At The American Interest Martin Wolf has what strikes me as a good post on the hazards facing China in its path to further economic development. Here’s a snippet:
A discontinuity in China’s economic growth is now far more likely than it has been for decades. Moreover, such a discontinuity might not be brief. The challenge facing policymakers is, after all, huge. They need to re-engineer a highly unbalanced and slowing economy without letting it crash. Many analysts, suspicious of Chinese statistics, think the situation is already far worse than official sources suggest, with growth running at closer to 4 percent than 6 percent.8 If so, the investment rate is even more radically unsustainable than now appears to be the case.
Something that goes unmentioned by Dr. Wolf: for China’s growth strategy to continue it much become much more dependent on its own domestic markets and I would argue that it must open those markets to foreign trade in a way that has never happened in China’s history. There just isn’t enough economic activity outside of China for economic activity inside of China to grow five-fold which seems to be the Chinese authorities’ target on the basis of trade.
