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Modernizing China's Growth Paradigm

Author

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  • Eswar S. Prasad
  • Raghuram G. Rajan

Abstract

China has achieved tremendous economic progress in the last three decades, but there is much work to be done to make the economy resilient to large shocks, ensure the sustainability of its growth, and translate this growth into corresponding improvements in the economic welfare of its citizens. We discuss the complex challenges that Chinese policymakers face in striking the right balance in terms of speed and coordination of reforms. We argue that China's current stage of development, along with its rising market orientation and increasing integration with the world economy, may make the incremental and piecemeal approaches to reforms increasingly untenable and, in some cases, could even generate risks of their own. The present favorable domestic and external circumstances provide an excellent window of opportunity for bolder reforms and for tackling some deep-rooted problems without causing much economic disruption.
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Suggested Citation

  • Eswar S. Prasad & Raghuram G. Rajan, 2006. "Modernizing China's Growth Paradigm," American Economic Review, American Economic Association, vol. 96(2), pages 331-336, May.
  • Handle: RePEc:aea:aecrev:v:96:y:2006:i:2:p:331-336
    Note: DOI: 10.1257/000282806777212170
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    References listed on IDEAS

    as
    1. Lin, Justin Yifu & Cai, Fang & Li, Zhou, 1998. "Competition, Policy Burdens, and State-Owned Enterprise Reform," American Economic Review, American Economic Association, vol. 88(2), pages 422-427, May.
    2. Eichengreen, Barry, 2004. "Chinese Currency Controversies," CEPR Discussion Papers 4375, C.E.P.R. Discussion Papers.
    3. Eswar Prasad & Shang-Jin Wei, 2007. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Chapters,in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 421-480 National Bureau of Economic Research, Inc.
    4. Marvin Goodfriend & Eswar Prasad, 2009. "A Framework for Independent Monetary Policy in China," Chapters,in: Monetary Policy Frameworks for Emerging Markets, chapter 8 Edward Elgar Publishing.
    5. Eswar S Prasad & Qing Wang & Thomas Rumbaugh, 2005. "Putting the Cart Before the Horse? Capital Account Liberalization and Exchange Rate Flexibility in China," IMF Policy Discussion Papers 05/1, International Monetary Fund.
    6. Olivier Blanchard & Francesco Giavazzi, 2006. "Rebalancing Growth in China: A Three-Handed Approach," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(4), pages 1-20.
    7. Morris Goldstein & Nicholas R. Lardy, 2004. "What Kind of Landing for the Chinese Economy?," Policy Briefs PB04-07, Peterson Institute for International Economics.
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    More about this item

    JEL classification:

    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • F3 - International Economics - - International Finance

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