Review on 'The Soft Underbelly of China’s Growth'

by Jun Zhang - Director, China Center for Economic Studies, Fudan University, Shanghai.
The original text is found at http://www.project-syndicate.org/commentary/zhang2

Seemingly complicated issue – export-lead growth leading to excess capacity and investment-growth nexus, which puts macroeconomic stability on the wane. Inward complexity arising from structural flaws, as exemplified by the immature capital market and the banking sector, which limits the growth of the private sector, was to the author the main culprit for a languid domestic economy. My knowledge of economic theories especially of the financial market is nil; need to study again. Is this currently the most pressing problem of China’s economy?
Furthermore, the author argues against globalisation as a means of avoiding inward complexity. He introduced the term ‘international balance of interests’, and cited Japan’s example in the 1980s as a failure of aggressive overseas expansion as a means to walk around domestic policy constraints.
The main challenge faced by China’s economy is therefore a government unwilling to sacrifice some short-term figures and stability for healthier and sustainable growth in the long run. Structural problems have to be tackled – they do not simply go away.