Dr Xiao Geng's life is a tale of rags to riches, not so much for himself, but for his country, China. As a United States-trained economist, he has contributed to the meteoric rise in the mainland's wealth through his economic ideas. As director of the Brookings-Tsinghua Centre for Public Policy, the Beijing branch of leading US think tank the Brookings Institution, Xiao has served as a bridge in fostering mutual understanding between the US and the mainland on prickly economic issues, 'I saw how China changed from poverty to progress. In one generation, I experienced hunger and the collapse of the Chinese economy during the Great Leap Forward and the Cultural Revolution. I experienced what Europe took 500 years to experience - from feudalism to industrialisation to modernisation,' Xiao says. Xiao was born in Nanchang, the capital of Jiangxi province, in 1963. 'That was right after the Great Leap Forward. In those days, China's birth rate dropped dramatically. We experienced hunger,' he recalls. During that era, Chinese families were given rations of food and clothing, for which they needed coupons to acquire. Xiao had a politically incorrect background by the standards of communist China. His grandfather was a landlord in Jiangxi. His father was an intellectual, having studied at university in China. In 1949, when the People's Republic of China was established, his father joined the Jiangxi branch of the People's Bank of China. 'He had a high salary by the standards of [the time],' Xiao says. His father's monthly salary was more than 60 yuan a month, higher than the average entry level salary of 36 yuan a month. In the late 1960s, during the Cultural Revolution, Xiao's father was sent to the countryside for re-education because his brother was branded a rightist and his sister had fled to Taiwan before the communists took over. In the 1970s, his father returned from the countryside and was appointed a manager of a television factory near Nanchang, but even then Xiao saw little of him. Meanwhile, his mother worked in a factory on the outskirts of Nanchang. 'I grew up with my grandmother,' Xiao says. In 1977, Communist Party leader Deng Xiaoping reinstated college entrance exams as part of his wider reforms. In 1980, Xiao sat for the college entrance examinations and emerged one of the top 10 students of Jiangxi province. He gained entry to study engineering at the University of Science and Technology in Hefei, the capital of Anhui province. Xiao excelled at university and was among the 10 students selected by this university to pursue postgraduate studies in the US on a World Bank scholarship. Xiao was admitted to study economics at the University of California, Los Angeles (UCLA), starting in 1986. 'I was an engineering student in Anhui, but chose economics at UCLA because I thought economics was very useful. 'We were one of the first batches of Chinese university students in the US. Deng's reforms were crucial. Without Deng, I would not have entered college in China and there was no way I could go to the US. When I was young, my parents told me it was useless to study because intellectuals were punished in China,' Xiao says. 'I was shocked by the different lifestyles and productivity between the two countries. In China I was so thin, because I did not have enough to eat. In the US I was so poor. I had only US$360 per month, while I had to pay US$200 for rent, but I still got fat,' he recalls. 'When I left China, there were no freeways there. Driving on freeways was a necessity in the US. The depth and width of knowledge in US university libraries was huge and shocking to me. In China, we had very few such resources. It was eye- opening.' After obtaining a PhD in economics from UCLA in 1991, Xiao worked for the World Bank in Washington until 1992. 'When I graduated from UCLA, I got a job offer from Hong Kong University. I did not go right away for several reasons. One reason was to get practical working experience in the US; 1989 was also a factor, but not the key factor. Many people didn't want to go to Hong Kong and China because it was right after 1989, it was a tense situation.' During Xiao's stint at the World Bank, the chief economist at the institution was Lawrence Summers, who later became a senior US Treasury official under US president Bill Clinton and is now director of the National Economic Council under President Barack Obama. For Summers' first trip to China in 1991, Xiao helped prepare his speech in Beijing on price reform. Summers also used Xiao's PhD thesis on ownership and productivity in China's economy for his other speeches at international meetings. Xiao describes the ideas in his PhD thesis that were used by Summers. 'I found the Chinese cities like Wenzhou had lots of private enterprises, and their economy was much better than provinces like Liaoning with lots of state-owned enterprises. It showed economies with fewer state-owned enterprises were doing well.' In 1992, Xiao joined the University of Hong Kong. 'Hong Kong is a much better location to study China. Hong Kong is much freer and its institutions are much closer to the US. In Hong Kong I appreciated how the market system worked, and that gave me a tremendous understanding of reform in China,' he says. Xiao spent six months at Harvard University in 1996, at the invitation of Professor Jeffrey Sachs, who was then at Harvard and is now director of the Earth Institute, a US-based centre that promotes sustainable global development. At Harvard, Xiao co-authored a book, China's Management of Enterprise Assets: The State As Shareholder, on reform of China's state-owned enterprises (SOEs), which was published in 1997. 'That book had quite a big impact in China,' Xiao says. In 1997 Beijing, at the 15th Party Congress set out its policy of privatising SOEs, as recommended in Xiao's book. Xiao had also written several articles on SOE reform, which were read by mainland policymakers. 'It's not like Chinese leaders would call me. I wrote papers, which were circulated among think tanks and policymakers in China. My work at that time was popular with students, professors and policymakers,' Xiao says. Mainland leaders would send researchers to Hong Kong, who discussed Xiao's papers with him and then circulated them among the leadership. 'A lot of Chinese policymakers read my articles. They first circulated my articles internally within the Chinese government, because some of the issues I discussed were sensitive and controversial. The most sensitive topic was the privatisation of SOEs. If you gave up state ownership, you gave up socialism - that was the conservatives' argument. My argument was that the US had virtually no SOEs, but it was the most powerful nation in economic and military terms,' he says. During the 1990s, Xiao discussed SOE reform with Shao Ning, who was then a senior official involved with reforming China's SOEs and is now vice-chairman of the State-owned Assets Supervision and Administration Commission. 'I used my training in Western economics and the language of Chinese political economy to discus this issue,' Xiao says. For example, in discussing SOE reform, Xiao used the term 'surplus value', which was used by Karl Marx to describe the value that capitalists extracted from the workers they exploited. In a paper, Xiao argued that the nationalisation of the mainland's businesses had resulted in 'negative surplus value'. 'At that time, most SOEs were loss-making, so their surplus value was negative. If you get negative surplus value you are in trouble because workers exploit all the people in China. That is the argument [for why] the old system didn't work.' He recommended that the Chinese state become a passive minority shareholder in SOEs, and that they be managed like private corporations. Although Xiao recommended the central government maintain no more than a 30 per cent share in large SOEs, Beijing kept majority control of them. 'The Chinese government did not accept all my recommendations on SOEs. It's not important if policymakers agree or disagree with you. What is important is they are informed and make decisions scientifically,' Xiao says. From 2000 to 2003, Xiao was one of the three advisers to Andrew Sheng, then the chairman of Hong Kong's Securities and Futures Commission (SFC). During his time at the SFC, Xiao and his team proposed the Qualified Domestic Institutional Investor (QDII) scheme, which allowed Hong Kong financial products to be sold to mainland investors. Beijing launched the QDII scheme in 2006. 'We coined the term QDII,' Xiao says. In 2006, the Brookings Institution offered Xiao a job heading the Beijing centre that it planned to set up. 'I met the Brookings Institution chairman John Thornton, who wanted to set up a Brookings centre in Beijing. John said US-China relations was one of the most important issues in the world in this century. John invited me to head this centre. I agreed.' Xiao gave up his tenure position at University of Hong Kong and in January 2007 moved with his family to Beijing to assume his new job as director of the Brookings-Tsinghua Centre for Public Policy. One function of the centre is to provide policy advice to the Chinese government. Another of its main purposes is to promote dialogue between US and Chinese policymakers. Since the centre began operations, it has hosted more than 70 events, many of which were attended by US scholars and policymakers. 'When US officials come to China, the centre arranges informal talks for them so they can know China better,' Xiao explains. The centre held informal dialogues that supplemented the official US-China Strategic and Economic Dialogue, which was established last year by Obama and President Hu Jintao. Prior to the United Nations Climate Change Conference in Copenhagen in December, the Brookings-Tsinghua Centre hosted a seminar for the US climate change delegation to meet their Chinese counterparts. 'The failure in Copenhagen was more or less reflected in the informal discussions in Beijing at our centre. A lot of issues were debated in our centre, which reflected the huge gap in US and China views. 'The US Copenhagen delegates were obsessed with the need to reach an agreement which the US Congress could accept. They didn't think the US Congress would pass anything that would use US money to subsidise technology transfer on climate change and energy to China. On the Chinese side, their view is that the historical cumulative per capita emission by the US is much higher than China's.' The latest topic Xiao is working on is the renminbi exchange rate, he says. 'That is an issue at the centre of US-China relations. 'What I heard in Washington shocked me. I was shocked by the US Congress testimonies. They were so biased and ignorant about China. Politicians, even scholars, didn't understand basic facts about China and the Chinese economy. They are obsessed with the exchange rate, thinking you can solve everything with the exchange rate. They think the Chinese economy is like a textbook economy, with a few variables like the exchange rate. If you change the exchange rate, everything will fall into place.' Xiao held extensive discussions on the renminbi exchange rate with US Treasury officials. The US Treasury has consistently refused to call China a currency manipulator, Xiao says. 'My discussions with the US Treasury certainly played a role. 'I spent much effort in using what I learned, not just in theory, but living and working in the US and Hong Kong. That allows me to appreciate how East and West should learn from each other and potentially co-operate, as well as potential conflicts between them. I'm probably in a good position to bridge East and West,' Xiao says. 'Understanding reform in China is extremely important for China, the US and the world. In one generation, we can change China from a state where it can't feed itself to one with a Hong Kong standard of living. 'If China can do it, India and Africa can do it. So in future, people in the whole world can possibly have a lifestyle like people in Hong Kong and Singapore. We have the capacity to end poverty.'