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While Beijing’s economic growth strategy has led to a significant competitive advantage for China, it has also increased inequality between urban and rural areas and put China’s economy at risk of overheating.
Despite victories for Taiwan's ruling Kuomintang party in recent metropolitan elections, President Ma Ying-jeou must still strike a fine balance between cooperation with China and toughness against Chinese threats if he hopes to win reelection in 2012.
In its efforts to rebalance the Chinese economy away from overinvestment and toward increased household consumption, Beijing can draw lessons from Japan’s experience with a similar transition.
A troubling perception gap exists between Chinese citizens, who feel their country is discriminated against in the international arena, and Western observers, who harbor suspicions of Beijing’s intentions.
As long as the rapid shift in the balance of power between the West and China continues to shape Beijing’s definitions of its interests and Western responses, the world is likely to see repeated disagreements between China and major Western powers.
Beijing should exercise its unique and major influence with North Korea in order to return peace and stability to the region and to protect China’s own interests.
China's interest rate hikes are primarily intended to rebalance China's overheated investment sector, but they will likely have little effect on the country's rising inflation.
With GDP growth likely to remain robust, China's attention must turn to the risk of inflation, caused by excessive credit creation in 2009 and part of 2010. Rebalancing remains the medium-term priority.
Beijing's attempts to manage rising inflation may depress domestic and global growth and will likely be insufficient to address the deeper structural imbalances in China’s economy.
Beijing's usage of the term "core interests" to describe its critical national priorities indicates that while China has become increasingly assertive on the global stage, the nature and direction of this assertiveness is still being worked out by Chinese leaders.