TIME Correspondent Michael Schuman has an interesting take in his article “Why China Will Have an Economic Crisis”
Chinese bureaucrats today suffer from the same problem that led Japanese bureaucrats astray — they believe the economy can be managed by fiat. The tools of classical economics — getting prices right — are secondary. Why guide an economy with abstract measures like interest rates when you can just tell the banks what to do?
That attitude is what killed Japan’s economic miracle, and now I see China slipping toward the same fate. Japan could not escape the forces of basic mathematics. China can’t either, no matter how brilliant its policymakers might be. When would a meltdown happen? It is interesting to play with a bit of history. Both Japan and Korea suffered their crises roughly 35 years after the Asian development model was switched on — the early 1950s to ’89 in Japan, and 1962 to ’97 in Korea. That puts a China crisis at around 2014-15 or so. I’m not predicting a firm date here. What I am saying is that China is running out of time to fix the problems of its economy. Continue reading »
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