Must-Read: Jong-Wha Lee: Containing China’s Slowdown

Must-Read: Jong-Wha Lee: Containing China’s Slowdown: “China has been breaking the mold on economic growth for the last three decades…

…So, are China’s economic prospects as bad as prevailing wisdom seems to indicate? And, if they are, how can they be improved?… Former US Treasury Secretary Lawrence Summers and his Harvard colleague Lant Pritchett to argue that China’s growth could slow to 2-4% over the next two decades, as the country succumbs to the historically prevalent growth pattern implied by “regression to the mean.” But, given that China’s growth pattern has, so far, been exceptional, the notion that it will suddenly start following a common trajectory seems unlikely….

China’s leaders [must] move the economy onto a more balanced and sustainable growth path… must implement reforms… in factor markets…. China’s leaders must improve labor-market flexibility and labor mobility; make land use, acquisition, and compensation more efficient; and build a more market-based financial system…. Similarly, policies to promote continuous technological innovation and industrial upgrading can increase productivity. And measures that increase domestic research capacity–for example, by strengthening protection of intellectual property rights–can nurture innovation.
Reform of China’s massive state-owned-enterprise (SOE) sector would also boost productivity…. The final piece of the puzzle for China is realism…