A Call for Beijing to Loosen Its Grip on the Economic Reins
Comment of the Day

March 01 2012

Commentary by David Fuller

A Call for Beijing to Loosen Its Grip on the Economic Reins

This is an interesting article by David Barboza for the NYT and IHT. Here is a section:
Mr. Zoellick said in news conferences on Monday that he was reassured that the government would undertake bold changes and that he expected China's economy to remain strong this year, with a soft landing likely.

The 400-page report, however, says little about the immediate challenges facing China's economy. Instead, it lays out a road map packed with recommendations that the authors hope will lead to gradual reforms introduced over many years, if not over a decade or more.

If all goes well and China undertakes serious changes, the study predicts, its economy could grow by about 8 percent a year for the next few years and could sustain average annual growth of about 6.6 percent for nearly 20 years.

That annual growth, the study says, is likely to slow eventually to about 5 percent in the years leading up to 2030, more than enough to enable China to surpass the United States as the world's biggest economy.

Although the risks of a global economic downturn are a concern, the report said, bigger risks may arise from internal structural challenges, like weak domestic consumption, overinvestment in public works and increases in inequality.

Nicholas R. Lardy, an expert on the Chinese economy at the Peterson Institute for International Economics in Washington and the author of "Sustaining China's Economic Growth After the Global Financial Crisis," called the report a thorough benchmark assessment of China and its economy.

But he also said the study failed to offer detailed prescriptions for reforms or to explain why previous efforts had stalled.

"Many of these issues have been on the agenda for at least a decade," Mr. Lardy said in a telephone interview. "But the report doesn't even attempt to explain what obstacles there are to doing these things. Until you shine a light on those things, it will be very difficult to understand why the changes haven't taken place."

David Fuller's view This study from the World Bank - "China 2030" - seems sensible enough. However, the problems and risks identified, the market oriented solutions suggested, and the risks of inequality cited, apply equally to all governments in my opinion.

In other words, we have seen versions of this report before. With a little fine tuning, the common sense suggestions can be applied to any country. In saying this about the World Bank's report, my intention is certainly not to demean it.

However, since China has the best 30-year growth record of any country in history, would a report on all the things that China got right in terms of economic policy be even more informative? It would certainly be more controversial.

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