Although economic deceleration is expected and is not necessarily a terrible outcome for China, concerns over the transition are warranted. Indeed, the economy is facing numerous constraints, domestically and externally.
The importance of innovation which the Chinese government puts on economic growth merits a review of the issue and the lesson of productivity paradox in which the US experienced will hopefully shed some light.
There are valuable lessons that policy makers can draw from the successful defense of the Singapore dollar against depreciation pressure in 1985 and interestingly, the case bear many resemblances to the RMB situation today.
It is necessary to review China’s enhanced yet uneven participation in global and multilateral institutions, and to recognize that China has not been fully included in a few important arenas of multilateral cooperation and governing regime building such as energy.
Last year, a series of financial crises forced the Chinese authorities to take a closer look at the regulatory setup of the financial system. The most popular replacement strategy suggested is to form a super central bank.