A Grim Reform Outlook Clouds Trade Talks

Every quarter Rhodium Group and the Asia Society Policy Institute produce the China Dashboard, a research project which attempts to assess Beijing’s implementation of structural economic reforms based on measurable outcomes, rather than just commitments. China’s enactment of market-oriented reform is critical for its economic trajectory and its interactions with advanced economies, including the United States. The Winter 2019 edition of our China Dashboard is now live. Our findings this quarter are grim.

Implementation of economic reforms is inadequate to stave off international pushback to China’s economic model or engender confidence about the US-China trajectory as negotiations resume in Washington this week. Reforms are not moving forward decisively in 8 of the 10 areas we track, a continuation of our Fall 2018 findings.

Critical benchmarks of fair competition for foreign and private firms are deteriorating. SOEs are advancing at the expense of private firms, and proposed policy solutions focus on increasing Communist Party supervision instead of reform. China’s competition policy regime exhibits substantial shortfalls in areas like transparency and equal treatment, despite several years of regulatory and bureaucratic reform.
The reform impulse is insufficient to put China’s economic trajectory on a more sustainable basis. Efforts to deleverage the financial sector have not led to better credit allocation; far too much capital investment is still spent inefficiently, aggravating industrial dislocations and bad debt.

Posted February 27, 2019
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