Turning Japanese: China Edition

Bloomberg: China's Future: Neither Boom Nor Bust
Rather than curing its economic woes and cementing its position as an economic superpower, or suffering a devastating collapse, China looks set to spend the next decade in genteel decline, much as Japan has since the 1990s.

...Another fatal mistake is timidity. The obvious solutions to both countries' problems all involve a scaling back of state control. Japan could probably have achieved higher growth in the 1990s if it had deregulated services, opened up the financial sector and permitted much more foreign investment. It chose not to do so, for fear of upsetting the cozy ties between government and corporate elites.

The same reluctance is obvious today in Beijing, where Communist leaders say they intend to let market forces “play a decisive role in resource allocation,” but in practice have intervened in the equity and foreign exchange markets to prevent prices from falling. The reluctance to reform the state sector reflects a fear of letting markets, rather than the Party, decide who gets to control important assets.

Meanwhile construction workers battle in Hebei. Maybe good for Caterpillar sales?
ZH: Caught On Tape: Chinese Bulldozers Battle As Economic Frustration Boils Over

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