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1 1 (December 2017)

handle is hein.amenin/aeiaamv0001 and id is 1 raw text is: Key Points * China has fundamental economic challenges, featuring sharp resource constraints, a rapidly aging workforce, and a terrible recent record of debt accumulation. These indicate a process of stagnation, not the continued GDP growth Beijing will of course report, * Greatly improved rural education and systemic financial deleveraging would improve China's prospects. * China also needs to return to the pro-market reform of 1978-2002, which was abandoned by 2009. Rural land ownership rights and less protection of state-owned enterprises are the key elements. * If Xi Jinping declines to start pro-market reform now, there is little prospect for China to become rich. By the time he is expected to fade from the scene in 2027, the population will have aged further, and China will likely still be wasting resources on state firms. China's 19th Communist Party Congress has con- cluded, and as is the norm, the dominant theme was stilted language. A Communist Party con- gress (CPC) brings personnel changes that can turn out to be highly important, but their impact can only be the subject of speculation for months or even years. This time around, a definitive state- ment is possible, but it concerns the economy, not the decision-making hierarchy. Unless the 19th CPC triggers pro-market economic reforms that begin to be implemented within a year or so, economic stagnation is all but guaranteed. This claim rests on three observations: i. The economic performance of the People's Republic of China (PRC) has been deterio- rating for most of the past nine years and now stands as unsustainable. 2. Only pro-market reforms can reverse this course and pave the way for another 15 years of healthy and comparatively rapid development. 3. While this is not the last chance for the PRC, it is the best chance to return to pro- market reform for at least a decade, after which it will be nearly impossible for China to become rich for another generation. Behind these observations is the idea that we know quite well what makes countries wealthy. The world's wealthy countries assign clear private property rights and generally encourage competi- tion. Although the PRC is far from wealthy, its period of pro-market reforms reinforces this idea. The 1978 foundational set of reforms granted ini- tial property rights to farmers, allowing them to AMERICAN ENTERPRISE INSTITUTE

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