http://business.time.com/2012/02/27/why-china-will-have-an-economic-crisis/?iid=biz-main-editpicks
This article argues in favor of why it is likely that China could face an economic crisis in the future. It says that China's "state capitalism" has created an artificial environment under which the economy is thriving. This however is not good in the long run where the economy should be running on free markets and reacting to price signals. It says that China could end up facing a similar fate as Japan and Korea.
This article argues in favor of why it is likely that China could face an economic crisis in the future. It says that China's "state capitalism" has created an artificial environment under which the economy is thriving. This however is not good in the long run where the economy should be running on free markets and reacting to price signals. It says that China could end up facing a similar fate as Japan and Korea.
4 comments:
This seems unlikely as the downfall of countries like Japan and Korea was that their governments attempted to manipulate the markets in much more inefficient ways than the Chinese.
But when it comes to manipulating the market, is there ever a level of efficiency that is "efficient enough?" Doesn't that almost always lead to trouble?
I think the bigger question is not whether or not China will have a crisis like Japan or Korea, rather will China's crisis be more like Japan's, or more like Korea's? South Korea is doing just fine now, they have rebounded well from their crisis in the late 90's that the author mentions. However, if China has a meltdown like Japan did, that's a lot more serious. Once you get trapped in that deflation, it is very hard to come back. China is of course a very different place than Japan, but reading reports of how great Japan was in the 1980's sounds a lot like reading reports about how invincible China is now. I think a reckoning is coming.
I agree with Natasha. Every country at some point or another is going to face a crisis, as I've learned after reading the book titled "Crisis Economics". People get too positive about their economy, and become too confident, which leads to risky measures being taken, and therefore false pedestals are formed and once that propped leg breaks, everything will come crashing down and the country in question like China will have to dig its way back out.
That is certainly a true that State Capitalism can be only good in short-run but not in a long-run. However, China used to be t country that wanted to modernize to keep up with other developed countries. Especially in global recession, certain controls of states can help.
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