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November 15, 2012

China's new leadership examining economic reform

The need to restructure how China achieves its economic growth - by emphasizing consumption over investment and exports - would mean major policy changes such as loosening the dominance of state companies across many industries.

"At this juncture, if the (new leadership) doesn't move quickly, the consequences will be clear and immediate," said Daniel Rosen, an economist and head of the Rhodium Group, a New York-based consultancy.

"GDP growth will deteriorate within six to nine months, and that will have consequences. I don't think they get even a one-year honeymoon."

The party has earned its legitimacy with a broad swathe of the populace with rapid economic growth. However, growth has fallen for seven straight quarters, hitting 7.4 percent in the July-September period. Should growth falter further, discontent will rise.



Even though the economy appears to be picking up in the near term, analysts still expect growth to be closer to 5 percent than 10 percent by the end of this decade.

Some, both in and out of China, fear the government could then resort to nationalism and populism, already on display in Twitter-like microblog postings about territorial disputes in the East and South China Seas, to deflect attention.


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