China needs to be bold to ride out the storm
… China has to switch from its export-oriented growth model to a new one driven by domestic demand.
To that end, Beijing should introduce further reforms, such as improvements to the social security net, reforms on healthcare, education, land tenure and taxation systems, as well as proper energy and resource pricing mechanisms, said Jiming Ha, chief economist of China International Capital Corp.
Political reforms are needed to facilitate the economic transition, according to Zhiwu Chen, a Yale professor. The state still controls three quarters of the economy, and Chen suggests Beijing should pool state-owned assets into funds and give its people shares to make them feel richer, enticing them to buy.
It is particularly important to enrich China’s villagers because there are 800 million of them, said Chen. Beijing needs to loosen controls on village land and allow farmers more freedom to transfer their land rights to offer them more wealth.
“China needs to act as aggressively as possible to boost consumption to replace exports,” said Paul Cavey, an economist with Macquarie Bank. “Structural reforms will help China to grow out of this crisis.”
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