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Don’t assume China’s model won’t work just because it hasn’t been tried before

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This letter was published in the Financial Times on April 22nd

Your editorial “A trade deal might help China’s needed reforms” (April 15) argues that more market oriented reforms that encourage the private sector would benefit China’s economy. This might be too narrow a viewpoint.

China’s state-directed economy where it is unclear where the state sector starts and the private sector begins is intended to serve a geopolitical purpose not just an economic one. State direction is seen to be a way of harnessing all of the country’s resources to project increasing geopolitical power. It therefore seems unlikely that moving to a western-style separation between state and private sectors is on the cards.

You also assume that the western model you recommend is inherently superior. Yet China’s particular model has never been tried before; and certainly not in an economy with the size and heft of China’s. It may well be that the western model will turn out to be superior. But it might be premature simply to assume it.

Dr Joe Zammit-Lucia
Founder and Trustee,
www.radix.org.uk,
London SW1, UK

Comments

  1. Peter Underwood says

    A very good observation and I agree that China has a unique set-up which I am following with interest. My friend Gerry Brady at: http://boomfinanceandeconomics.com/#/ has interesting views about bond issuance and the ability for TPTB to go on issuing for a very long time without invoking serious inflation.

    He says the global economic model changed in 1980 but the central banks are fighting the last war when all the parameters have changed now. He has charts and analysis to prove it.

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