China reform checklist: How to tell that this time it's for real?

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dareconomics wrote:

Chinese leaders enjoy discussing economic reforms almost as much as the mainstream financial press hyping said reforms. Chinese leadership has linked economic growth with political stability. In light of this fact, this is all you need to know about Chinese economic reforms: if the reforms have any negative consequences, they will quickly be rolled back. The PBOC has been attempting to liberalize the financial system by stepping away and letting the banks fund each other rather than relying on central bank liqudity. Unfortunately, whenever it begins backing out of the overnight lending market, interest rates spike, so it rushes right back in.

This is exactly how government reforms will proceed. The government will attempt to reform the economy. Once adverse consequences erupt, (i.e. higher unemployment, the wrong guy’s factory being shuttered) the government will reverse course in short order. After conditions settle down, it will make another feeble attempt to reform and change its mind once the consequences return. Rinse and repeat.

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Nov 04, 2013 2:37pm EST  --  Report as abuse
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