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Monday, March 16, 2009

In Downturn, China Exploits Path to Growth

In Downturn, China Exploits Path to Growth - NY Times.

Interesting article that has the view that China is using the economic crises and their stimulus to improve their economy, and there are some positive things coming out of the slow down.

The question is how much of the stimulus is going to be spent effectively? Japan spent a lot of money on infrastructure after their property bubble collapsed, unfortunately much of it was unproductive spending that had little long term impact.

The challenge that is understated is the increase in unemployment, firms going out of business, lack of a safety net, corruption, and how export orientated the economy is.

My suggestions for improving China's economy:
  • Rule of law - This would help the economy tremendously. Corruption charges should be pursued no matter how high up they lead. Even to the family of high government officials. I would suggest a truth commission be put in place and starting from X date, corruption won't be tolerated.
  • Allow complaints to the central government. Close down secret prisons.
  • Declare a real war on corruption. Allow newspapers and other media to report on corruption. A huge percent of the Chinese GDP is swallowed in corruption.
  • Real bankruptcy law.
  • Put in place a real safety net for health care and the elderly.
Unfortunately, I see little chance of the above suggestions happening. The majority are to controversial and the corruption issue is one that could explode, but my opinion is for China to move forward, it has to be taken care of, either sooner or later, and the longer you wait the more painful it will be.



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