we find that doubling the levy rate leads to a 6.87% reduction in SO2 emissions. Firms achieve emission abatement through reducing output and coal consumption rather than end-of-the-pipe solutions. 


About the Speaker

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Junjie Zhang

Junjie Zhang is Associate Professor of Environmental Economics in the Nicholas School of the Environment at Duke University. Since 2016, he has founded the Environmental Research Center and International Master of Environmental Policy Program at Duke Kunshan University. During 2021-22, he serves as Volkswagen Visiting Chair in Sustainability in the Schwarzman College at Tsinghua University. Zhang is a co-chair for the Environmental Economics Committee in the Chinese Academy of Environmental Science, an advisory board member for the Nicholas Institute for Environmental Policy Solutions, and a board member for the Professional Association for China's Environment. He has also served on the editorial board of several academic journals. Before his current position, he was an associate professor in the School of Global Policy and Strategy at the University of California, San Diego. Zhang's research centers on empirical policy issues in air pollution, energy transition, and climate change. He has received fundings from the U.S. National Science Foundation, U.S. National Oceanic and Atmospheric Administration, China National Natural Science Foundation, China's Ministry of Ecology and Environment, China Council for International Cooperation on Environment and Development, Energy Foundation, Packard Foundation, World Bank, and Asian Development Bank. He holds a B.S. from Renmin University of China, a B.S. and an M.S. from Tsinghua University, and a Ph.D. from Duke University.

 

Seminar Series Moderators:

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Headshot of Dr. Scott Rozelle

Scott Rozelle is the Helen F. Farnsworth Senior Fellow and the co-director of Stanford Center on China's Economy and Institutions in the Freeman Spogli Institute for International Studies and Stanford Institute for Economic Policy Research at Stanford University.  For the past 30 years, he has worked on the economics of poverty reduction. Currently, his work on poverty has its full focus on human capital, including issues of rural health, nutrition and education. For the past 20 year, Rozelle has been the chair of the International Advisory Board of the Center for Chinese Agricultural Policy, Chinese Academy of Sciences (CAS). Most recently, Rozelle's research focuses on the economics of poverty and inequality, with an emphasis on rural education, health and nutrition in China. In recognition of this work, Dr. Rozelle has received numerous honors and awards. Among them, he became a Yangtse Scholar (Changjiang Xuezhe) in Renmin University of China in 2008. In 2008 he also was awarded the Friendship Award by Premiere Wen Jiabao, the highest honor that can be bestowed on a foreigner. 

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Hongbin Li is the Co-director of Stanford Center on China's Economy and Institutions, and a Senior Fellow of Stanford Institute for Economic Policy Research (SIEPR) and the Freeman Spogli Institute for International Studies (FSI). Hongbin obtained his Ph.D. in economics from Stanford University in 2001 and joined the economics department of the Chinese University of Hong Kong (CUHK), where he became full professor in 2007. He was also one of the two founding directors of the Institute of Economics and Finance at the CUHK. He taught at Tsinghua University in Beijing 2007-2016 and was C.V. Starr Chair Professor of Economics in the School of Economics and Management. He founded the Chinese College Student Survey (CCSS) in 2009 and the China Employer-Employee Survey (CEES) in 2014.

Hongbin’s research has been focused on the transition and development of the Chinese economy, and the evidence-based research results have been both widely covered by media outlets and well read by policy makers around the world. He is currently the co-editor of the Journal of Comparative Economics.


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This article was originally published by the Stanford Graduate School of Business. Click here to read the full article.


From regulating crypto to arresting the effects of climate change, an international panel of scholars and business leaders examined ways the United States and China can work together in a webinar hosted by Stanford University.

The 2021 China Economic Forum, conducted online on November 12, featured discussions on sustainability and finance, “to advance dialogue and collaboration between Stanford and our partners in China,” said Stanford President Marc Tessier-Lavigne in remarks prior to the conference.

“The last year and a half has highlighted for everyone the increasing level of global interdependence, whether it is health, supply chains, finance, the need for cooperation — especially between the U.S. and China — as we contend with the effects of climate change and the need for new and sustainable sources of energy,” said Jonathan Levin, dean of Stanford Graduate School of Business.

 

Read the full article.

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Panel at Stanford China Economic Forum discusses climate change, financial technology as key areas of mutual interest.

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