China’s success will depend Beijing’s ability to centralize power, to begin to sell off government assets, to rein in credit growth, and to accept much lower GDP growth rates.
China’s problem is excessive debt in the economy, not a banking system facing insolvency. Beijing’s reform strategy should reduce the debt burden as quickly as possible to minimize the economic costs.
China is embarking on ambitious economic reforms to boost its growth prospects. What is the rationale behind these new reforms and what are the prospects for their success?
A simple model can help illustrate the problems that China will face over the coming decade.
Because savings and investment must always balance, the idea that the savings rate in any country is determined at home is nonsense.
The structure of investment strategies in the Chinese stock markets had always guaranteed that this would be a brutally volatile market that trades almost exclusively on “the consensus about the consensus”, and therefore prices will reflect very rapid shifts in this consensus.
China’s consumer price index (CPI) and producer price index (PPI) data suggest that China is facing deflationary pressures. Beijing must tackle the country’s debt and create alternative sources of demand to address them.
A slowing Chinese economy might be good or bad for the world, depending on domestic savings and domestic investment.
Policies that affect the savings rate of a small country can have more-or-less predictable domestic impacts because the global economy is so large that domestic policies are not affected by external constraints. But with a large economy, the analysis changes.
Instead of a hard landing or a soft landing, the Chinese economy faces two very different options, and these will be largely determined by the policies Beijing chooses over the next two years.
If Pedro Sánchez Castejón hopes to lead Spain and his party out of its current economic crisis, he must recognize that the crisis is fundamentally a conflict between the interests of Europe’s bankers and of Europe’s workers.
Rising inequality is inextricably tied to economic imbalances and, in a context of limited productive investment opportunities, the only sustainable outcome is sharply higher unemployment.
As China's economy rebalances over the coming decade, average growth of 3-4 percent is likely to be the upper limit on what Beijing can achieve.
The speed of China’s growth in the coming decade depends on whether or not it is possible to maintain current levels of consumption growth once investment growth is sharply reduced.