China Politics Stall Overhaul for Economy

When it comes to confronting economic slowdowns, the Chinese government has not been shy about making bold moves. Faced with the contagion of the global recession 4 years ago, policy makers created a $585 billion stimulus package that helped inoculate the nation against economic malaise still sapping United States and Europe. But today, even as China’s vaunted export manufacturing juggernaut loses force and Shanghai stock market remains in a slump, Communist Party appears so distracted by its politically tangled once-a-decade leadership transition it is unwilling or unable to pursue more ambitious agenda many economists say is necessary to head off a far more serious crisis in the future. Although the departing government has tried in recent months to address decelerating growth by easing bank loan restrictions, increasing pensions and offering tax breaks to small businesses, a lack of consensus among top stewards of the economy has stymied a more muscular response, insiders say. Similarly, many analysts question whether incoming leadership has the political will to overcome resistance of the so-called princelings and other well-connected families that have prospered under the current system. China’s standard economic formula, they say, is losing its potency: overzealous government investment and lagging consumer spending are creating serious imbalances that are expected to lead to a much more painful reckoning, perhaps not long after the new raft of younger leaders assumes power in early 2013. “There are tough choices to make, but central government appears to be so paralyzed they are sitting on their hands,” said Ho-Fung Hung, a political economist at Johns Hopkins University in Baltimore. “The situation is looking increasingly dire.” The economic data is indeed glum. Direct foreign investment has fallen for 9 months out of the past 10, and industrial output is rising at the slowest rate in three years. Last week, Frederick W. Smith, chief executive of FedEx, the global airfreight titan, warned of more trouble to come, saying China’s faltering exports pointed to a weakening global economy in the coming year. Since the death of Deng Xiaoping, the wily leader who steamrollered his conservative opponents to introduce market reforms in 1980s-90s, China’s political system has increasingly operated through consensus. The horse-trading, involving dozen or so men who negotiate in secrecy, has dimmed the prospect of significant political or economic change. “The slogans are loud and the plans are grand, but when it comes to implementation, the constraints are many,” said Zhao Xijun, economics professor at Renmin University in Beijing (…..)

Link: http://www.nytimes.com/2012/09/27/world/asia/chinas-politics-hinder-effort-to-shore-up-economy.html

Acerca de ignaciocovelo
Consultor Internacional

One Response to China Politics Stall Overhaul for Economy

  1. Professor Uziel Nogueira says: China is THE best positioned economy to weather the global economic downturn. The Middle Kingdom has a first rate exporting machine, a well trained working force in full employment, the largest currency reserve in the world, a robust twin trade-budget surplus, a continent size economy in need of infrastructure investment and a fast growing military industrial complex. The latter generates synergy and positive feedback between military and civilian industries. A powerful and advanced military establishment is inevitable. China’s ‘ economic problem ‘ is how best use its economic and financial muscle to sustain a well balanced growth. After all, the MAIN challenge for the Chinese leadership is how to integrate its vast economy. In the external front, the economic center of gravity is rapidly moving from the highly indebted G-7 countries to the fast growing BRICS and other emerging markets. China’s economic and financial strategy is twofold. First, it is helping the EU-US to get out of the debt trap while increasing its market share and direct investment in the two largest economies. Second, it is recycling its huge financial assets to buy resource-generating WEALTH (not paper wealth) in any corner of the world.


    In a few years, Beijing will achieve something that took more than a century to be achieved by US i.e., to have a strong economic presence in the global economy. It doesn’t matter how you look at the global scene today. Good days, bad days and China always win.

    http://www.nytimes.com/2012/09/27/world/asia/chinas-politics-hinder-effort-to-shore-up-economy.html

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