Andy Xie, renowned Chinese economist, opined that with the change of the Chinese leadership, control on government spending is required to avoid a crisis…
China’s economy has become a game for the mandarins. Their voices weigh disproportionately on national policymaking. They of course advocate printing more money to feed their spending habits. Such blind spending, if left unchecked, will drive the economy towards hyperinflation, financial crisis and currency devaluation. Such consequences would be fatal to political stability. The new leaders must hold off the printing press and put the mandarins on an emergency diet.
There is no quick fix for the incoming leadership. The economic downturn is not the biggest challenge. Their first job is to stop the rot from spreading. But it will take years to get to the root of the problem and fix the system.
Doing nothing, however, is not an option. The rot in China’s system grows on its own without a countervailing force – at present, the top leadership is the only one. If the new leaders choose not to make hard decisions in the name of stability, the system will become truly unstable.
See Andy’s recent article on SCMP on the subject here: http://www.scmp.com/comment/insight-opinion/article/1067358/crash-diet-needed-chinas-binge-spending
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