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Fall 2019 China Dashboard Net Assessment

Every quarter Rhodium Group and the Asia Society Policy Institute produce the China Dashboard, a public research initiative that assesses Beijing’s implementation of structural economic reforms based on measurable outcomes, rather than just policy commitments.

In this edition we see China’s growth slow to a nearly three-decade low, amidst rising economic headwinds , unprecedented banking stress and intensifying external pressure. Structural reform has taken on new urgency—both for China’s internal interests and its interactions with the world. Beijing cannot rely on the economic stimulus toolbox to paper over financial risks as it has in the past, and is hoping to boost foreign investment to help stabilize.

Our findings this quarter show “green shoots” of reform, but debatable ones. Neither the practical impacts nor the details of these positive signs are proof of a change of season yet; however, actions that would bend our indicators in the right direction are within reach, and the tone and frankness of conversations now taking place are more serious.

A few key points from this quarter’s edition:

China’s leadership focused on changing external perceptions of China’s reform intentions, primarily through piecemeal efforts to open the door wider to foreign investment, without much success. New laws and regulations on investment opening did not translate into international confidence about the reform outlook this quarter: our indicator of cross-border investment fell to record lows.

Competition policy reform made slight progress. The government reviewed one fewer foreign-involved merger than domestic mergers for the first quarter on record, and other indicators such as new business registration and market entry and exit suggest broader improvement in the competitive environment.

Bank failures introduced credit risks, making funding costs in China more market driven. However, financial efficiency continued declining, while bottlenecks to liberalizing system-wide capital costs in China remain in place.

Posted December 10, 2019
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