Monday, 4 June 2007

China: Coming to Grips with the New Global Player

Lead article in World Economy (an academic economics journal that does tend to publish accessible articles). Requires subscription for full PDF or ask a friendly academic.

China: Coming to Grips with the New Global Player

* Horst Siebert 11Kiel Institute for the World Economy, Germany, and SAIS Bologna Centre, Johns Hopkins University, Italy


This paper analyses China's economic performance in the last 25 years and discusses its prospect for growth in the future. Exports and investment have been the two driving forces for the high annual GDP growth rates. FDI plays an important role. However, structural issues such as the loss-making state-owned firms and the fragile banking industry have to be solved. Monetary policy is complicated by the accumulation of reserves which, however, provide an insurance for the fragile banking system. Property rights, a crucial element in transforming a communist society, are far from being clearly developed. Major policy issues in the future include the correction of the distorted growth process and of the institutional deficits, especially with respect to the rule of law and the lack of democracy.

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