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Beijing must tackle economic challenges

First published: Financial Times, 19/12/2010

The revelation that China plans to build its first aircraft carrier to boost its maritime power, coupled with other demonstrations of greater political assertiveness at home and abroad, has important implications, including for macroeconomic management. In the coming year, China’s leaders face big decisions as signs of overheating of the economy become apparent, and with increasing pressure to reboot the country’s economic development model. But politics in China means that policy responses to both these challenges will be enigmatic and uncertain.

Growing intolerance of domestic political opponents, and an increasingly prickly posture in the face of perceived foreign ones, are not unique to China, but they have constituted an Achilles heel in its long, illustrious history. China’s more recent shift in attitude could be related to the leadership transition, factional struggles in the Communist party, growing self-confidence or rising levels of social unrest. But these can all be slotted under both deep-seated insecurity and intransigence….. more