What Makes China Tick?

This week seems to be China week. Everyone seems to be asking the same question: why is China so successful? ( see here and here and here.

Now maybe this is just an excuse for a bit of self-publicity, since I have just spent a day ‘sprucing-up’ the China page on my website, but lets see if I can take a shot at the question myself.

Firstly, let it be said, Brad Setser seems to be asking many of the right questions. To recap the issues as far as Brad is concerned would be:

1) State intervention in the economy (or certain forms of state intervention at certain stages in the development process) is less of an impediment that is often argued.
2) China’s markets are far more flexible than they seem.
3) High savings rates and high investment rates can overcome a multitude of other sins.
4) High savings, high investment rates and undervalued exchange rate can overcome other sins.

Andy Xie, in the other corner, argues that China?s meteoric economic rise is due to:

(1) its low base;
(2) its size; and
(3) its development model.

As Xie suggests the combination of the still-low base and the large size mean that China?s role in the global economy should continue to rise rapidly.

On the development model he argues that ‘openness Is China?s key asset’.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".