By Joe Cash BEIJING (Reuters) - Chinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to ...
Update on Halifax Serval Cat | SaltWireBEIJING - Chinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020.
"Things always fail slowly until they suddenly break," said William Hurst, Chong Hua Professor of Chinese Development at University of Cambridge. Since then, the economy quadrupled in nominal terms while overall debt expanded nine times. To keep growth high, China in the 2010s doubled down on infrastructure and property investment, at the expense of household consumption.
"We're at a moment when we are seeing some structural shifts, but we should have seen these coming," said Max Zenglein, chief economist at MERICS, a China studies institute.The end of China's economic boom will likely hurt commodity exporters and export disinflation around the world. At home, it will threaten living standards for millions of unemployed graduates and many whose wealth is tied up in property, posing social stability risks.
Logan Wright, a partner at Rhodium Group, says Beijing has to decide which portion of that debt to rescue, as the amount is too large to provide full guarantees of repayment, which the market currently regards as implicit."When all of a sudden funding is cut off for the remaining investments that seem subject to market risk, that's a huge moment of uncertainty in China's financial markets.
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Analysis-Part of China's economic miracle was a mirage. Reality check is nextChinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020. The 60-point agenda was meant to fix an obsolete growth model better suited to less developed countries - however, most of those reforms have gone nowhere leaving the economy largely reliant on older policies that have only added to China's massive debt pile and industrial overcapacity. The failure to restructure the world's second-largest economy has raised critical questions about what comes next for China.
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