In a new Explainer, George Magnus assesses the major long-term challenges facing the Chinese economy, and measures the Chinese Communist Party (CCP) needs to take in order to address them.
Rising income inequality and a housing market under increasing pressure – both as a result of capital misallocation – are straining the Chinese economy to an unprecedented degree, argues George Magnus in a new Explainer titled ‘The Chinese economy: Troubled times ahead’. The CCP needs to address these systemic problems through local government reforms and the redistribution of capital from the state sector to the private sector, otherwise the economic heft and credibility of the Chinese economic ‘model’ may flounder.
The CCP has had some meaningful success in eradicating poverty in the PRC using a generous bar for measurement, but this will not suffice to secure its future if it cannot solve the crisis in the property sector, or more broadly reduce income inequality, which increasingly resembles its Achilles’ heel.George Magnus
George Magnus outlines the structural nature of these issues, as well as others, and the economic mire the CCP finds itself in today. Solutions are made clear, however, Magnus argues that the PRC’s own wish for self-reliance and adversarial relationship with most of the world’s GDP is now leading the CCP to double down on state-led economics and control, making these solutions harder to achieve
The CCP’s ability to project power beyond Chinese borders militarily, and in other ways, depends to a significant degree on its economic heft and the credibility of the Chinese economic ‘model’ relative to what it insists is a failed system – democratic capitalism, particularly of the kind found in the US.George Magnus