In 1983, a group of Soviet economists wrote a confidential memo about the state of the Soviet economy. They described the economy’s miserable performance and outlined a path for reform. In the end, their description of a stagnant economy was more prophetic than their calls for reform.
Are we seeing the same thing in China? The Wall Street Journal reported yesterday that a Chinese think tank had worked with the World Bank to write “China 2030,” scheduled for release Monday. The situations of China and the Soviet Union couldn’t be more different, with China’s economy expanding at rates never before seen: over 10 percent a year, on average, for thirty years. It’s a wonderful success story. The question is whether it can continue to grow at something close to this rate under its current system, the beautifully named “socialism with Chinese characteristics.” Many would bet that further expansion will require adoption of institutions similar to developed countries around the world. There’s a lot to choose from there, but in most the state-owned sector is smaller, governments issue reasonably transparent financial statements (Greece notwithstanding), and banks do more than funnel money to state-run enterprises. We’ll see more specifics when the report comes out.
In the meantime, the next decade promises to be an interesting time in China. If the success to date has been miraculous, the future may be even more so. Or not. Experience tells us it’s hard to guess turning points, even when they’re right around the corner.
Update: here’s the report.