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July 19 "China's Economy: Strengths and Weakness," with Dr. Nicholas Lardy, Senior Fellow, Foreign Policy Studies, Brookings Institution Dr. Lardy examined China's economy and stated China is on a gliding path towards meeting its WTO obligations and, in the long term, will continue to be economically open and generate growth through increased competition. Lardy explained how China's economy is growing robustly, though he emphasized official Chinese documents tend to report higher numbers then what is truly accurate. Nevertheless, China has continued to set policies that are open to and encourage increased foreign direct investment, especially in the manufacturing sector. China also continues to reduce their tariff and non-tariff barriers, which are already considered low for a developing country. Moreover, overall reduction in total inventory accumulation and China's willingness to scale back state-owned companies has created a more market orientated economy that is better able to absorb the adjustments required to meet WTO goals and extensive economic liberalization. However, Lardy also points out that China suffers from high unemployment and inequality has grown dramatically. This situation is a potential social time bomb, but due to rising average incomes for most Chinese, the current climate is relatively stable. Other concerns surround China's state-owned banks that make politically based lending decisions that tend to skew the financial situation. True private banks, which lend to only the best borrowers, are needed to expand capital-intensive industries. However, there remains little doubt that China is beginning to dominate the East Asian economies and is considered a driving force in the region. |