The Top Ten Issues for China’s Economy

A group of Chinese economists from Beijing have circulated a “top ten” list of the difficulties faced by the Chinese economy in 2018. This list has been removed from all media in China, but it has been released outside China (as far as I can tell, in Mandarin only). For obvious reasons, the economists who drafted this list have chosen to remain anonymous. It is of interest to see what Chinese economists themselves see as the important issues for the Chinese economy. This is a list for 2018, but it sets the stage for 2019. The top ten (per these Chinese economists) is as follows. 1. Trade war with the United States. China has consistently maintained a major trade imbalance with the United States. China sells but does not buy. The imbalance grew even more extreme in 2018. This is a core factor leading to the trade war. This is because the U.S. has shown it will not allow a major trade deficit to continue with any country. It is therefore clear that the trade war with the U.S. will not be resolved until the trade deficit issue is resolved. Since such a resolution does not seem to be imminent, the trade war will likely continue, exerting great pressure on the Chinese economy. 2. The disappearance of Made in China 2025. From 2015 to 2017, the Chinese government touted its Made in China 2025 program as its core policy for development of the Chinese economy. Due to pressure from the U.S., Europe and Japan, public discussion of the program has virtually ceased. Foreign opposition to this program has been based on the following two factors: a. The advances in technical expertise outlined in the program do not rely on Chinese domestic innovation. Rather, the program relies on forced technology transfer and IP theft. Objection to this approach is at the core of the United State’s Section 301 complaint against China. You can read the United States Trade Representative’s most recent Section 301 report in full here . b. The Made in China 2015 program is widely viewed outside China has having been implemented to position China to be able to use technology to project Chinese power. Without resolution of a. and b., it will be difficult for China to openly revive the Made in China 2025 program and nothing has been proposed in its place. 3. Frozen domestic real estate market. The Chinese domestic real estate market has been used to help finance both the central and local governments. The constant rise in real estate prices has been treated as a “blood transfusion” for both the local and central governments. But the end in price appreciation has been reached and continued price inflation will lead to a bubble. But popping the bubble now would cut off necessary funds for the government and would cause social problems in a population that has never experienced a real estate crash. For that reason, China’s real estate policies are frozen in place. 4. […]