Alicia García-Herrero (Natixis) | Out of the key reasons for the cyclical slowdown in 2018, namely the worsening sentiment due to the US-China trade war and the rapid shadow banking crackdown, the former can be considered as an external shock but the latter is self-inflicted.
Iris Mir | China aims to recover the ancient Silk Road to create an unprecedented trade link between Asia and Europe. Least developed Chinese provinces would also benefit largely from the ‘one belt, one road’ project as Beijing will need to invest greatly in infrastructure and high-speed railways. Local governments see the project as a golden opportunity to revive stagnating growth.
By Richard N. Cooper via Caixin | There is a widespread impression both inside China and out that after the vigorous economic reforms of the 1980s and 1990s, moving away from central planning and state control to greater emphasis on markets, the reform process stopped, or even reversed, during the 2002-2012 period. This view was perhaps reinforced by the emphasis in the third plenum of the Communist Party’s 18th Central Committee in November 2013 on the need to move further toward less guidance from the state and greater reliance on market prices to allocate resources.
China is reaching a crucial point in which both the Communist Party and the citizens must define what they want to be and in which direction they want to move. The human costs of three decades of rampant growth are huge and the country is facing pressing challenges such as environmental pollution, deep social inequalities and weak employment opportunities. It may be time for China to start figuring out the puzzle of allocating resources in a country of 1.3 billion people.
BEIJING | By Andy Xie via Caixin | Poor economic data in China will make the short-sighted howl, but policymakers know it is really a sign of rebalancing – and raising per capita incomes.
What really makes China anxious about reforms is not a fall on exports, but it’s incapability to continue absorbing the expensive investments that for years triggered miraculous growth. Could be China making the same mistakes than in 2008? Could the country be falling into the investment trap again? Among many other issues, the Central Committee of the Communist Party agreed on markets playing a greater role in allocating resources. This and other decisions suggested a less interventionist model where the private sector should have a greater role. The new leadership doesn’t have many options left.