Can its leaders navigate a soft landing?

Executive Summary

China’s headlong leap into the ranks of the world’s largest economies has slowed since the severe global recession of 2008, with real gross domestic product growth falling from 10.6 percent in 2010 to an estimated 6.6 percent this year. Chinese leaders are struggling to cope with the lower growth, along with rising debt, a loss of jobs to lower-wage countries and the need to institute more market-oriented reforms. The country’s difficulties have generated economic shock waves throughout the world, from financial markets in New York and London to commodity exporters in Brazil, Australia and central Africa. As China and other nations try to handle the situation, here are the key takeaways:

  • The years of China’s 10-percent-plus annual growth are over, and Chinese leaders must manage lower growth without creating serious disruption, internally or globally.

  • President Xi faces conflicting impulses to reduce state control of the economy while preserving government and Communist Party authority.

  • How China resolves these issues will reverberate from Australia to Latin America to Africa; one study estimates China will contribute almost 39 percent of total global GDP growth this year.

Resources

Bibliography

Books

Hung, Ho-Fung, “The China Boom: Why China Will Not Rule the World,” Columbia University Press, 2015. An associate sociology professor at Johns Hopkins University uses historical, sociological and political analysis to explain how much China depends on the existing economic order and how the interests of Chinese elites maintain those ties.

Kroeber, Arthur R., “China’s Economy: What Everyone Needs to Know,” Oxford University Press, 2016. An economics journalist and researcher offers a primer on how China’s economy grew and the implications for its slowdown.

Lardy, Nicholas R., “Markets Over Mao: The Rise of Private Business in China,” Peterson Institute for International Economics, 2014. A senior fellow at the Peterson Institute traces the institution and practice of private entrepreneurship in post-Maoist China.

McGregor, Richard, “The Party: The Secret World of China’s Communist Rulers,” Harper, 2010. A Financial Times writer deconstructs the secret world that influences China’s economy, military and local governments, highlighting the corruption and tension that keep the party from evolving.

Naughton, Barry, “The Chinese Economy: Transition and Growth,” MIT Press, 2007. A classic economic history by the Sokwanlok chair of Chinese international affairs at the University of California, San Diego, explains China’s economic experiments, failures and successes from the post-Qing era to the early 2000s.

Osnos, Evan, “Age of Ambition: Chasing Fortune, Truth, and Faith in the New China,” Farrar, Straus and Giroux, 2014. Winner of the Pulitzer Prize and the National Book award, this work by a New Yorker staff writer follows several Chinese citizens as they negotiate a turbulent era of individual attainment amid the Communist Party’s quest for control.

Spence, Jonathan D., “The Search for Modern China (Third Edition),” W.W. Norton and Co., 2012. A Yale University history professor emeritus outlines China’s political, economic, social and cultural past in a dazzling narrative.

Articles

Back to Business: Special Report, Business in China,” The Economist, Sept. 12, 2015, http://tinyurl.com/o4tesht. The current state of China’s entrepreneurs and the private sector is explored.

“The New Class War: Special Report, Chinese Society,” The Economist, July 9, 2016, http://tinyurl.com/gppn5mv. The rise of China’s first large middle class creates opportunities and challenges for the Chinese government.

de Jonquieres, Guy, “The Problematic Politics of China’s Economic Reform Plans,” International Journal of China Studies, August 2014, pp. 399-412, http://tinyurl.com/gqswlfy. The scholarly paper provides a thorough overview of the political and economic challenges before President Xi Jingping as he seeks to keep his country socially and financially stable.

Reports and Studies

“China 2030: Building a Modern, Harmonious, and Creative Society,” World Bank and Development Research Center of the State Council, People’s Republic of China, 2013, http://tinyurl.com/hza9eta. A joint report by the World Bank and the Chinese government research body lays out goals for China to become a more stable, wealthier society.

“China’s Economic Rise: History, Trends, Challenges, and Implications for the United States,” Congressional Research Service, Oct. 21, 2015, http://tinyurl.com/l87nlln. A report by Congress’ nonpartisan research arm describes the history of China’s quasi-market system and stunning economic success in the last 30 years.

“China’s Environmental Crisis,” Council on Foreign Relations, Jan 18, 2016, http://tinyurl.com/6496rvc. The Council on Foreign Relations provides an introduction to the economic and policy reasons why a massive environmental crisis is engulfing China.

“China-U.S. Trade Issues,” Congressional Research Service, Dec. 15, 2015, http://tinyurl.com/jk5g5oz. A CRS report recounts the politics and current state of trade between the two global giants.

Barton, Dominic, et al., “Mapping China’s Middle Class,” McKinsey Quarterly, June 2013, http://tinyurl.com/zdlet22. A business consultancy says that rising prosperity in China’s inland cities will fuel consumption.

The Next Step

Debt and Economic Risks

Lanman, Scott, “China’s Holdings of U.S. Treasuries Fall to Lowest Since ‘13,” Bloomberg, Sept. 16, 2016, http://tinyurl.com/jlygsou. China’s U.S. Treasury holdings fell in July to the lowest level in more than three years.

Magnier, Mark, “Warning Sounded Over Chinese Economy,” The Wall Street Journal, Sept. 28, 2016, http://tinyurl.com/j7cwjzg. Despite recent stability, deep-seated problems threaten China’s economy as the country heads toward a leadership change in late 2017, according to a survey.

Taylor, David, “China warned to rein in growing mountain of debt or risk triggering another global financial crisis,” ABC News, Sept. 26, 2016, http://tinyurl.com/zg3ggsa. The Bank for International Settlements, a Swiss-based international financial organization, cautions that China’s ballooning debt is too large and could set off another financial crisis.

Corruption

Blanchard, Ben, “Mayor of China’s Tianjin investigated on suspicion of corruption,” Reuters, Sept. 10, 2016, http://tinyurl.com/z8svpa3. The mayor of the major Chinese port city of Tianjin is being investigated on suspicion of corruption.

Chin, Josh, “Retired Chinese General Sentenced to Life in Prison for Corruption,” The Wall Street Journal, July 25, 2016, http://tinyurl.com/hx2fp88. A Chinese military court handed down a life sentence to a retired general, the highest-ranking official to be convicted for corruption.

Martina, Michael, “China puts new focus on illicit assets in corruption fugitive hunt,” Reuters, Sept. 20, 2016, http://tinyurl.com/jboyhg3. As part of President Xi Jinping’s anti-graft campaign, China is accelerating its effort to recover stolen money moved overseas.

Environmental Impact

Harrabin, Roger, “China embarked on wind power frenzy, says IEA,” BBC, Sept. 20, 2016, http://tinyurl.com/zhg42vj. Despite China’s rapid increase in its wind turbine output, coal-fired power stations are still receiving priority in the power grid, according to the International Energy Agency, an intergovernmental organization.

Hernandez, Javier C., “Chemical Accidents in China Have Killed Nearly 200 This Year, Report Finds,” The New York Times, Sept. 21, 2016, http://tinyurl.com/jpme7u6. Almost 200 people in China have died due to chemical accidents, according to a report by the environmental group Greenpeace, which suggested a relaxed regulatory system was to blame.

Vaughan, Adam, “China tops WHO list for deadly outdoor air pollution,” The Guardian, Sept. 27, 2016, http://tinyurl.com/z464luo. The World Health Organization ranked China as the world’s deadliest country for outdoor air pollution.

Economic and Political Reforms

“China cuts consumption tax on cosmetics to stir growth,” Reuters, Sept. 30, 2016, http://tinyurl.com/jtumknc. China’s finance ministry will reduce or remove the consumption tax on cosmetic products in an effort to spur more domestic spending.

“China launches $52.5 billion fund to restructure state enterprises,” Reuters, Sept. 26, 2016, http://tinyurl.com/zr5mdqc. The $52.5 billion Enterprises Restructuring Fund will be used to improve the competitiveness of inefficient state-owned enterprises.

Wei, Lingling, “China Unveils Economic Blueprint for 2016,” The Wall Street Journal, Dec. 21, 2015, http://tinyurl.com/haveocp. China’s 2016 economic blueprint set its sights on improving a sluggish economy and tackling debt.

Organizations

American Chamber of Commerce in the People’s Republic of China
The Office Park, Tower AB, 6th Floor, No. 10 Jintongxi Road, Beijing 100020
8610-8519-0800
http://www.amchamchina.org
A trade association for American businesses in China.

Asia Society
725 Park Ave., New York, NY 10021
212-288-6400
http://asiasociety.org
A cultural and educational organization offering lectures and classes on arts, business, culture and policies; has additional locations in Shanghai and Hong Kong.

The Brookings Institution
1775 Massachusetts Ave., N.W., Washington, DC 20036
202-797-6000
https://www.brookings.edu
A nonprofit public policy research organization that has a sister center in Beijing.

Center for Global Economy and Business
Henry Kaufman Management Center, 44 W. Fourth St., New York, NY 10012
212-998-0100
http://www.stern.nyu.edu/experience-stern/about/departments-centers-initiatives/centers-of-research/global-economy-business
The division of the Stern School of Business at New York University promotes faculty research concerning global aspects of modern economies and business. Its China initiative offers specialized information on that country.

Council on Foreign Relations
The Harold Pratt House, 58 E. 68th St., New York, NY 10065
212-434-9400
http://www.cfr.org
A nonpartisan membership organization that conducts research, sponsors discussions and publishes the journal Foreign Affairs.

International Monetary Fund
700 19th St., N.W., Washington, DC 20431
202-623-7000
www.imf.org
A global financial organization that conducts research and publishes extensive data.

RAND Corp.
1776 Main St., Santa Monica, Calif. 90401
310-393-0411
http://www.rand.org
A nonprofit think tank that conducts research and analysis.

World Bank
1818 H St., N.W., Washington, DC 20433
202-473-1000
http://www.worldbank.org/en/country/china
A global financial institution that loans money to developing nations.

DOI: 10.1177/237455680220.n1