Nicholas Lardy’s Latest Book Challenges Conventional Wisdom about the Chinese Economy
WASHINGTON—China's slowdown in economic growth is largely because of a reversion to state control of the economy, Peterson Institute for International Economics (PIIE) senior fellow and China scholar Nicholas R. Lardy concludes in his latest book, The StateStrikes Back: The End of Economic Reform in China?,released January 28 by the Peterson Institute.
Arriving in timely fashion as the China-US trade conflict rages and concerns about a Chinese slowdown mount, the book defies conventional economic wisdom that a Chinese slowdown is inevitable. Lardy, PIIE's Anthony M. Solomon Senior Fellow, analyzes new data to argue that China's future growth prospects could be as bright as its extraordinary ride of the past 30 years. At the same time, Lardy sets out how President Xi Jinping has struck back against Chinese economic potential by re-exerting state control since taking office. In The State Strikes Back, Lardy demonstrates that Xi has consistently championed state-owned or controlled enterprises, and encouraged local political leaders and financial institutions to prop up ailing, underperforming companies. This top-down pressure constitutes a major drag on China's economic potential while at the same time squeezing out private enterprises. Xi's course is costly, but it is also reversible.
"The State Strikes Back continues Lardy's pathbreaking work pursuing his independent analysis of Chinese economic development to wherever the research leads, even when the conclusions are at odds with popular simplistic stories," PIIE President Adam Posen writes in the prologue.
In this sequel to his Markets over Mao: The Rise of Private Business in China, published by PIIE in 2014, Lardy argues that the slowdown of recent years reflects the increasing drag of state companies on economic growth and the burgeoning misallocation of resources by China's financial sector. If China's leadership continues to opt for state-led growth in pursuit of greater economic and political control, China's growth trend would slow further, he writes. Alternatively, if China's leadership reverses course and returns to market-oriented reforms, the nation could achieve a high growth rate for the next two decades.
The book was released on January 28 at an event at the Peterson Institute for International Economics. The webcast is at https://piie.com/events/book-launch-state-strikes-back-end-economic-reform-china.
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