BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 8/2011:
China's economic growth engine: The likely types of hardware failure, software failure and power supply failure
Wing Thye Woo ()
Abstract: The 6th Plenum of the 16th Central Committee of the
Communist Party of China (CPC) concluded on October 11, 2006, with the
commitment to establish a harmonious society by 2020. The obvious
implication from this commitment is that the present major social, economic
and political trends are not leading to a harmonious society or, at least,
not leading to a harmonious society fast enough. Analytically, if the
Chinese economy is depicted as a speeding car, there are three classes of
failures (a) a hardware failure from the breakdown of an economic
mechanism, a development that is analogous to the collapse of the chassis
of the car; (b) a software failure from a flaw in governance that creates
frequent widespread social disorders that disrupt production economy-wide
and discourage private investment, a situation similar to a car crash that
resulted from a fight among the people inside the speeding car; and (c) a
power supply failure from hitting either a natural limit or an
externally-imposed limit, a situation that is akin, respectively, to the
car running out of gas or to the car smashing into a barrier erected by an
outsider. For hardware failure we discuss the possible weakening of China's
fiscal position generated by the repeated recapitalization of the state
banks. For software failure, we discuss possible social disorder caused by
outmoded governance. And for power supply failure, we discuss the possible
trade disputes from China’s chronic trade imbalances and the physical
constraints posed by China’s rapidly deteriorating natural environment.
Keywords: China; growth; banks; environment; (follow links to similar papers)
JEL-Codes: O43; O53; P48; (follow links to similar papers)
48 pages, May 26, 2011
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