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  • The Chinese Economy at the Crossroads

    The World Bank’s latest report sounds a warning on China’s future economic growth, reiterating critical recommendations concerning the Chinese economy by The Heritage Foundation’s Index of Economic Freedom.

    The report makes a strong case that, if China is to keep up growth rates at even half the level it has managed over the past 30 years, it “should complete its transition to a market economy—through enterprise, land, labor, and financial sector reforms.” More clearly, Robert Zoellick, the chief of the World Bank, said during the launch of the report in Beijing yesterday, “As China’s leaders know, the country’s current growth model is unsustainable.”

    According to the Index of Economic Freedom, China’s economic freedom has been on a downward trajectory since 2000, when its score peaked at 56.4 points. At best, economic freedom in China continues to rest on fragile foundations. The embrace of market principles that could enhance efficiency and long-term competitiveness has become sporadic and is unevenly distributed throughout the country. It is hardly surprising that private enterprises in China have an average lifespan of only 2.9 years. Markets for capital, labor, goods, and services are all highly regulated. Without economic freedom, there is little opportunity for innovation.

    The Chinese economy is at a critical crossroads. This fall, new Communist Party leadership will be selected, and a new government will take over early next year. Derek Scissors, Heritage research fellow in Asia economic policy, sums it up this way:

    It’s at least possible that, given time in office, [incoming Communist Party Secretary Xi Jinping] will come to accept that China is off course. Not today, not tomorrow, but (perhaps) soon. This is what the reform camp is aiming at. The rest of the world should remain skeptical, but it should be cheering them on.


    Click here to view this post in Spanish at Libertad.org.

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    4 Responses to The Chinese Economy at the Crossroads

    1. @Lilla_Pappa says:

      This article assumes that economic growth is a desirable goal. Economic growth in the West has produced wealth inequity, a corrupted political system, human deaths and environmental destruction. Perhaps humanity needs to take a step back from the desire for economic growth and start looking towards a sustainable future instead. China is right in keeping its economy and government as far out of the reach of Western greed as much as they possibly can for as long as they can.

      • Rich says:

        Wealth inequality certainly exists in China, although the poor far outnumber the wealthy, most living in what we call "abject poverty.". As far as corruption, Communist Mao lays claim to millions of dead Chinese, and China is the 2nd biggest polluter on the planet, with 1/10 of our GDP output. Your comments are off thrack.

      • How can you have a sustainable future without economic growth? To have no growth will end up being bad in the long run. If there is no economic growth but costs go up, then you have deficits…and we can see in Greece where that takes you. There needs to be some sort of growth in order for a government to sustain itself. Otherwise, nations will start bottoming up like Greece before we can blink.____Also, to your point about the corruption of economic growth: have you considered that in order for a business to run, it depends on virtuous people? Yes, it is unfortunate that those people are people, and therefore have to deal with imperfect human natures, and therefore will make mistakes. But you cannot simply paint all economic growth as corrupt and evil. There is virtue to be found in the ability to decide to go into business, to make a purchase as a consumer, to make wealth and be able to help others create it too.

    2. Robert says:

      The gains that China has made in raising the standard of living for it’s people has been due to free enterprise, not Marxism. Better goods and services are due to incentive for an honest profit. Better agriculture, medicine, transportation, communication and cleaner environment takes money. Marxist “sustainability” equals a third world economy with rationing and an oppressive government with few human rights.

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