China's Economy: Great Power, Great Responsibility

For roughly 30 years, China’s “economic miracle” has catapulted the once-impoverished country from relative backwater to global economic juggernaut. Driven by export-led growth and massive state investments in manufacturing and infrastructure, China had enjoyed a period of scorching GDP growth at an average of 10 percent a year. However, that growth has now stuttered to roughly seven percent and, as the country’s upward trajectory flattens, wide gaps have begun to emerge in the Chinese economic model.

These gaps derive from a deep inefficiency at the core of China’s model. Namely, a reliance on economic controls and enormous state-led stimulus, which has shackled Beijing to the success of bloated state-owned enterprises (SOE). As Director of the Project on Chinese Business and Political Economy at CSIS, Scott Kennedy, writes: “[Chinese] efficiency of manufacturing has improved and they have excellent logistics, but capital in China is wasted in monumental proportions.”

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