Complex economy will test Beijing
Financial Times, January 25th, 2010
David Pilling’s optimism (FT today) concerning China’s ability to navigate the conflicting pressures of growth seems premature. As the experience of the Asian tigers over the last 30 years and the post-war recovery of Japan demonstrated, the growth-through-exports model is a very effective path to accelerated growth. It appeals particularly to centrally-controlled economies because the policy levers are effective, simple and easily applied and controlled.
The problem is that it leads to the repetitive creation of the severe imbalances referred to in his article (still visible in Japan). Generating a complex, self-sustaining domestic consumer economy, enabling the appearance of Adam Smith’s ‘invisible hand’, requires a wide and deep adaptability that is likely to take decades rather than years to achieve and will conflict directly with the Chinese authorities’ overriding desire to maintain political control.