China and Japan

http://www.futureofcapitalism.com/2010/08/china-and-japan

"Beijing, beware," writes a finance professor at Peking University, Michael Pettis, in Foreign Policy: "China's economic growth has followed what's sometimes called "the Japanese model." In Japan and other Asian countries, this model has proved extraordinarily successful in the short term in generating eye-popping rates of growth -- but it always eventually runs into the same fatal constraints: massive overinvestment and misallocated capital. And then a period of painful economic adjustment....too much of the economy depends on hidden subsidies to survive."

Link via The Browser, which summarizes the piece as, "Government sets industrial policy, directs resources and subsidies. Result is over-investment, misallocated capital."

by Editor  |  Aug 21, 2010 at 10:46 pm Related Topics:  China, Press receive the latest by email: subscribe to the free futureofcapitalism.com mailing list