Engineering was a conventional popular choice of university major and a great start to a promising career at a time when Hong Kong’s construction industry was thriving in the 1980s. Trained as a civil engineer and now a leading economics scholar at HKUST Business School, Prof Edwin Lai candidly admitted that he got bored after five years working as an engineer and decided to jump off the bandwagon for new challenges.
After working several years at an engineering consultant, Prof Lai enrolled in a part-time program in urban planning, a subject he reckons closer to social sciences, which inflamed his desire to study economics. It was also during the early 1980s when mainland economic reform was set to begin. Fascinated by the revolutionary transformation from a centrally-planned to a market-oriented economy, Prof Lai was keen to understand more and to contribute in this historical moment of Chinese economic development.
In pursuit of intellectual challenge
He gave up his full-fledged professional career and started from scratch to study economics, which was almost Greek to him at that time. With unwavering determination, he did very well in his study and gained his PhD degree from Stanford University in the US. His dissertation supervisor was the famous Joseph Stiglitz, who won the Nobel Prize in Economics in 2001.
“It was very difficult especially at the beginning because the students in my class at Stanford were elite students from all over the world, who had studied economics for years. I had to redouble my efforts to catch up, but there was not a single moment I regretted,” Prof Lai said.
He added that it was perhaps the sunny California and its inclusive culture that made him utterly forget that he was once an engineer. So he picked up the gauntlet to the intellectual challenge he loved without looking back.
A passion for teaching
Prof Lai took up his first academic post in the US, then Hong Kong and Singapore, before in 2007 he was recommended to join the Federal Reserve Bank of Dallas in the US.
While serving as a senior research economist and adviser at one of the 12 regional Federal Reserve Banks in the US Federal Reserve System (the US Central Bank), the world’s most powerful government financial institution, he gained knowledge of how the economy functioned and how it was regulated and influenced by policies.
Now, he can share his knowledge of the functioning of the US and world economy and economic policies with students in courses like Globalization and International Macroeconomics & Finance which he teaches today, making them more lively and interesting.
When asked about his dream of contributing to China’s economic development, Prof Lai said teaching in Hong Kong is one important way in which he makes such contributions. He explained that as his students would be mostly working in the fields of economics and finance in Hong Kong and Mainland China, they can bring about a positive and far-reaching impact on the economy in the region. The PhD students he supervises would mostly go on to teach in universities in the region, and they would in turn teach their students, creating further impacts.
To maximize the impact
In addition to teaching, Prof Lai’s research interests are very broad, including intellectual property protection, international trade, global value chain and RMB internationalization.
Take RMB internationalization as an example. He predicts that the currency can be a major invoicing currency in the Asia-Pacific region if China can attain a high degree of capital account openness and a high level of financial development comparable to those of the developed countries.
One factor that prevents the RMB from being an international currency is that the mainland financial market remains immature, where investment instruments are insufficient, and the currency is not sufficiently convertible. But Prof Lai doesn’t support a complete relaxation of its capital control as there would be a danger of unexpected flows of hot money, which can destabilize the financial system, causing a crisis similar to those hitting Indonesia and Thailand back in 1998. China needs to take a prudent and measured approach to guard against all sorts of undesirable possibilities.
“I shall continue to conduct research on the potential of the RMB to be a major invoicing and reserve currency in the world,” he said.
To make his voice heard, he writes newspaper commentaries to educate the public and policy-makers. In academic interaction, he stimulates other scholars with his own work at conferences and seminars. Prof Lai said that one of his main contributions is serving as an educator to students, fellow scholars, policy-makers and the general public.
The value of economics education
Prof Lai noticed that most Americans have studied some economics in college, where the percentage of its citizens who could “think and talk sensibly” about economics was much higher than that in China. This partly explained why the US could function as an efficient economic system. In order for China’s economy to continue to perform well, we must educate its citizens about economics, he said. So economics educators are important for China, he concluded.
Prof Lai’s beliefs in economics and his understanding of the real world helped him work his way to where he is today at HKUST Business School. He said that the School’s liberal and supportive research culture was similar to what he experienced in the US, making him feel like a fish in water, or more precisely, in Clear Water Bay, where we can see things wide and far.