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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Derek M.
Scissors

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