Why China is Floundering
Conflicting interests paralyzing policymakers.
BY Caroline Cakebread | June 8, 2010
China expert Andy Xie at Caixin online is warning about conflicting demands from powerful interest groups in China. It’s paralyzing China’s macro-economic policy and according to Xie is threatening to derail the economic giant. As he writes:
Powerful interest groups have paralyzed China’s macro policy, with ominous long-term consequences. Local governments consider high land prices their lifeline. State-owned enterprises don’t want interest rates to rise. Exporters are vehemently against currency appreciation. China’s macro policies have been reduced to psychotherapy, relying on sound bites and small technical moves to scare speculators. In the meantime, inflation continues to pick up momentum. Unless the central government bites the bullet and makes choices, the economy might experience a disruptive adjustment in the foreseeable future. Read the full blog post.