“China needs to reverse the expansion of the private sector and introduce more effective plans for state investment, but this time with the democratic participation of the Chinese people in the process.”
In part one of my analysis of China’s economic future, I dealt with the claims that China would slow towards stagnation because its investment rate was too high, the working population was falling fast and the economy needed to become like mature Western capitalist economies based on consumption-led growth. I argued that the Western capitalist model was hardly great shakes, given its regular and recurring crises and the much lower levels of consumption growth. Anyway, in an economy, consumption does not lead investment and national output. On the contrary, it is investment that leads in capitalist economies just as much as in China.
The reason that Western analysts are so sceptical of the Chinese model is that they are seeped in a different economic model for growth. They are convinced that China can only be ‘successful’ (like the economies of the G7!) if its economy depends on…
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