What will be China’s economic fate for the next decade?

Rob Schmitz Nov 8, 2013
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What will be China’s economic fate for the next decade?

Rob Schmitz Nov 8, 2013
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This weekend, China’s leaders will begin meetings to hammer out economic reforms they hope will put the world’s second largest economy back on track. Decisions made by Communist Party leaders over the course of the gathering could shape the future of China for a decade or more.

The purpose of these large party meetings is to set a broad, overall direction for policy for the next decade. It’s a chance for the new leadership under President Xi Jinping to brand itself by using big slogans to give an indication of where the country is headed under the new leadership.

Many experts think China’s economy is headed toward a cliff. China’s economic planners have been carefully tweaking and reforming the economy for the past 30 years. But many economists think something more drastic is now needed and that the leadership in Beijing is going to have to start making more painful decisions about China’s economy.

“The easy stuff has been done,” says David Kelly, research director of Beijing-based firm China Policy. “So the question is, what risks will they take? If they put the breaks on certain processes, they’re in trouble. If they hit the accelerator, they’re in trouble another way.” 

What Kelly means is that if China continues to rely on its own state sector to build things for growth, it will create lots of economic waste and it will create more corruption. If China phases that policy out and instead creates opportunities for private companies to compete in a more consumer-lead growth scenario, that’s going to take time, meaning China will have to cope with slower growth and possible unemployment in the short term.

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