Hello, everybody! Good afternoon
Today is 8 May 2017
Let me give you the explanation about the 8th cyclical crisis in China 
The title here shows that 
the eighth cyclical crisis was mainly caused by the first overproduction
That is a very frequent crisis 
that has happened in almost all western capitalist countries
especially in the 1920s and 1930s
The 1930s overproduction crisis in Western countries 
ignited the Second World War
It was a big disaster and thousands of people died in the war 
But when the over-production crisis happened in China in the late 1990s
what happened after this crisis? 
We should not only focus on the economic crisis
we also need to pay attention to what happened after the crisis
especially when the government took measures to deal with such a crisis
The title here “Dual Options” means that 
when the Chinese central government dealt with the overproduction crisis
the measures could be divided into two parts
One part insisted on marketization or market reform
another part tried to use the government's tools 
which are the fiscal system and the bank system 
which at that time still belonged to the government
It means that at the micro level
the central government kept the market system 
which was kind of short-sighted and followed the rules of crisis
On the other side
the government's hands
 were used to directly intervene into the so-called marketization 
and make some shareholder banks
 and foreign capital investment banks go bankrupt
which means that the private banks at that time
in the late 1990s, were forced to close down by the government
The government
on the other hand, issued the government's fiscal bonds 
to directly invest in the infrastructure construction
to help the economy grow from the depression
So on one side, the government still took procedures of marketization
On the other side, when facing the challenge of the crisis
they had to make a change
That is a very interesting phenomenon
Let's start our analysis of this crisis
First, I will give you my main arguments, main theory
The key argument is that overproduction 
is very common in any industrialized country
Not only in the West, but also in the East
 In the 1940s, after the Second World War
very soon Western countries regenerated industrialization from the 1950s
Then in the 1960s-1970s, overproduction happened again
It was not as severe as that of the 1930s 
but it was also very serious and caused a lot of social conflicts 
in the 1960s to 1970s 
I have given the description last time 
when I gave the analysis about what happened in the 1970s in China 
I said at that time that you can compare China and the western countries 
and you will know why in the 1960s and 1970s
Maoism was very popular in Western countries 
It's because of a lot of social conflicts and left-wing movements 
and even the guerrilla movements in these Western countries
They were not caused by Maoism 
but by the reality caused by the economic crisis
The similar crisis of overproduction happened in the 1930s
After that, from the 1970s
Western countries started to transfer labor-intensive, low-level
no high-tech industries to the so-called ally countries
which is to say that the Asian countries are the allies of Western countries
That is the result of the Cold War ideology
Following the Cold War strategy led 
by the United States and the other major Western countries
these Asian countries would accept the industries from Western countries
That is why there were four small tigers and four small dragons 
and all of these tigers and dragons were followers of Western Cold War ideology
But they were small
including Hong Kong at that time 
with a population of less than four million in the 1970s
The labor force in Hong Kong was very small and there was no market
Like in Singapore
at that time there was a population of only two million
Also, there was no domestic market
Their areas were also small
And in some bigger countries like Indonesia
a big population lived in the countryside
 It is a typical dual system
The urban population was very small
 so there was no big domestic market
Very soon, from the 1970s to the 1980s
these small areas and countries got many low-level industries 
And then the capital need to find new areas or new countries
So from the 1980s, a new trend started
These foreign investments moved out from these small countries
That's also because in the 1980s and 1990s there was a big change
the Soviet Union and other socialist countries collapsed
 and then there was more room
It was a big opportunity for foreign capital
They would not just stay in small industrialized countries
They could take more benefits，more interests
 from former socialist countries and the Soviet Union
That caused more competition in the East Asian countries
 which were also called industrial areas
So the capital liquidity movement accelerated
That was the new trend in the late 1980s and the early 1990s
The capital flow became a more and more common phenomenon
 in these East Asian countries
At that time few countries in East Asia realized that they need to take control
So the capital flow in the 1990s became a key concept of globalization
Last time I talked about the 1990s crisis in China
I explained how the WTO was set up in 1994-95 
and how NAFTA and the EU were set up in the 1990s
It is all because
originally if you want the capital to flow freely in and out
 it is very difficult to negotiate between two countries
But in the 1990s
because the capital flow became a very popular new trend in the world
so WTO emerged as a new international organization 
The main change of WTO was the Uruguay round
They could not solve the problem of the capital flow's
 free entry and free retreat
 But when they set up the WTO
almost all these negotiations were given up 
and then capital flow became a popular concept
Every member country accepted this concept and then WTO was set up
Not long after the capital could flow freely
immediately a new very serious international crisis happened 
That is the East Asian financial turmoil
No matter what happened outside China
China started to acknowledge the market system 
as a new goal of Chinese economic reform
That was passed in 1992 in the 14th Party Congress
The mainstream of the political circle in China
no matter it's political think tank or political officials
believed that marketization and globalization would be our future
So no matter what happened outside China
the mainstream inside insisted on their new goal 
which was marketization and globalization 
So in the summer of 1997
almost all the East Asian industrialized small countries 
though not all countries are small
like Indonesia and Malaysiav
all fell into the financial trap or the crisis
But this big event was taken by Chinese mainstream 
as a reason to push forward the marketization of the financial system
It means that the mainstream at that time 
didn't understand what happened in the East Asian countries
Even at that time there was a financial crisis 
but in China it was just a reason 
to push forward the financial reform towards the market system 
It was just an event 
which made them push forward the financial reform towards the market system
So a lot of people outside China
especially scholars who did their analysis about East Asian financial turmoil
thought that the reason 
why China survived was that China still had capital control 
and other countries fell into the trap
the financial crisis trap was because of the system of free capital flow
a free-market system
They still believe that at that time
China had a very strong control in the market system
 No
I said there is some misunderstanding 
because at that time
 the mainstream in the political circle still insisted on relaxing control
When facing the economic crisis
the mainstream political circle didn't take the measures 
to slow down marketization
They were still very keen to accelerate marketization
especially the shareholder system and the privatization
marketization and globalization
all of these “-izations”
They were still very important to the mainstream political circle
So that is very interesting
And then because of the mainstream policy
China not only had an economic crisis in 1998
but also had another depression which was called deflation in China
In Chinese political circle
we said since 1998 there were 4 years of deflation
The truth is that we had 4 years of depression
In 1929-33 when in Western countries there was overproduction crisis
there was a 4-year depression
At that time they called it the Great Depression
China also had a 4-year depression, from 1998 to 2001
But it was not called depression, instead we had a 4-year deflation
So similar
That is mainstream naming 
But on the other side
because when they encouraged the state bank system to be marketized
the bank system could not carry out any measures 
to deal with the financial crisis
So the government had to use the fiscal bonds
They doubled the fiscal bonds and led the bond-investment 
to the infrastructure construction in inland China
They were not aware that 
we had to use the government's hand to deal with the economic crisis
But fortunately because the bank system didn't work
the government had to use the fiscal system
The bond-investment was carried out by the SOE, state-owned enterprises
No matter whether they were aware or not
practically they found the right way to deal with the economic crisis
On one hand, at the micro level
they still insisted on marketization and privatization 
to push forward the economic reform in the Western-style like capitalist countries
But on the other hand
these reforms stopped the government from dealing with the economic crisis 
so they adopted the fiscal bond-investment 
which solved the problem and stabilized economic growth
Even there was a 4-year depression, the GDP annual growth was 7%
At that time, they said, above 7% less than 8% was good
Originally there was a 9% annual GDP growth 
From 1998 because of the East Asian financial turmoil, it was 7%
It decreased, but not so bad
So that is that time
We must understand these two options
Which one did the government choose? 
In my understanding, the government chose the market system
Fortunately, they still had fiscal investment
Most of these investments could not be invested in the coastal areas
because the coastal areas at that time 
were facing the decrease in overseas demand
they didn't need so much investment
So a large number of the investment went to the inland
especially to the programs of Western China Development
Traditional Industrial Base Regeneration
and Rise of Central China
These were regional investment 
to give backward areas like western and central China a big opportunity 
to improve their economic situation
So they rose fast
After four years
since the new millennium, the regional gap was re-balanced
So I said, no matter what they said or did
the outcome was much better than what they thought
That was a practical outcome
That is what we need to understand
That's my argument
Let's move to the first part of this lecture
The background analysis
I mentioned that in the 1990s 
because of the overproduction after the Second World War
in Western countries
they transferred physical production
especially low-level, labor-intensive production, to developing countries
They tried to maintain the high-tech and the old machinery industries
But after the 1980s-1990s
a large number of the machinery industries also moved out
So Western countries upgraded their economy 
from physical industries to the financial sectors
The financial capitalization or the financial capitalism
became a new trend or new phase of the capitalist era, of capitalist history
That mainly happened in the 1990s and the early 21st century
So it started in the 1980s and accelerated in the 1990s
In the first decade of the 21st century
financialization or global financialization, or financial globalization
began a new phase of the capitalist history
It means that the capitalist economy has upgraded their economic structure 
from physical production to financial production
That is the main context of globalization
Because the currency is a kind of credit 
and the credit is based on political power
You need power
After the Soviet Union collapsed
there is only one unipolar power and that is the United States
When the United States took such universal power
which is a unipolar power
this country became the unipolar power of financial credit 
So the biggest political-military power can equal the biggest financial power
That was a new international phenomenon in the first decade of the 21st century
It means that nobody
no power can stop this unipolar power from transforming political power 
to financial power and to use financialization 
to take a large amount of interest from the world
So that is why these Western countries upgraded their economy 
from physical production to financial production 
They can have a large number of benefits much more than before
 in the 20th century
In the 21st century there is a very complicated situation
because they did have an upgrade but no power
No one can regulate such kind of new power
It's somehow like a big genie
There is an Arabic legend of Aladdin and his oil-lamp
When he touched the oil-lamp
a big genie came out of the oil-lamp and nobody could control it
That is a similar story to the 21st century's financial genie
Nobody can put it back in the oil-lamp
It's because the man 
who touched this oil-lamp is a unipolar power, a universal power
So he touched the oil-lamp 
and then he himself became a big genie 
and then controlled all of the world
That is a new legend in capitalist history
We must know that 
this big genie can transfer almost all institutional costs 
to all the developing countries
And if the developing countries just join this globalization
there is no way to escape
The only way is to be a very good follower to tolerate whatever you take
especially if it is a big cost
So you have such kind of picture in front of you
 and you got to think about where you can go
Up to now, there is nowhere to go
That is our fate
 it's unthinkable
But we need to know how such phenomenon happened
We talked about the Soviet Union's collapse after the Second World War
This world could have been in a kind of terror-balance 
because both these two big guys had control of very strong nuclear power 
and they could destroy the globe many times
That was a terror-balance controlled by these two
with a twin-head power that they could control
But when one vanished 
and then there is no terror-balance 
and there is only one unipolar power
They don't need to have such kind of so-called priority or advantage
The United States as a big power, as a unipolar power
released control of the military information system construction 
there was many high-tech in such programs 
and let it go into the market and be industrialized
This was a big chance for almost all the venture-investment companies
They all followed this new policy and invested in the high-tech industries
That was in the 1990s
But it also means that they could take many benefits 
because it was a good chance for freeriding
When there was a terror-balance
most of these investment companies invested a lot of capital in the high-tech 
for the so-called highway of information and many things in the West
And then all became the sunk cost
It means that if you take some parts of the high-tech 
for business or for marketization or for new industries
you can immediately have a big return
Such chances absorbed a lot of venture investments
The investments fell into the new area 
and made USA a big market of high-tech and of the new economy
In the late 1990s
a new concept was created by US economists
They called it new economy
But new economy?
Very soon, after just five or six years
it became a new bubble
Some people came up with a critical name
new economic bubble
Originally it was a new economy 
and then was added “bubble”
it became a new economic bubble 
The new economic bubble broke in 2001
In 2001, China joined the WTO
So these two events merged
to make almost all people believe that 
China took the free ride of globalization 
because China joined the WTO and then had a so-called high growth
People believed that globalization saved China from a long-term
4-year depression which in China was called deflation
But in fact it was not globalization that saved China
The new economic bubble broke 
and made a large amount of surplus capital 
escape from the US high-tech markets to China 
and let China have a large amount of FDI, foreign direct investment
Foreign capital flowed into China 
and China had some high growth again
So it was not the globalization that saved China
the IT bubble broke and saved China
That is very interesting
We challenge the ideological explanation about this crisis
That's one background, an international background
You can see that in 1997 these countries fell into the trap of financial crisis
That is IMF trying to deal with South Korea crisis
At that time none of the worldwide scholars understood 
why there was a so-called financial crisis happening 
in the newly industrialized area in East Asia
So they came up with the explanation saying that it's your problem
that you had problems with your domestic institutions and so on
Nobody said that 
it was because of a large amount of capital flowing 
from industrialized countries 
because the capital had a very slow return in these industrialized countries
but if they invested in IT industries in the US
a large number of profits came from freeriding
Because large investment from the governments 
had become sunk cost 
and then they could have a big return
So US markets absorbed a lot of capital 
that flowed from the East Asian countries
 and that's because of the free flow
There was a financial crisis in the East Asian countries
but at that time nobody gave such explanation
so they believed it was only your own problem
Then the IMF came to these countries 
to negotiate with these countries' governments
You must deepen your free-market system
 To begin with, their problem was caused by the free-market system 
with the free flow of capital
Then the IMF and the World Bank came 
and forced them to deepen their reform of marketization 
for the free flow of financial capital
Certainly, there were a lot of social campaigns
This is in South Korea
People lost their jobs so they wanted to renegotiate the IMF agreement
Here it says “I'm fired” 
which means IMF, I'm fired again
These people rushed to the banks trying to take their money out
but banks had no liquidity so the banks could only close
Hong Kong was attacked by venture investment
Many crises happened in these areas
At that time in the 1990s
China tried to accelerate globalization mainly relying on overseas demand 
to help with economic growth
When these countries suffered from the crisis
the overseas demand declined dramatically
Then there's no overseas demand increase
so Chinese GDP growth decreased
This is the background of the East Asian crisis
Now look at the Asian equity market
From the summer of 1997, all decreased
Hong Kong, Philippines, Indonesia, Singapore and Thailand
most of these countries' financial markets decreased
A lot of people committed suicide as their investment failed
Here's the GDP
You can see that Indonesia decreased, so did China
Hong Kong was a bit better than China but also serious
Indonesia, Thailand, all these Asian countries had a very big decrease
That is the international background
Now let's look at the domestic context
I just mentioned my argument in the first slide
The government at the micro-economic level took some measures 
but it also reduced the local demand
Overseas demand and local demand 
at that time both decreased
In China, because in the 1990s 
the Chinese wanted to accelerate the market system
so they took several measures trying to deal with the inflation
 in the late 1990s 
When they announced 
they had made a soft landing
at that time the domestic demand decreased 
and the price index also decreased 
because the domestic demand decreased
They wanted it to happen
They never thought that there would be a new threat from overseas
In 1996-97, because of the 1994 high inflation 
there was a more than 20% inflation 
they spent three years trying to reduce inflation
so they had a so-called soft-landing
But in fact it was a hard landing
The hard landing made local demand largely decreased
Domestic banks all had a lot of bad loans
So the very complicated domestic situation 
made China fall into the domestic crisis in the late 1990s
Even if there were no East Asian financial turmoil
even if there were no overseas crisis
If you just do the analysis about Chinese domestic economic events
you can also realise at that time
in the late 1990s
because of these very urgent market measures of market system 
these government's measures 
as well as the government's measures to control high inflation
the domestic demand decrease would also bring China into the economic crisis
Because of the taxation reform, in the rural areas
a large number of rural industries closed down
A large number of non-agricultural laborers lost their jobs
Their income decreased
which also affected the local demand
So there were many negative events
I believe that in the late 1990s
even if there were no foreign crisis
the domestic crisis would happen in the late 1990s
But nowadays people believe that in the late 1990s
the Chinese crisis happened because of the East Asian financial turmoil
We can still accept such concept, such idea
but we need to do deeper analysis about such a crisis
It's a crisis caused by two events
one is from overseas, the other is domestic 
We have to understand that 
domestic demand and overseas demand both decreased
In normal time
I mean, in different countries 
you can deal with the decrease of overseas demand 
or maybe you face the other problem of domestic demand
But both happened
It's a very bad situation
In the late 1990s, that was the situation that China faced 
So they accelerated marketization
globalization and privatization 
and made the state-owned-enterprises private and go to the market
and they thought whatever they did in the late 1990s were right
So they wanted the Chinese economy 
to be the same as the Western economic system
Marketization, privatization and globalization, etc
At that time they were not very aware that 
these measures would put China in very serious danger 
But in 1997, the East Asian financial turmoil happened 
and then the foreign demand largely decreased
Some people of the central government noticed this
I remember at that time
the Vice Premier Li Lanqing in January 1998 
wrote a letter to President Jiang Zemin 
to warn that overseas demand would largely decrease
So he suggested to the President 
you should take some measures to increase the domestic demand 
because the overseas demand would decrease a lot
Jiang as President Chairman took his responsibility 
and gave this letter to the new Premier
In June 1998 Zhu Rongji just took the position of the Premier
He got this letter 
and Jiang asked him to do something 
to stabilize the Chinese economy in 1998 
In 1997, the East Asian financial turmoil made overseas demand decrease
so how could we stabilize our economic growth? 
That was a big question to Zhu Rongji who just became the Premier
Certainly, that was challenging
So Zhu Rongji immediately
 organized central government's economic departments
I remember at that time 
there were more than twenty to thirty key persons 
from all the economic departments 
and they had a meeting together for almost twenty or thirty days
It was a long meeting about 
what measures we should take to save our economy
so that it won't fall into depression so quickly
They took some very serious measures
Even though political circle of mainstream still insisted on privatization
marketization, globalization, liberalization
whatever -izations
when the political leaders in China had a very practical threat 
from the East Asian financial turmoil
they've got to deal with it
They got to have some measures
We need to tell apart the ideological propaganda 
So foreign scholars do their research
 and read these documents, newspapers, etc
They didn't know anything about the real situation
They didn't know what happened
But inside, the central government's economic departments 
had the instruction 
from the top leader
 and they started to do something
No one could have a holiday, not even the Spring Festival
They didn't have any day for recreation
They just stayed in the office trying to figure out 
how to adopt measures to deal with the situation
We can say maybe that's caused by some kind of political regime
If you are an official in the so-called liberal country
you certainly have your concerns about your family 
and you got to go back to your home
but these people stayed in some hotel 
for more than twenty days and could not go back home
They must work in this room for the new policies, new measures
This somehow didn't look good in the eyes of these foreign scholars
They never thought that China could deal with a crisis like this one
But it's true
They immediately realized that both domestic demand 
and overseas demand decreased
the only way for Chinese economic growth was the investment
There is a popular description of economic growth
It says the economic growth is driven by three horses
one is the main one, the domestic demand
second is the overseas demand, and third, investment
It means that the main factor is the domestic demand
with the help of overseas demand and investment
But now the main factor decreased, as well as foreign demand
Only one was left
so you lost two out of three horses
You only had one horse, which was the investment
When they were trying to start investment
 they found that almost all banks had a large number of bad loans
You could not use banks 
to increase investment in the infrastructure construction
The infrastructure construction cannot have a short-term return
If you invest in the air force or highway or fast-speed train
after 1 year, 2 years, 3 years or maybe 5 years
you still cannot have the return
You still cannot have enough return to cover your costs
Maybe it will take ten years
So most of these are private sectors
They don't have such kind of ability
to wait for more than five years or ten years for the return 
to cover the costs
No
They want return in half a year or maybe one month
Private sectors want to have very fast investment 
and then very soon they can have the return
So that is the difference
You can only rely on one sector
which is the state-owned enterprises
The state-owned enterprises used the fiscal bonds, the capital
to invest in infrastructure construction
especially when there was a national strategy 
to accelerate western China's development 
No private sectors wanted to do such program 
because western China is far from the coastal area
If you want to transport commercial goods you need to pay more
Nobody wanted to do that
The only one sector was state-owned enterprises
So it happened to change the 1990s' marketization, privatization, globalization 
to state-controlled investment of state-owned enterprises
What was that? 
It's public, it's state capital
So whatever you think
however you analyzed
few people can understand that 
it was not because some people had an idea to do it
it was the result of the crisis
Let me give you my conclusion
Chinese always give “crisis” two meanings
it is a danger, and it is also a chance, opportunity
Sometimes it's more opportunity than danger
When you face the danger, what do you do? 
Your follow the others and you only focus on the present
then the danger can be a crisis
If you take a long view
you confront the crisis 
and you take this opportunity for a new development
So in front of the late 1990s' crisis, the 8th cyclical crisis
what did China do? 
At that time, fortunately or unfortunately, right or wrong 
I don't want to give you a judgement 
I am just saying China chose the way 
to accelerate the infrastructure construction in inland China
Finally several years after inland China received such investment
it grew
Then it had even bigger room to contain big costs
 That is why later in the ninth crisis after the Wall Street financial crisis
China could still maintain high growth
That originated from the late 1990s
So I said when Zhu Rongji retired 
and Wen Jiabao took the position as Premier
he followed Zhu Rongji's policy 
and still put the fiscal bond-investment in the infrastructure construction 
Before Lin Yifu, whose English name is Justin Lin
went to the World Bank to be the senior vice president 
and chief economist in the World Bank
he raised his suggestions to the central government in the late 1990s 
when China was facing the challenge of the East Asian financial turmoil
He said now we are in a very vicious circle
There are two main surpluses
one is industrial surplus, the other is labor surplus
We have two surpluses and we are in a vicious circle 
How can we solve the problem? 
He said, use the fiscal bond investment in rural construction
He said, new rural construction
which is similar to what South Korea did in the 1970s-1980s 
He said we have big room in the inland 
to accept investment in the rural area
so we could have high growth for 20 years
He said that we didn't need to worry about this crisis
That was his suggestion
And he said we should learn from Roosevelt's New Deal
So we could have a Chinese version of Roosevelt's New Deal 
like in the United States in the 1930s
Whatever he said
now you can do your own judgement about whether it's right or wrong
After he came back from the World Bank
he said we could have another 20 years of high growth 
because you had invested in the infrastructure construction
these areas in inland China nowadays were able to absorb more investments
He said you didn't need to worry about inflation or deflation
You just keep doing one right thing
Investing in the inland
Justin is an economist
I suppose that 
his suggestion was more effective and more practical
 in the political think-tank
Okay, so when there was such suggestion
we also need to know that 
they insisted on privatization, marketization, globalization, liberalization
whatever -izations in the 1990s
the outcome was very negative
In the late 1990s
 many factories collapsed or were shut down 
and a large number of workers were laid off
Workers were laid off especially from SOE, state-owned enterprises
During the reform, they kicked out 45 million workers
That is the second largest number in new China's history 
since the 1960s
The largest number was in the 1960s 
when the Soviet Union retreated
There was no investment
so a lot of factories closed down 
and a large number of workers were laid off
That was the largest number of unemployment
The second-largest was in the late 1990s after 30 years
If you compare the two
I'd say that in the 1980s, 40 million were laid off
because in the 1970s 
there were foreign investments from Western countries
and then you had big debts 
and you could not keep the investments growing
and many people lost their jobs
The educated youth went back to the urban area 
and they also had no job
So altogether it was 45 million
But this time, not objectively
but subjectively you forced them 
to close factories and to make workers leave
You asked the workers to buy off their social welfare 
at the price of only several thousand yuan
Several thousand yuan  means
 maybe several hundred to one thousand dollars
One thousand dollars or maybe less
They bought off all the social welfare
You cannot imagine
 how can you set up your whole life with one thousand dollars
It's almost impossible
On the other side, here is my worry
Most foreign scholars cannot do the studies of such phenomenon
because even most of the 45 million workers were out of a job
it was not calculated in the statistics
If you can only read the statistics
you still have no idea
no information of this big event
It's very negative
But you have no information
And nominally they were not out of a job
In Chinese there is this saying: “pending for a job”
that you still have a position as worker
Nominally you have a job
 but practically you have no job
You have a little money for your survival
You can buy a little food
But technically you don't have a salary
You have a little money
something like pocket money
Some factories even asked you to come every morning to the workshop
stay there and read some documents or read something
and that was considered as a chance for training
So there were so many titles, so many excuses
The government asked the state banks to give a salary loan
so that the factories would not close down and would stay open
But there were no products
So many things happened in China in the late 1990s
Unlike East Asian countries
when they had a financial crisis
they closed all the factories 
and all the workers took to the streets and then there were fights
It's not like Western countries or these East Asian industrial countries
It's a special Chinese system
They still controlled these factories 
so nominally the workers were not out of a job
So you cannot just read the textbook
That is just statistics
Maybe that year the unemployment rate was less than 6%
 but maybe it was actually 40%
much higher than almost all these Western countries
 in the new millennium
In 2010 or 2011, in Greece
Spain and Italy there were many people out of a job
It was 20% or 15% but it was calculated in the statistics 
and then it's easier to do your analysis
But when you do Chinese studies you cannot have the data 
So the data are not exactly correct 
and a lot of politics researchers 
talked about the total sum of unemployment
total sum of those who were waiting for employment
and the total sum of those who took a little money 
and joined the training programs
altogether it was 45 million
You won't know that there they were unemployed
So it's a very interesting research topic
There is one more thing about the crisis 
that we should take into consideration and that is the bank reform
Before 1997 most of these big banks in China 
were owned by the state and the bad loan percentage was 1/3
If such phenomenon happens to any country under the western system
there is only one outcome: going bankrupt
All Chinese banks at that time should be bankrupt
The bad loans were much higher than the self-capital
You have your original self-capital 
according to the Basel I
you need to have at least 8% of the capital in the bank 
but if you have a 30% bad loans
which is much higher than the 8% of their capital
it means that you are going bankrupt
So any bank, with capital lower than 8%, must go bankrupt
Few overseas scholars carried out research 
on this very special event of how China dealt with such serious financial crisis
much more severe than any East Asian country in the financial turmoil
In almost the same year, 1997
all these Asian countries fell into the trap
All banks collapsed
But how China dealt with such problems?
Ok, let me give you an explanation after the break
