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In China, new leadership but familiar challenges

(L) Xi Jinping greets the media at the Great Hall of the People on November 15, 2012 in Beijing, China.

On China’s new rulers to-do list: Tackle the nation’s widening wealth gap, clean up decades-worth of environmental neglect, and straighten out the kinks in the economy.

"The first and most immediate challenge is how to handle a slowing economy," says Patrick Chovanec, professor at Tsinghua University’s School of Economics and Management. "There are a lot of people who would like them to respond with stimulus and help pump the country back up, there are others who argue that what’s needed is more reform; even if that means slower growth in the short run."

If the new leaders choose a path of economic reform, says Chovanec, that will mean a transfer of capital from a public sector full of giant state-owned enterprises to the private sector, opening up China to more market competition.

 

 

Rob Schmitz: On China’s new rulers to-do list: Tackle the nation’s widening wealth gap, clean up decades-worth of environmental neglect, and oh yeah -- straighten out the kinks in the economy.

Patrick Chovanec: The first and most immediate challenge is how to handle a slowing economy.

Patrick Chovanec is a professor at Tsinghua University’s School of Economics and Management.

Patrick Chovanec: There are a lot of people who would like them to respond with stimulus and help pump the country back up, there are others who argue that what’s needed is more reform; even if that means slower growth in the short run.

If the new leaders choose a path of economic reform, says Chovanec, that’ll mean a transfer of capital from a public sector full of giant state-owned enterprises to the private sector, opening up China to more market competition.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.
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Rob. Please don't get tunnel vision and constrain your analyses with U.S. stereotypes and economic models. Remember the old adage: to a carpenter, every solution looks like a hammer and nails. If you limit yourself to western concepts like: GDP, fast and slow economy, private and public sector, and competition, we'll all be caught sleeping if a welder and iron I-beams show up. China has the ability to do that. I'll give three examples to make this point.

The U.S. keeps dabbling with high speed trains. Florida is proposing a Tampa to Miami route with a top speed approaching 170 mph. So, to judge the financial impact of China's rail improvements, you might ask U.S. planners for rail-based financial models. After posting an article on that basis, you'd be caught totally blind in the headlights when you found out that China is already prototyping a 6000 mph ultra-efficient train! No U.S. model applies.

What if you found out that the Chinese discovered a NEW form of DEMOCRACY, unlike any known in the western world, that didn't have all the failings of U.S. democracy. What then? What if the Chinese developed a new type of computer that was a MILLION times faster than the best U.S. super computer. What then?

Please. Be very open minded about what you are learning.

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