According to SCMP, “After decades of pursuing balanced development nationwide, China now aims to concentrate resources on the best-performing provincial and municipal economies rather than pumping money into poor areas to help them catch...
scmp.com/economy/china-… via @scmpnews
scmp.com/economy/china-… via @scmpnews
...up.” It goes on to quote an article by Xi Jinping in which he says that China must “make full use of comparative advantages” in important economic clusters.
I hope this puts to rest a long-standing argument about the “catch-up” potential of the poorer provinces. Several...
I hope this puts to rest a long-standing argument about the “catch-up” potential of the poorer provinces. Several...
...years ago the then-analyst at Standard Chartered claimed that “all China needed” to maintain 8.5% GDP growth for many more years was that its poorer provinces catch up economically to the richest ones, as if this would be the pretty automatic consequence of government plans...
...to concentrate investment in the poorer provinces. Among many analysts there was this belief that the “right” amount of investment per capita in a poor province was the same as that of a rich province, and the “right” amount for China was the same as it was in the US....
...As I discuss in my 2013 book, this idea is based on the theory that rich economies are richer than poor ones because they have more “bridges” (i.e. capital investment), when in fact it is the other way around: they have more bridges because they are...
amazon.com/Great-Rebalanc…
amazon.com/Great-Rebalanc…
...richer, which means they have more capacity to absorb investment productively, and they are richer because they have the right set of institutions (including the right business incentives) that allows workers and businesses to behave more productively.
That is why there...
That is why there...
...is a limit – based on its level of development of its legal, financial, political, education, etc. institutions – to how much an economy can benefit from investment in capacity and infrastructure. Once it reaches that limit, it needs institutional reform, not more...
...bridges, to become richer, but of course that is the hard part: it is much easier just to keep building bridges until you run out of debt capacity than to reform all the relevant institutions, including of course political institutions.
