Review for Is the chinese economy about to fall off a cliff?

from John Cassidy

Jorge Fieza
A report released by the Conference Board claims that the Chinese
Economic Miracle is now over. The piece is not totally plausible, at least for the
author of this article. Through the text he confronts conclusions from Hoffman
and Polk the authors with known facts from past and present of China
economy.
The report, financially supported by multinational companies, brings critiques
to Chinese economy, along to the Communist Party. In its arguments, the
model used by the policymakers until now is unsustainable.
The main fact is that the Chinese economy is actually slowing down after
growing almost twenty years at an average annual rate of about ten percent. At
this rate, in the next ten years China would trespass U.S. economy as the
worlds biggest (this growth at about 2.5%/year, or less). By now, China is still
not even a rich country, with a per-capita G.D.P. of $6,807 same as Iraq and
South Africa.
In a fully capitalist economy, China would already be in a financial crisis, just
like U.S., U.K., South Korea, Argentina, etc. The reason theyre still rolling on is
the governments control on almost everywhere. If theres a crisis, the
government will step in, so investors and creditors feel safe to keep growing.
Problem is that the government also has limits, and these are already over, so
they must make the transition to another economic growth model, relying more
on innovation, increased productivity and consumer spending.
Assuming the need, to apply that task the government must run over a hard
transition, presenting many challenges: political, economic, social and even
cultural. A communist government may be incapable of introducing productivityenhancing reforms, as it is so tied up in the current system. On the other hand,
policies have been launched to reinforce countrys power from inside
(technocrats) and from inviting foreign and multinational companies, China is
already the worlds biggest basis for industries. Along, investments were made
in infrastructure and scientific education, providing a strong platform that might
help to go through problems reported by the Conference Board.