China’s asymmetric market liberalization: The great ascendancy and structural risks

‘China’s asymmetric market liberalization: The great ascendancy and structural risks’, Asian Pacific Economic Literature, forthcoming

 

Abstract        

China’s Great Ascendancy from a poor agrarian economy to an economic superpower is unprecedented. But in the process, structural imbalances, resource inefficiency, and income inequality worsened rapidly. It is argued that the coexistence of China’s extraordinary growth and serious structural risks are two sides of the same coin: asymmetric liberalization of product and factor markets. Distortions in markets for labor, capital, land, energy, and the environment lower production costs, increase corporate profits, raise investment returns, improve the international competitiveness of Chinese goods, and therefore lift China’s growth. But they also depress consumption. China needs to accelerate factor market liberalization in order to complete the transition to a market economy and to lock the economy onto a more sustainable path.