M-RCBG Associate Working Paper No. 33

Overcoming the Great Recession: Lessons from China
Liu He


Foreword by Graham Allison and Lawrence Summers

For the past decade, Liu He has been an influential economist and policy advisor in Beijing. An alumnus of the Harvard Kennedy School (MPA ’95), Liu was a trusted advisor to President Hu Jintao during the global financial crisis of 2008. Since Xi Jinping became president in 2012, he has emerged as Xi’s right-hand man on economic policy. As head of the Office of the Central Leading Group on Financial and Economic Affairs, comparable to the National Economic Council in the United States, Liu frames policy options for the Politburo Standing Committee and has been named in the press as “chief architect” of the major reform program announced at the conclusion of the Third Plenum in November 2013. At the Summit between Presidents Obama and Xi at Sunnylands, Liu was one of two assistants President Xi included in the conversations.

In a way that is perhaps more common in the United States than in China, Liu is both a practitioner and a student of economic policy. He recognizes the need for China to learn from global experience as its economy develops and integrates into the global economy. In this thoughtful paper, Liu compares two global crises: the Great Depression of 1929 and the Great Recession of 2008. This study was undertaken early in the crisis and published in China in the summer of 2012. The objective of the project was to understand past events in order “to navigate the ongoing financial crisis safely and respond more proactively by learning from history.” With the perspective of an insider who supported Chinese leaders in making choices that allowed China’s economy not only to weather the crisis, but to outperform all other economies since the crisis, he provides a nuanced account of the past and astute clues for the future. While he doesn’t say so, the brute fact is that since the 2008 financial crisis, nearly 40% of all the growth in the global economy has taken place in just one country: China, despite its having only 15% of the world’s population and less than 20% of its income. Liu’s reflections on lessons learned and guidance taken, as well as questions that remain unanswered are thus instructive for policymakers, and investors, around the world.

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