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China's economic growth engine: The likely types of hardware failure, software failure and power supply failure

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  • Woo, Wing Thye

    ()
    (BOFIT)

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.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 8/2011.

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Length: 48 pages
Date of creation: 26 May 2011
Date of revision:
Handle: RePEc:hhs:bofitp:2011_008

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Keywords: China; growth; banks; environment;

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References

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  1. Giovanni Peri & Gianmarco I.P. Ottaviano, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," Working Papers 58, University of California, Davis, Department of Economics.
  2. Sylvie Démurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," Asian Economic Papers, MIT Press, vol. 1(1), pages 146-197.
  3. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  4. Wing Thye Woo, 2008. "Understanding the Sources of Friction in U.S.-China Trade Relations: The Exchange Rate Debate Diverts Attention from Optimum Adjustment," Asian Economic Papers, MIT Press, vol. 7(3), pages 61-95, October.
  5. Jeffrey D. Sachs & Wing Thye Woo, . "Understanding China'S Economic Performance," Department of Economics 97-04, California Davis - Department of Economics.
  6. Woo Wing Thye & Hai Wen & Jin Yibiao & Fan Gang, 1994. "How Successful Has Chinese Enterprise Reform Been? Pitfalls in Opposite Biases and Focus," Journal of Comparative Economics, Elsevier, vol. 18(3), pages 410-437, June.
  7. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
  8. Liu, Liang-Yn & Woo, Wing Thye, 1994. "Saving Behaviour under Imperfect Financial Markets and the Current Account Consequences," Economic Journal, Royal Economic Society, vol. 104(424), pages 512-27, May.
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