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Opinion | To reboot China’s economy, Beijing must have the confidence to let go
- Fear of losing control is holding Beijing back from much-needed economic reforms, yet their success would shore up the central government’s credibility
- Reforms must address local governments’ dependence on property development, the private sector environment and consumption
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China is mired in an economic slowdown that threatens its impressive achievements over the past four decades. Officials, struggling to counter the bad news, are arguing that the worst may be over, as reflected in some economic indicators.
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Even so, there is no doubt China’s economic woes are grounded in deep structural problems that are not being adequately addressed because the solutions would weaken the government’s control over the economy.
Yet such reforms could secure the social and economic benefits needed to strengthen the credibility of the authorities.
Views on China’s economy have fluctuated between extremes over the past year. Reversal of the country’s draconian Covid-19 policies last winter led to a burst of enthusiasm that “revenge consumption” would spark an economic revival.
But the optimism proved short-lived given the drumbeat of disappointing second-quarter economic outcomes and recent manufacturing indicators. Major financial institutions have cut their China growth forecasts and markets are looking for bolder actions that would signal a clear commitment to reforms.
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Addressing three festering issues would dramatically improve growth prospects: the interrelated financing problems affecting the property market and local governments, the discouraging operating environment for the private sector, and the lower-than-expected household consumption.
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