Modernizing China's Growth Paradigm
IMF Policy Discussion Papers, March 1, 2006
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Bibliographic details
- Authors: Eswar S Prasad, Raghuram Rajan
- Published: March 1, 2006
- Series: IMF Policy Discussion Papers
- DOI: https://doi.org/10.5089/9781451946147.003
Summary
- China has achieved tremendous economic progress in the last three decades, but there is much work to be done to make the economy resilient to large shocks, ensure the sustainability of its growth, and translate this growth into corresponding improvements in the economic welfare of its citizens.
- The paper discusses the complex challenges Chinese policymakers face in striking the right balance in terms of speed and coordination of reforms.
- It argues that China's current stage of development, along with its rising market orientation and increasing integration with the world economy, may make incremental and piecemeal approaches to reforms increasingly untenable and, in some cases, could generate risks of their own.
- The present favorable domestic and external circumstances provide an excellent window of opportunity for bolder reforms and for tackling some deep-rooted problems without causing much economic disruption.
Major challenges and analysis
- Tradeoffs in reform sequencing and coordination:
- Balancing speed and coordination of reforms is complex and critical to avoid unintended disruptions.
- Risks of incremental reform at China's current stage:
- Rising market orientation and increasing global integration increase the costs and risks of slow, piecemeal reforms.
- Need for resilience and sustainability:
- Strengthening the economy to be resilient to large shocks and ensuring the sustainability of growth are central concerns.
- Distributional outcomes:
- Translating growth into corresponding improvements in the economic welfare of citizens is an explicit objective.
Policy implications and recommendations
- Opportunity for bolder reforms:
- Current favorable domestic and external circumstances create a window for more ambitious reforms.
- Address deep-rooted problems proactively:
- The paper suggests tackling fundamental structural issues now to minimize economic disruption later.
- Importance of coordination:
- Reform speed should be balanced with careful coordination to manage risks associated with liberalization and market orientation.
Publication and metadata
- Authors: Eswar S Prasad, Raghuram Rajan
- Publication date: March 1, 2006
- Series: Policy Discussion Paper No. 2006/003
- Issue: 003
- Volume: 2006
- Pages: 16
- DOI: https://doi.org/10.5089/9781451946147.003
- Stock No: PPIEA2006003
- ISBN: 9781451946147
- ISSN: 1564-5193
- Subject tags: Balance of payments; Capital account liberalization; Capital controls; Commercial banks; Exchange rate flexibility; Financial institutions; Financial regulation and supervision; Financial sector reform; Foreign exchange
- Keywords: a number of reform; banking system; banking system's reform effort; Capital account liberalization; Capital controls; Commercial banks; Eastern Europe; economy; exchange rate; Exchange rate flexibility; export-led growth; Financial sector reform; Global; market economy; market-oriented economy; PDP; policy complementarities; policy reform; Policy reforms; reform; reform agenda; reform of the state enterprises; reform process; reform strategy; state enterprise; state-owned enterprise reform; trade and financial integration; transition economy
Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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- Modernizing China’s Growth Paradigm