Today, the World Bank will release a report called ‘China 2030’ which addresses the structural changes that the country must make to maintain robust economic growth. In other words, continued Chinese growth is not a sure thing. The report will explain that more state owned enterprises, which are protected from competition and given access to cheap loans from state banks, should be privatized. China’s economy should also begin shifting away from a massive export surplus to encourage the domestic consumption of retail goods.
What’s the Big Idea?
For years, economists have been predicting that China will overtake the US. These sorts of predictions were made equally about the Soviet Union, which ultimately lacked a private retail sector to encourage domestic growth, and then about Japan, whose growth slowed sharply in the 1990s. In other words, assurances of China’s approaching economic dominance should be taken with a grain of salt, says Nobel economics laureate Gary Becker. The shift away from an export-heavy market will not come easily or pleasantly to China.