SILVANA MALLE

Profili macroeconomici della Cina

213

Settembre-Dicembre 2006

Anno LXXI    n. 3

Summary -Economic growth in China is impressive, but underlying weaknesses  may erode in time its potential unless measure are taken to further liberalise the economy and reduce the costs of growth.  While the contribution of the private sector to growth is becoming dominant, the interference of the party/state with the economy is still an impediment to a better allocation of capital. That is needed to eliminate waste and free resources for both private use and social needs, in particular those of the rural areas whose incomes do not keep up with the pace of growth. On the basis of official data, China has been able to contain state debt and reduce the general public deficit, but the macroeconomic picture suffers from lack of transparency.  Recurrent needs of bank consolidation in the near past, the persistence of a large state-dominated banking sector and a more than opaque capital market together with a long established practice of easy credit to state enterprises as well as fiscal engineering on the part of the provincial governments raise the problem of how solid are the financial foundations for growth and how long will the contingent liabilities of the public sector remain tolerable. Excessive capacity built in several sectors could badly suffer from a possible slow down in the world economy.China needs to contain the costs of growth, improve equity and efficiency of public spending, limit growing income disparities and last, but not least, enhance the role and autonomy of the Central Bank in support of stabilisation.  More clarity is also needed on the exchange rate regime  policy and possible move to managed floating from gradual capital movements’ liberalisation.