Case 1: Price dual track reform and the Mo-Gan-Shan Conference 1984

In 1984 China's agricultural reform (known as the rural Household Responsibility System (HRS)) started seeing some success. Grain production grew extremely quickly and by the end of 1984 the Chinese government was able to claim food self-sufficiency, a historical achievement. However, reform in the urban sector, mainly the industrial sector, remained stagnant. Industrial firms were still regulated by government planning. Price and production were still administratively determined. The prices of energy and basic materials were very low, a heritage from the planning era since the 1950s. Because of that, shortages of energy and basic materials were widespread and became major concerns to the national decision makers as well as to academia.

On 3–10 September 1984, a group of 124 young economists gathered at Mo-Gan-Shan, a mountainous resort in Zhejiang Province, to discuss the direction of reform for the urban sector. These young economists were mostly in their twenties and thirties. Some of them were graduate students. After a week of heated debates, the young economists came up with a set of reform recommendations, among which was the famous ‘price dual track system’ reform. The idea was to allow suppliers of energy and basic materials, mostly state-owned enterprises, to sell their products beyond the government-set quota, to the market, at flexible prices. With this policy, the enterprises would raise revenue and therefore have the incentive to increase their production and reduce the shortages that had been impeding the growth of the manufacturing sector, as well as meeting the growing demands of consumers. More deeply, the reform policy allowed enterprises the opportunity to respond to market signals and make rational business decisions so they would be adaptive to future reform toward a market economy.

The price dual track system idea was the first among all the recommendations to be adopted by national leaders and soon became formal national policy. With this reform, China started the transition period toward a market-oriented economy.

Case 2: Forest carbon management system

In 2001 the task force on forest and grassland, composed of senior scientists and economists, both domestic and international, organized an ‘International Workshop on Eco-compensation’. The development of climate change issues in the world was one of the focuses of the workshop. The Clean Development Mechanism (CDM) and carbon trading scheme were introduced during the workshop. Government representatives attending the workshop realized that climate change issues and development of the carbon market could have greater impacts on the forest sector than anything else, including the recent accession of the World Trade Organization. Then officials from the State Forestry Administration (SFA) requested additional knowledge about climate change and its potential relationship with forest management. The task force acquired funding from the Ford Foundation and held a second training workshop on climate change and forest management. The training workshop was given by a group of forest economists and was attended by people from the national government and from academia. The subsequent outcomes of the training workshop included: (1) the forest sector rejoined China's climate negotiation delegation; (2) the Forest Carbon Management Office was established under the SFA; (3) with funding from the World Bank, the world's first carbon forest project under the CDM scheme was implemented in China's Guangxi Autonomous Region, and later expanded to other provinces; and (4) afforestation became a prominent element in China's national climate strategy (including the Copenhagen Commitment made by the Chinese government).