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The Chinese Economy: Transitions and Growth Barry Naughton
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As Chinese data continues to deteriorate, housing continues to show weakness and bad debts rise, some take solace in the fact that this is all part of China's plan to rebalance its economy and cool growth. One of the key challenges facing China's new leaders will be how to keep the world's second largest economy on track. The Chinese government is getting serious about ending the state's parasitic role in the Chinese economy, reports the New York Times. Case in point: China, where labor shortages are working to slow growth in the nation's economy. Economic growth, it also requires a change in traditional modes of economic policymaking. Market forces always work to whatever to work toward long-term good. China has long cemented its reputation as a lucrative export market for metals and energy, but now Canada is also fuelling its gastronomic revolution. Chinese economic policymakers will have to reduce explicit government controls and inter- vention and become more comfortable with allowing market mechanisms to guide ever larger segments of the economy. When I chat with people about China's economic growth, I often hear a story that goes like this: The main driver's behind China's growth is that it uses a combination of cheap labor and an undervalued exchange rate to create huge trade surpluses. Market Forces and the Chinese Economic Transition. In a paper, Li Zuojun, deputy director at the Development Research Center of the State Council (DRC) writes that after 30 years of rapid growth, China is beginning to restructure. The diminishing advantage of low-cost factors and the declining FDI in China indicates that both the country's current export model and its mode of economic growth are at a turning point. Despite these Too gradual a transition, however, exposes the Chinese economy to the risk of a sharp correction for an undesirably long period. Can China's economy keep growing despite recent slowdowns?