August 11, 2012

SURE, THE POLITICS ARE FATAL, BUT THE DEMOGRAPHICS ARE FAR WORSE:

Superpower Denied? Why China's 'Rise' May Have Already Peaked (Minxin Pei, 8/09/12, The Diplomat)


The most serious long-term obstacle to Chinese growth is its state capitalist system.  In the last decade, Beijing has largely reversed pro-market reforms and embarked on a decidedly statist developmental path.  Consequently, state-owned enterprises have gained enormous clout in the economy and enjoy monopolistic privileges.  The financial system favors such firms at the expense of private entrepreneurs.  Household income, at 43 percent of GDP, is too low to support a higher level of consumption, a critical factor in rebalancing the Chinese economy and providing a source of future growth.  Without systemic reforms, according to an influential World Bank study, growth in the coming two decades will fall well below 7 percent per annum.   But reforming state capitalism is almost impossible politically because that will undermine the very foundations of the Communist Party's rule.

On the political front, the coming decade will likely be one of rising opposition against the party's political monopoly. 

Posted by at August 11, 2012 3:59 PM
  

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