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China's Hard Landing John Makin, "The Unplannable Planned Economy," AEI Economic Outlook, June 2004 (aei.org)
China, AEI scholar John Makin contends, has become too dynamic to operate as a planned economy.... But it hasn't even seriously begun a transition that, it must be said, ultimately may or may not occur, to a market economy."
Makin believes China is in the midst of an over-investment cycle similar to the one Japan experienced during the 1980s and 1990s. High saving rates mean industry and government are spending money on productive capacity that cannot be used profitably in the near future. While China's industrial sector has many hallmarks of a developed market economy, its financial system, Makin finds, lags seriously behind. Its central bank (still designed to operate in a planned economy), rising numbers of bad loans, and unsustainably ...