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The Reforms China Needs

19 6 2

NEW YORK – This year marks a decade since the global financial crisis erupted. For the United States, 2018 is very different from 2008. The economy has gone from the brink of collapse to the brink of overheating, thanks to a massive tax cut enacted when growth was already robust. The attitude toward China has also changed dramatically. Recognition that cooperation with China was necessary to manage global demand has given way to protectionism and hostility.

Oct 29, 2018 Elizabeth Drew thinks that anything could happen in the upcoming congressional elections.

Oct 29, 2018 Dominique Moisi thinks the Saudi crown prince and the Trump clan are the biggest losers in the Jamal Khashoggi affair.

Oct 25, 2018 Michael Spence foresees significant long-term consequences, affecting the very structure of the global economy.

Yet, for China, 2018 feels similar to 2008 in an important way: negative shocks originating in the United States pose a significant threat to its economic growth. In 2008, the shock was a decline in demand for its exports, owing to the collapse of Lehman Brothers and the ensuing global financial crisis. Today, it is the trade war initiated by US President Donald Trump’s administration.

The risks China faces are not entirely outside its control. The situation could be made worse if the country repeats the policy responses of 2008 – namely, relying exclusively on massive fiscal and monetary stimulus to prop up demand.

While the........

© Project Syndicate