China's economic reform plan will probably fail

Reuters

A farmer carrying potato leaves dodges as he walks through a broken wall surrounding land to be developed into a commercial area in Tongxiang, Zhejiang province, November 8, 2013

Article Highlights

  • Overcapacity lies at the heart of China’s economic problems.

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  • Only sustained reform will bring another generation of rapid wealth gains.

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  • China's 2013 party plenum reforms are weaker than they seem.

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Reactions to the Chinese Communist Party’s announcement of major economic reforms in November have ranged from unbridled optimism to skepticism about the party’s ability to implement sweeping change. In fact, the reforms themselves are flawed in multiple ways—most are inauthentic, uncredible, or nonviable. However, the areas of land and finance offer more limited prospects for true reform. The primary means of judging reform progress should be progress in reducing excess capacity. The most likely outcome is that the party will claim success but the economy will slowly stagnate, harming China’s partners.

 

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About the Author

 

Derek M.
Scissors
  • Derek M. Scissors is a resident scholar at the American Enterprise Institute (AEI), where he studies Asian economic issues and trends. In particular, he focuses on the Chinese and Indian economies and US economic relations with China and India. Scissors is also an adjunct professor at George Washington University, where he teaches a course on the Chinese economy.

    Before joining AEI, Scissors was a senior research fellow in the Asian Studies Center at the Heritage Foundation. He has also worked in London for Intelligence Research Ltd., taught economics at Lingnan University in Hong Kong, and served as an action officer in international economics and energy for the US Department of Defense.

    Scissors has a bachelor’s degree in economics from the University of Michigan, a master’s degree in economics from the University of Chicago, and a doctorate in international political economy from Stanford University.

  • Phone: 202.862.7168
    Email: derek.scissors@aei.org
  • Assistant Info

    Name: Alex Coblin
    Phone: 202.419.5215
    Email: alex.coblin@aei.org

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