‘ August 1, 2015
No economy can have its cake and eat it too. The overarching objective of modern China’s economic reform program, which was launched in 1978 soon after the death of Mao Zedung and perhaps best encapsulated in Deng Xiaoping’s 1992 pronouncement of the concept of a ‘socialist market economy’, has been always fraught with inherent contradictions.
Indeed, as someone who has professionally focused on China’s economy since 1993, worked extensively in many regions of the country – some far, far off the beaten track – and been on the factory floor in more Chinese state-owned enterprises (SOEs) than have most Chinese (so I’ve been told by friends in Beijing), Deng’s notion always seemed to be a blatant contradiction in terms.
The country’s sheer size – in geographic, population and resource endowment terms – coupled with the tremendous ingenuity, determination and patience of the Chinese leadership and society, have, time and time again over the past 35 years, allowed China to largely paper over these contradictions and achieve a globally envied record of economic growth (even if allowances are made for the inadequacies and inaccuracies of Chinese official statistics).
But the recent perturbations in China’sSTOCK MARKETS – less so the price gyrations themselves than the authorities’ as well as the population’s reactions to them – may well mean a fundamental tear in the country’s microeconomic fabric and a breakdown in Deng’s logic are in the offing. Heightened sensitivity to the prospects of China’s continued economic fortunes has been reflected in news headlines around the world for the past few years. Attention there has largely focused on the apparent slowdown in China’s annual macroeconomic growth rate, from about 10 percent to roughly 7 percent (at present).
This post was published at David Stockmans Contra Corner by Harry G. Broadman Forbes.com.
Recent Comments