House Party

"For years, China's transformation from one of the world's poorest nations was lauded as a triumph that lifted hundreds of millions of people out of poverty. There were always questions about data reliability and growth sustainability, but the general views on China have recently taken a decidedly sour turn. Concerns abound about state interference in the economy, an ageing population, and high debt level. Making Sense of China's Economy untangles China's complex economic structure, evolving issues and curious contradictions, and explains some key features of this most puzzling of global economic powerhouses. This book reveals how factors such as demographics, the initial stage of development in 1978, the transition away from full state ownership and central planning, the dual urban-rural society, and a decentralised governance structure have combined to shape the economy, its development and its reforms. It shows how the pragmatic and adaptive nature of China's policymaking upends familiar perspectives and hinders simple cross-country comparisons. The book also explores crucial topics including the property market, debt accumulation and environmental challenges. In this book, Tao Wang innovatively weaves the multiple strands of China's economy into a holistic and organic tapestry that gives us unique insights from both a Chinese and an international perspective. This book is critical reading for business leaders, investors, policymakers, students, and anyone else hoping to understand China's economy and its future evolution and impact, written by a specialist who has studied the country from both inside and out"-- Provided by publisher Cover Half Title Title Page Copyright Page Table of Contents List of figures Acknowledgement Introduction Chapter 1: China’s economy: The ever-changing puzzle China’s economy now The largest economy on some measures, but still an underdeveloped one Vibrant private firms operate alongside state-owned behemoths Alarmingly high debt levels, but the debt-financed growth model has endured A proud, ancient nation, but a clumsy newcomer to the international stage Key elements in understanding China's economic dynamics Size matters The starting point Political system and governance structure Unbalanced regional development and gaping social inequality Pragmatic and adaptive policymaking Notes Chapter 2: The evolving economic structure The economy in 1978 China’s rapid industrialisation and commercialisation Factors behind the transformation of China’s economic structure The rise of trade and shifts in trade pattern The transformation of the rural and urban landscape The changing ownership structure China’s ageing demographic structure Notes Chapter 3: The road to here: Key reforms since 1978 Phase one: reform and opening to liberate productivity Comprehensive urban reform Price reform Enterprise profit-to-tax reform Fiscal decentralisation Special economic zones International trade reform The one-child policy Phase two: establishing a socialist market economy Part 1: market liberalisation SOE reform Price reform RMB exchange-rate reform Financial market reform Fiscal and tax reform Part 2: restructuring and building the social safety net SOE restructuring Bank restructuring and financial reform Urban social safety-net reform Urban housing reform The third phase of reform: deepening, rectification, rebalancing Financial liberalisation Tax and local government fiscal reform Provision of public services and social protection Administrative reform and regulatory changes SOE and factor market reforms Notes Chapter 4: The state versus the market Ownership structure and resource allocation The share of state ownership Invisible versus visible hands Resource allocation – the state versus the market The role of industrial policy Industrial policy in the 1980s and 1990s Industrial policy since 2000 The role and effectiveness of industrial policy Steel industry Photovoltaic industry (solar panels) The integrated circuit or semiconductor industry The general role of government 1990s government reform – reducing the fiscal burden and delegating power Recentralisation and adjustment of the government’s role Government as the ultimate bearer of risks Notes Chapter 5: How does economic policy work in China? Key policymaking bodies How are economic policies made and implemented? Evolving and multiple economic policy objectives How does China’s monetary policy work? Monetary policy framework and reaction function Details of monetary policy management Quantity over price PBC’s base money management Interest-rate management Macroprudential rules and credit management Shadow banking and monetary policy Questions and myths about China’s monetary policy What is the risk of China’s exceptionally large M2? Has China kept interest rates artificially low? Will interest-rate liberalisation lead to better capital allocation? Fiscal policy management From quasi-fiscal to budgetary management The outsized role of local government A prudent and pro-investment fiscal stance Notes Chapter 6: Urbanisation and the urban–rural divide The great urbanisation China’s steep and persistent urban–rural disparity The evolution of the hukou system and its role in the urban–rural divide Origin and evolution Hukou-related restrictions and inequalities Impact The dual land system and its impact on urbanisation The dual land system and modest policy adjustments Impact on urbanisation and the urban–rural divide Continued urbanisation – where to from here? Notes Chapter 7: The property market and local-government finance China’s property market: types of property and housing stock Commodity housing, economic housing and various types of social housing The stock of urban residential housing The key drivers of China’s housing demand Property as an engine of growth and industrialisation Property and local-government finance China’s policy-driven property cycles Property policy objectives and instruments Notable property cycles The property-bubble debate: measurements and unique Chinese features The impact of a property bust: transmission channels and possible remedies Notes Chapter 8: The slow move towards a consumer economy The true state of Chinese consumption Strong growth and continued upgrades Weak relative to the rest of the economy Why has China’s consumption been weak relative to its economic growth? The rise in the household savings rate The relative decline of household income and the rise of corporate savings Why and how should China boost consumption? No magic turning point for consumption Policy plans to promote consumption Increasing household income Lowering the household savings rate Improving income distribution Lowering the corporate savings rate Do Chinese households have too much debt? Can consumption be China’s growth engine? Notes Chapter 9: How serious is the debt problem? How much debt does China have and where is it? Why has China’s debt risen so much? The rise and containment of shadow credit Why has China not had a ‘traditional’ debt crisis? And why no ‘Minsky moment’ as yet? What is different about China’s debt problem? China’s experience of debt restructuring Late 1990s debt and SOE restructuring The unconventional debt restructuring of 2015–2016 What are China’s debt risks and what to watch? Notes Chapter 10: The environment, public health and the government management challenge China’s public health crisis management since SARS Lessons from SARS COVID-19 pandemic exposes weaknesses and strengths Environmental protection and decarbonisation: changing policies Rules and regulations: easing vs. tightening Challenges in moving towards a modern public management system Notes Chapter 11: China and the world The steady integration of trade and investment Changing views How the world sees China: from exporter and market to competitor and disrupter China’s view of the western world: from role model to flawed peer and competitor Beyond trade friction: rule follower to rule disrupter? China’s clumsiness in dealing with the world Future scenarios Notes Chapter 12: Can China sustain its economic development? Is China facing a middle-income trap? How can China sustain its economic development? How much can China grow over the next decade? Major risks and challenges ahead The key challenges are domestic The role of the state versus the market Social equality and economic efficiency Technology, big data and the rise of the digital economy Charting its own course Notes Appendix A: Availability and reliability of China’s economic statistics Issues with GDP data Issues with investment and consumption data Labour statistics and other data issues How does one track China’s economic development? No good alternatives for official data Electricity consumption Li Keqiang index Alternative estimates of GDP growth Notes Bibliography Index