1/9
"By now it’s obvious that the country’s economic problems are rooted in politics. Restoring confidence would require systemic changes that offer real protection of the entrepreneur class and private ownership."
nytimes.com
"By now it’s obvious that the country’s economic problems are rooted in politics. Restoring confidence would require systemic changes that offer real protection of the entrepreneur class and private ownership."
nytimes.com
2/9
While this is a very good article, I'm not sure I fully agree with this particular point. The country’s economic problems are certainly rooted in politics, but they are the result of structural problems, and are the cause, not the consequence, of a decline in confidence.
While this is a very good article, I'm not sure I fully agree with this particular point. The country’s economic problems are certainly rooted in politics, but they are the result of structural problems, and are the cause, not the consequence, of a decline in confidence.
3/9
Many analysts make a similar argument, but mainly because they failed to see the development of the deep structural problems in the first decade of the 2000's. This is when China began to reach the productive limits of its high-investment growth model even...
Many analysts make a similar argument, but mainly because they failed to see the development of the deep structural problems in the first decade of the 2000's. This is when China began to reach the productive limits of its high-investment growth model even...
4/9
as the cleaning up of the banking system – accomplished mainly by forcing losses onto the household sector through highly repressed interest rates – pushed its savings rate to surreally high levels and, with it, its consumption rate to surreally low levels.
as the cleaning up of the banking system – accomplished mainly by forcing losses onto the household sector through highly repressed interest rates – pushed its savings rate to surreally high levels and, with it, its consumption rate to surreally low levels.
5/9
China had to bring down its investment rates as a rising share was directed into non-productive property and infrastructure investment, but because of its extremely low consumption rate, it couldn't bring down investment while still maintaining high GDP growth targets.
China had to bring down its investment rates as a rising share was directed into non-productive property and infrastructure investment, but because of its extremely low consumption rate, it couldn't bring down investment while still maintaining high GDP growth targets.
6/9
This, by the way, is what also happened to nearly every other country that followed a similar growth model, although none ever did so to quite the same extremes as China did.
That's why it should have been clear a decade ago that as long as China maintained excessively...
This, by the way, is what also happened to nearly every other country that followed a similar growth model, although none ever did so to quite the same extremes as China did.
That's why it should have been clear a decade ago that as long as China maintained excessively...
7/9
high GDP growth targets, not only would debt grow unsustainably, but a rising share of economic activity would shift from the hard budget constrained sectors of the economy (i.e the private sector) to the soft budget constrained sectors (mainly local governments and SOEs).
high GDP growth targets, not only would debt grow unsustainably, but a rising share of economic activity would shift from the hard budget constrained sectors of the economy (i.e the private sector) to the soft budget constrained sectors (mainly local governments and SOEs).
8/9
The relative decline of the private sector, in other words, is not the cause of China's slowdown, as many analysts claim, but is rather the consequence of the combination of deep demand imbalances and excessively high GDP growth targets.
The relative decline of the private sector, in other words, is not the cause of China's slowdown, as many analysts claim, but is rather the consequence of the combination of deep demand imbalances and excessively high GDP growth targets.
9/9
For the same reason, while reviving private sector confidence will help at the margin (mainly by boosting consumption a little), it won't solve the underlying problem. To do that requires politically difficult transfers that sustainably rebalance domestic demand.
For the same reason, while reviving private sector confidence will help at the margin (mainly by boosting consumption a little), it won't solve the underlying problem. To do that requires politically difficult transfers that sustainably rebalance domestic demand.
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